Cheap loans ‘close to extinction’

Research by Moneyfacts has revealed that on a three-year £5,000 loan, only four lenders still offer rates below six per cent, while more than 40 per cent of the market charge eight per cent or more; a further 16 per cent charge over ten per cent.

She commented that because consumers are still reeling from their Christmas debts, it is unfortunate timing that loan rates are “creeping up again”.

“With a difference of 14.8 per cent APR between the most and least competitive rates, shopping around for the best deal is an absolute must,” she said.

“Choosing the wrong deal could be the difference between paying £180 per month or £151 and incurring almost £1,044 extra in interest over the three year term.”

According to price comparison site uSwitch, the average rate across the whole personal loans industry has risen 10.61 per cent to 10.98 per cent over the past year.