The availability of cheap secured loans is beginning to fall, it has been suggested.
According to Samantha Owens, head of personal finance for Moneyfacts, rates on some 27 personal loans products have been modified over the course of this year – with the majority of these changes shown to be increasing the amount of interest charged. Ms Owens pointed to research carried out by the financial publication indicating that those taking out a personal loan of 5,000 pounds from Blackhorse have found their repayments increased by 386 pounds during the past 12 months. At present those taking out a loan from the provider will end up repaying 6,312 pounds and 96 pence over a three-year period, however in March last year this stood at 5,927 pounds and four pence.
The study also revealed that a total of 12 money lenders, including Norwich Union, Morgan Stanley and GE Money, have withdrawn from the personal loan market over the course of the past year.
Yet it may not all be bad news for those wishing to secure a cheap secured loan as Moneyfacts reveals that rates on some loans on the market are cheaper than those attached to borrowing of larger amounts. Traditionally, however, the annual percentage rate (APR) on a personal loan falls as a higher amount of money is borrowed.
Those taking a personal loan of between 7,500 and 14,999 pounds with Nationwide were indicated as being charged 7.9 per cent in interest, however for borrowing between 15,000 and 25,000 pounds consumers were shown to face interest of 9.4 per cent. Meanwhile, the Moneyback Bank charges 7.1 per cent interest for a loan in the 15,001 and 20,000 pounds tier, with this falling to 6.9 per cent for credit of 7,500 to 15,000 pounds.
Such moves, Moneyfacts reported, are carried out by money lenders to make sure borrowers only take out a loan for as much money as they need.
Ms Owens said: “Over the last year we have seen lenders reassessing how they offer personal loans too, with more and more lenders adopting personal pricing or a credit rating assessment. This is not necessarily bad news for the borrower. Whereas before a prospective borrower was either accepted or declined, now those lenders that offer an APR dependent on a credit rating will offer an alternative rate to those borrowers who otherwise could have been declined.
“But what it does mean is that it is increasingly difficult to work out what the best deal is. If you look at our best buys for example, from the top six rates offered on 5,000 pounds over three years, four are dependent on credit rating.”
As such, those wishing to supplement their spending as 2008 progresses could be well advised to carry out as much research as possible before taking out a loan. In doing so, borrowers may be able to discover that they are able to select a cheap loan and are left with affordable monthly repayments. Speaking earlier this year, Ms Owens reported that despite any concerns they have to the contrary, those consumers who have recently graduated should find that they are able to secure a best-rate loan.
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