A large personal loan charges ‘much less’ than small ones

Borrowers keen to get their hands on a large personal loan may be surprised to hear that rates for such arrangements have fallen to their lowest level in years.

This is according to Moneysupermarket.com, which revealed that rates for smaller personal loans of amounts such as £3,000 or £5,000 have been skyrocketing for the past few months and are now at their highest peak in a decade.

As a result, the price comparison site has claimed a so-called two tier loan society has been created and so anybody with a clean credit rating can borrow larger amounts – for instance of £7,000 or £15,000 – at just 6.8 per cent, while people looking to borrow £3,000 could end up being charged twice this amount.

The website revealed that lenders are affixing such steep fees to relatively less generous amounts because they are no longer bringing in any revenue from payment protection insurance after a High Court ruling against the banks in April concluded the industry was mis-selling this cover.

Head of loans and debt at Moneysupermarket.com Tim Moss said: “For families in need of some extra cash to see them through these difficult times … a personal loan can be a great option. However, recent moves in the loans market mean you will pay much higher interest rates if you have an imperfect credit file.”

And it seems more households are indeed turning to borrowed funds to see them through the downturn, as the price comparison site revealed last week that a third of consumers have increased their unsecured debts in the last year.

By Paul Thacker