Interest rate hikes hitting borrowers

People who are considering taking out a loan may be risking debt management issues due to interest rate rises over the past two years.

Comparison service uSwitch found best buy unsecured personal loans for £8,000 over four years are currently 7.4 per cent annual percentage rate (APR), compared to 5.5 per cent APR in January 2006.

Those taking out smaller loans are feeling the hit the most, the study indicated, with a 3.44 per cent rise on rates for £1,000 over one year in the last 13 months to 19.99 per cent APR.

Consumers considering a consolidation loan to become debt free may be concerned about the rises.

Simeon Linstead, head of personal finance at uSwitch, said credit cards may offer a cheaper alternative to small loans and the internet often offers better deals.

He added that fixed-rate loans can offer “the peace of mind that both their interest rate and monthly payments are fixed for the term of the loan”.

In other news, Nationwide announced fixed rates for its mortgage are to be cut by up to 0.2 per cent.

By Morwenna Kearns

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