Loan rates for cars jump 44%

According to Monefacts.co.uk, the rates on unsecured loans have shot up

30 November 1999 2 min read

According to Monefacts.co.uk, the rates on unsecured loans have shot up – by as much as 44% in just two years.

Those looking for a £5,000 loan have been hardest hit. The average rate jumped from 8.6% in May 2007, to 12.4% today.

Michelle Slade, analyst at Moneyfacts.co.uk, commented: “Despite bank base rate being at an all time low, borrowers looking for a personal loan have seen no benefit.

“Those looking for just £5,000 have seen a staggering jump in the cost of a loan. In May 2007 a customer would have paid £664 interest on a £5,000 loan over a three year term. Today that has jumped to £957.

“With many providers showing just typical rates, the actual increase compared to a few years ago could be much higher.

“Tighter lending criteria is likely to mean only those with a perfect credit history will be getting the best rates.

“Rising unemployment has meant the risk of customers defaulting on unsecured loans has increased and this increased risk is being seen in higher rates.

“If a customer is struggling to meet repayments, unsecured lending is likely to be the first on which customers default, rather than secured lending such as their mortgage.

“In the last year, 19 personal loan products have been withdrawn. If a personal loan is required, borrowers have fewer options.

“Shopping around is key. Only Sainsbury’s customers who hold a Nectar card can get a loan rate of less than 8.0%, with the AA and Yourpersonalloan.co.uk.”

Alternative means of funding a new business car include: personal contract hire (PCH); and personal contract purchase (PCP). For small businesses wishing to fund a car through the company, then contract hire or lease purchase are alternative options.

Further information

You might like to read our Special Report Why now is a great time to lease.

How the loan rates have changed