Are Banks Trying To Kill The Small Personal Loans Market?
By Lea Pachta Borrowers looking for a personal loan of less than £5,000 need to be prepared for a shock as loan rates have rocketed by as much as 130 per cent compared to 2006, according to analysis by moneysupermarket.com. This is despite Bank of England base rate falling 4 per cent over the same period. Although loan rates have risen across the board since 2006, it is loans for smaller amounts that have rocketed. Four years ago the top 10 average rates for loans of £3,000 was 6.49 per cent APR which equated to £309 interest over three years; today’s average is currently 14.92 per cent APR – an increase of 130 per cent which means customers pay back more than double the amount of interest. For loans of £5,000 the top 10 average rate was 5.83 per cent in 2006 while today it is 10.84 per cent, an increase of 86 per cent. We are also seeing a growing gap between the lower tiered loans and the higher amounts; until April 2008 the correlation between tiers was very similar, however looking
