6:36 am, January 27, 2009
UNSECURED personal loans have become significantly more expensive for borrowers, it is reported.
Loan rates have jumped by up to 3.5 per cent in 18 months, reports comparison site moneyfacts.co.uk.
A car buyer would have been able to source a loan for an average rate of 8.6 per cent in June 2007.
Today, the same average rate has leapt to 12.0 per cent – meaning a 3 year loan costs an extra £262 in interest.
The dearer the car, the bigger effect any interest rare rises have, too. A 5 year loan for £25k means, today, buyers are paying an extra £1,468 in interest.
Moneyfacts analyst Michelle Slade said: ‘Base rates may be at a historically low level, but anyone needing a personal loan has seen no benefit.
‘With stricter lending criteria, it is now much harder to be accepted for a loan. If you are, you will be paying a premium for the benefit.
‘The risk of customers defaulting on unsecured lending has increased. As a result, borrowers are paying a significantly increased rate than they were 18 months ago.’
It means the case for in-house finance is more compelling than in years. Manufacturers are still able to source competitive rates, which means car buyers are often better off by using dealer finance.
The obvious benefit to dealers is an extra source of revenue from commission.
It is imperative dealers point out these benefits to customers, if they are to both make more money, and save money for their buyers.
