Money News

£5,000 personal loans may vary over £1,000 to repay

If you’re thinking about taking out a personal loan it’s more important than ever to shop around as loans are at their most expensive since 2001.

Personal loan rates are at a nine-year high, as banks and lenders continue to lend only to the lowest-risk applicants.

And the difference between the cheapest and most expensive £5,000 loan repaid over three years is £1,055 in extra interest.

Michelle Slade, spokesperson for financial website Moneyfacts.co.uk, said: “The post-Christmas loan sales we see each January did not materialise, a further indication that lenders do not want to encourage unsecured lending.

“The majority of lenders advertise typical rates, so borrowers shouldn’t be surprised if they have to pay a higher personal loan rate than that shown.”

Chris Eagle, commercial manager at Creditchoices.co.uk, said: “In January 2001, when the base rate was 6%, you could borrow £5,000 over three years at 9.4%. Today with the base rate at 0.5%, the best deal for the same amounts is 8.9%.”

“If you really need to take out a loan – perhaps to pay off more expensive credit card debt - then make sure you look for the best rate, check your credit rating and don’t make multiple applications as that can make you look less creditworthy to lenders.”