Unsecured loan market tightens

Posted 2008-03-12

The average cost of an unsecured personal loan has risen significantly over the past few months, new research has found. Average interest rates on small unsecured loans are now over four per cent higher than they were a year ago, with the average rate on a £1,000 loan standing in the region of 14.4 per cent against 18.5 per cent last year. While rates have risen less sharply on larger loans, MoneyFacts.co.uk still recorded an average 2.1 per cent spike in loans of £5,000 - up from eight per cent in March 2007 to 10.1 per cent today. Michelle Slade, an analyst at the financial website, blamed the credit crunch for the difficulties and noted that tightening of the wider financial money markets has left many people unable to secure any credit at all. "Anyone looking to take out a loan in 2008 is going to find themselves faced with having to shell out more by way of monthly repayments than they would have done over the last couple of years," she said. Recent research from MoneyExpert.com found that rates on secured loans are falling as lenders find themselves attracted to the security of borrowers who put up their home as collateral.

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