The price of personal loans has increased, in the effort of the crackdown in the selling of payment protection insurance (PPI).

Loan providers, were making a substantial amount of profit from selling PPI with their loans, however after being warned by regulators to stop mis-selling these products, they had to gain their profits from raising the cost of their loans.

Tactics such as telling the customers that they had to purchase the PPI to receive the loan, as well as charging the borrowers for the PPI without explaining the product to them, were used by the lenders.

Two competitive loan providers, Moneyback Bank and Alliance and Leicester have both increased the rates on their loans, by a whole per cent in the last year. The one per cent increase on a loan of £5,000 over five years, will cost an extra £3.76 per month, but at the end of term, an additional £188 would have been spent.

Darren Stevens, director of customer services at Chelsea Building Society said: "Whereas previously Britons could rely on their family members to bail them out when they got into difficulty, now when they turn to their families as a last resort they might find that their families are also suffering the pinch. A lack of extra funds means that families have to help each other out in non-financial ways.

He added: "Britons should start taking control of their own finances through proper financial planning and saving."