The news is not all good, as rates on personal loans are still at five year highs. However, according to reports they have now fallen to their lowest level since the Bank of England cut the base rate to its current low in March of last year.

A number of lenders are said to have cut the rates on their personal loans recently, which will prove good news for anyone that is looking to borrow money. The loan rate cuts have been applied by both mainstream lenders and some other lenders such as supermarket finance sectors, and amongst the lenders that have reduced their personal loan rates so far are Nationwide, Halifax, Sainsbury’s, and Tesco.

Based on Moneysupermarket.com tables the average rate that is now charged on the top ten loan deals is now 8.35 percent on a loan of £7500. This is the second highest rate recorded since 2005, when the average rate was 6.3 percent, with the highest being seen at the start of last year when the average rate was 8.42 percent.

It has also been pointed out that in 2005 the base interest rate was far higher, and this meant that the profit margin for lenders was only slight coming in at around 1.55 percent.

These days, however, with the base rate being so low the profit margin for lenders has soared to around 7.85 percent. Many of these loans are also only made available to those that have the best credit ratings, and those that have blemished on their credit records can expect to pay a significantly higher rate or may find that they cannot quality for a loan at all.

Reductions being seen in personal loan rates is a post from: Glitec Loans

Reports show that when the base rate stood at 5 percent, just seven months ago, personal loans were available at 6.9 percent, which was a margin of 1.65 percent. However, although the base interest rate is now just 0.5 percent the same loan charges interest of 8.5 percent, which means an astonishing 8 percent margin.

Personal loan rates are expected to settle at around 10 percent by the summer according to some officials, partly because of the ban on PPI that has been announced and is due to come into force. As a result on the ban of single premium payment protection insurance, lenders could lose a lot of revenue, and officials believe that hiking up rates and charges are amongst the ways in which they will try and recoup some of these losses.

One industry official said: ‘Rates are going up on a daily basis. It’s the lenders’ reaction to the severe restrictions being introduced by regulators on the way payment protection insurance is sold. Instead of making profits on the back of this expensive insurance, they are going back to basics and having to make money out of lending you money.’

Lenders may still advertise reasonable rates, which is known as the typical APR, and is supposed to be available to at least two thirds of applicants. However, another recent report has suggested that far fewer than two thirds are getting this typical APR, with most finding that they are being charged much more, which is something that regulators are now looking into.

PPI ban sees spike in loan rates is a post from: Glitec Loans

Over the past six months the base interest rate has fallen month on month, dropping to the lowest level in the history of the Bank of England, at just 0.5 percent. However, over the same period figures show that the interest rates being charged on personal loans have continued to increase.

Even borrowers that have an excellent credit rating and credit history are being charged an average rate of interest of 12.3 percent on personal loans, according to the data, which was compiled and released by Defaqto. This rate of interest is higher than the average rate of just 10.8 percent, which was being charged on personal loans for the same consumer group at the time when the base rate stool at 5 percent, last October.

Even the lowest rate personal loan, which the report claimed was from the Co-operative Bank, had increased from 7.6 percent to 7.8 percent, again for those with excellent credit ratings and histories.

One industry official said: ‘Lenders are under more funding pressures now and they are reluctant to lend to all but those with top credit scores.’

He added: ‘The imminent loss of payment protection insurance sales will also hit lenders’ profits so they are looking to stretch their margins.’

Another industry expert said: ‘This may all sound very negative, but there is no need to panic. Loan rates in general are not increasing as much as credit card rates and, unlike these variable rates, your loan rate will not rise as it is fixed for the length of your agreement. Other great deals on, for example, a £5,000 loan over three years include Sainsbury’s Finance (8.8%), Tesco Personal Finance (8.9%), Alliance & Leicester (8.9%) and Lombard Direct (9.4%), to name a few. You’re going to need an excellent credit file to get them – no missed credit card payments over the past six months – but they are nonetheless there for the taking.’

Rates on personal loans continue to increase is a post from: Glitec Loans

However, over the past year the base interest rate has fallen a number of times, and in particular over the past two months, which has seen 2 percent sliced from the base rate. The base interest rate is now at 3 percent, which is almost half what it was a year ago, at 5.75 percent.

However, whilst most would think that this was good news for borrowers recent research has shown that the interest rates on personal loans has actually be creeping up since September, and the average rate is now double that of the current base rate. The research shows that before September the gap between personal loan rates and the base rate was under 3 percent, but consumers can now expect to have to cover a gap of more than 5 percent between loan rates and the base rate.

The research was carried out by Moneysupermarket.com, and an official from the financial website stated: “Loan costs are often overlooked in the frenzy of a base rate cut, when the focus is on the impact of any rate movement on mortgage payments and savings rates. What our calculations clearly show is that the cost of a personal loan is as apparently uncorrelated to base rate as mortgage rates are. The key difference though, is that mortgages are priced according to LIBOR rather than base rate – loan rates are not.”

He added: “Whilst personal loans are often seen as the ‘poor man’ of everyday financial products, there is always a spike of activity post-Christmas and into the New Year when consumers take their finances in hand, and turn over that new leaf. Invariably this involves consolidation of store cards, credit cards and overdrafts. However, loans are not the cheap form of borrowing they once were. In the last two weeks, we’ve seen three of the top loan providers – Tesco, Asda and Yourpersonalloan increased their rates by as much as 0.3 per cent, despite base rate dropping by 1.5 per cent.”

He went on to state: “The Competition Commission’s recommendations on the sale of PPI last week will undoubtedly result in loan rates soaring next year, perhaps up to around ten per cent, which means they won’t be that much more competitive than credit cards. However, it’s likely we could see one or two downward rate movements after Christmas as providers seek to attract those with New Year’s resolutions of the financial kind, but borrowers need to keep a close eye out for the best deals and ensure they only apply for products they’re likely to be accepted for. This is where our SmartSearch tool will help – enter a few basic details and we’ll point you towards loans you are likely to be eligible for with your credit history. With lending criteria becoming more and more stringent, it’s important to keep your credit record as clean as possible and not taint it with failed applications for loans.”

Rates on personal loans have soared is a post from: Glitec Loans

One recent report has suggested that interest rates on some personal loans may have shot up to as much as 36.9%, leaving some borrowers facing repayments that are hundreds of pounds higher than they would otherwise have been. The cost of borrowing on credit cards has also risen sharply recently, leaving many consumers unable to enjoy affordable credit any longer.

Industry officials from one price comparison site claims that personal loans with the Lloyds TSB subsidiary Black Horse have gone up by up to 36.9% recently. This means that customers borrowing even relatively modest sums by way of a loan could find that they are having to pay hundreds of pounds extra in interest alone over the term of the loan. A number of other banks have also been raising their interest rates on personal loans over recent months despite recent Bank of England base rate cuts.

An official from the price comparison site said: ‘Personal loan “best buys” are changing every day which demonstrates just how unpredictable and volatile the current climate really is.’ Consumers are being urged to carefully check and compare personal loan rates to ensure that they get the best deal possible in the current difficult climate.

Brits being hit with rocketing loan interest rates is a post from: Glitec Loans

One recent example was the Nationwide building society, which hiked up the interest rates on its unsecured personal loans recently. This took the interest rate on some of its personal loans to a higher level than the interest rate on its credit card. Tighter lending conditions and increased wariness amongst lenders have resulted in an increase in interest rates on personal loans, as well as other forms of borrowing, leaving the consumer with some very tough choices to make.

One industry official stated: ‘It’s not only mortgage rates that continue to increase, so too have the rates and monthly repayments on personal loans.’

Consumers are also reminded that whilst most lenders advertise a typical APR on their unsecured personal loans, this is not necessarily the rate that each consumer will get, as the actual interest rate will depend on various factors including the credit rating and history of the applicant.

Now is the time for consumers to not only shop around for personal unsecured loans in order to try and get the best rate of interest, but also to ensure that they check all of their finance options in order to determine whether a personal loan is the most effective and affordable solution to their financial needs.

Recent additions:

•  Nationwide asks for larger deposits from borrowers
• Mortgage lending levels remain subdued
• Credit crunch leads to increase fraud on finance applications
• Finding an affordable loan

Hikes in personal loan rates may mean credit cards are more viable option is a post from: Glitec Loans

An unsecured loan can be used for a wide range of purposes, and amongst the popular purposes for which these loans are often used are the purchase of a new or used car, paying for a holiday, paying off smaller debts such as credit cards, funding an educational course, paying for a dream wedding, purchasing items for the home, and more. In order to find the best personal loan for your needs you need to compare a range of loans from a number of lenders, as this will increase your chances of finding a competitive loan for your needs.

It is important to remember that the eligibility criteria is very specific for most unsecured loans, and you should avoid making applications for a loan unless you meet the requirements, otherwise you could find that your application is rejected, which can damage your credit. Many unsecured loans are available online, and this makes it easy to check the eligibility, compare different loans, and make your application once you have found a suitable loan.

The maximum amount that you can borrow by way of an unsecured loan is around £25,000, but the exact amount that you will be able to borrow will depend on your credit rating, your income, your employment and financial status, your outgoings, and various other factors. The repayment terms are generally significantly shorter than with a secured loan, with repayment periods of one to five years with most lenders, although there are some lenders that will offer up to ten years.

In order to be eligible for an unsecured loan you need to have good credit in most cases, as most unsecured lenders will not consider lending to someone with damaged credit. This is particularly true in the current financial climate, where the global credit crunch has resulted in far tighter lending conditions, making it more difficult for consumers to get loans. There are some lenders that offer unsecured loans to those with damaged credit, but the interest rates charged on these can be extremely high.

If you are unsure with regards to which unsecured loan is going to best suit your needs based on your needs and circumstances you may want to consider going through a loan broker. You will only have to complete one application form, and the broker will then use this information to source a range of suitable lenders in order to try and find you the best deal possible on an unsecured loans.

Requirements For An Unsecured Loan is a post from: Glitec Loans

Naturally one of the benefits of a personal loan is you can generally use the money for whatever you want, therefore you may not fall into any of the above categories. Additionally it’s a financial commitment that will last several years and you want to make sure you get value for money and good service over the course of that time. It’s important to spend as much time planning for and researching the best product to suit your circumstances as it is planning how you’re going to spend the money.

Starting Comparisons of Loans

The first thing to consider is whether an unsecured personal loan is what you are actually looking for. Personal loans are in most ways a flexible product, as previously stated you can generally use them for any purpose. If the amount you plan to borrow is smaller than would generally qualify for low APR deals or you wish some flexibility in how much you repay and when it may be worth considering borrowing against a credit card or overdraft instead. Bear in mind that while personal loans usually have a more strictly fixed repayment schedule than credit cards or overdrafts, this can be helpful in planning your financial commitments. Again if the amount you wish to borrow is quite large you will probably have to consider a secured loan, which means putting your home or other assets up as security and can effectively be seen as a second mortgage.

Length of Repayments

Once you’ve decided that an unsecured personal loan is the most appropriate form of finance for your circumstances the most important thing to consider before you even start looking at what loan deals are available is how much you wish to borrow. Most loan deals will apply to loans of a certain amount and this can vary between providers. Some providers such as Alliance and Leicester, Cahoot and Lombard Direct offer their typical APR to loans over £5,000 and others such as Bank of Scotland offer their best APR on loans of £7,000, Tesco have raised this to £7,500. Once you’ve ascertained how much you wish to borrow you can identify which loan companies will provide the best deal. While considering how much you wish to borrow its also worthwhile to consider things like how long a period you wish to repay the loan over as different loan companies may provide you with different repayment periods. Two examples are AA who offer repayment periods of between 1 and 5 years and Tesco who offer repayment periods of between 1 and 10 years.

Personal Circumstances

Obviously everyone’s personal finance circumstances are different and this will have a bearing on what loan company to chose when applying for a personal loan. Some companies will be quite selective about who they lend money too, whereas others may be more flexible but in turn charge higher rates of interest. A poor credit record, being self-employed or simply not having much of a credit record for loan companies to judge you against can affect which companies will be open to lending you money and possibly also the rate of APR they offer you.

Therefore it’s important to bear this in mind and shop around for a reputable company with a good rate of APR if you find yourself in a less than advantageous situation when it comes to applying for a loan. Additionally if you feel you have been unfairly turned down for a personal loan you can ask why and while they are not obliged to divulge the reasons behind their decision most companies will be forthcoming. It may also be worthwhile to investigate your credit record to ascertain if everything is in order or if maybe poor credit is related to something unconnected like a previous tenant.

Choice

By the time you’ll have reached this stage of choosing a personal loan you’ll probably want to start looking around at the different loan companies and what they can supply you with. This is a good thing but it is incredibly important to shop around when choosing a loan partly to ensure you get the best deal in terms of APR and a repayment period to suit you but also because there are still some important considerations that should affect your choice.

Loan Incentives

Different loan companies will offer different services when you sign up to a personal loan with them. Bonuses such as repayment holidays either at the start of the repayment period or during it or a quick transfer of the funds into your account which may be free or come at a small charge. Generally these kinds of bonuses will be well advertised and easy to compare between companies should you decide this is a factor worth considering for you.

However what is probably less well advertised are the penalties associated with personal loans. Some loan companies will charge an arrangement fee for taking out a personal loan. You may decide its worth it if the loan meets your requirements but its still worth being aware of while your at the stage of deciding what loan company provides the most appropriate deal for you.

Another important consideration is whether you may like to repay more than your standard payments at any time or clear the loan ahead of schedule. This could be a great decision for you, maybe you’ve come into some money, had a promotion or are simply managing better than you anticipated. Many loan companies will charge significantly for early repayment of a loan which could reduce the benefits of repaying early and in fact render the loan far less value for money than it seemed at the time. Choosing a company which doesn’t employ early repayment penalties may be a better choice but as with an example for Morgan Stanley they may then charge higher rates of interest.

Payment Protection Insurance

A final consideration when taking out a loan is payment protection insurance. This is often offered alongside a personal loan and it can be tempting after all your hard work and shopping around to just accept the loan company’s policy. Loan company’s can charge quite significantly for this insurance and it can add a tremendous amount of money to your overall loan cost. Cahoot offer a cheaper form of payment protection insurance or buying it direct from a company such as Pay Protect can work out even cheaper.

Choosing a UK Personal Loan is a post from: Glitec Loans