Report points to loan cost increases

A new report has highlighted the extent to which the costs of borrowing via a personal loan have increased in recent months.

Figures compiled by Defaqto have shown that when the base rate of interest was last at five per cent in December 2006, the cost of borrowing £2,000 over a 24 month period was 3.2 per cent less than is currently the case.

The same comparison applies to £10,000 loan deals to be paid back over a 48-month period, which means becoming debt free has become more of a struggle for British consumers in the past 18 months.

Additionally, the firm behind the recent research has suggested that many of the UK’s leading lenders are rejecting far more people for loans than was the case in late 2006, with some now turning down a majority of applicants.

A review was launched last week by Finance and Leasing Association, the Royal College of Psychiatrists and the Money Advice Trust into the link between debt management difficulties and mental health problems.

By Dan Mather