Loan rate trends see wide contrast

There has been a significant contrast between the way annual purchase rates (APRs) have changed for larger and smaller loans, a survey has found.

There has been a significant contrast between the way annual purchase rates (APRs) have changed for larger and smaller loans, a survey has found.

A study by Moneysupermaket.com has indicated those looking for an unsecured loan as a means of debt consolidation to pay off a more expensive deal taken out in the past could be in luck, as the average deal over £5,000 has dropped to a four-year low.

Such deals have been falling in price since peaking last year among the top ten lenders, the survey showed.

The typical £7,500 loan now costs 6.79 per cent, with this APR down 1.48 per cent since the 2010 peak.

However, the situation is very different for smaller loans and these may lead people into deeper debt.

A £3,000 loan will cost 15.5 per cent on average, up 4.55 per cent on 2007 levels.

Head of loans and debt at the site Tim Moss suggested rates will probably rise as Christmas approaches before falling again in the new year, stating: "We can expect to see some more inventive propositions entering the marketplace for 2012 as competition increases."

Mr Moss went on to warn: "The decision to borrow should never be taken lightly; consumers needing an injection of credit should keep an eye on rates, particularly at the moment," adding that a European directive means only 51 per cent of customers will get the advertised rate and therefore the costs will be higher for those without an unblemished credit record.

According to debt charity Credit Action, Britons pay £174 million a day in credit interest.

By Joe White
 

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