With the credit crunch in full-swing and many families across the country struggling to keep up with their bills, news that the personal loan market interest rates are continuing to rise is definitely bad news. Despite these negative trends though, it is still possible to get hold of a good value loan deal, which would still have considerably less interest than taking on debt on a credit card.
Personal debt
Figures released last month by the Citizens Advice Bureau revealed a worrying number of British homeowners who had sought advice from the advisory service because of the fear of debt. The CAB noted that many families have become increasingly worried about whether they will be able to keep up with various monthly payments especially with high interest rates incurred with certain borrowing methods.
A CAB spokesman said that many of the problems had been compounded by “irresponsible lending” and that many people were struggling with debts of over £15,000 on cards.
"These findings make sobering reading, especially as they are based on data collected just before the worst of the credit crunch began to bite,” said David Harker from the CAB.
"Since then we have seen an enormous rise in the number of people turning to us for help because they have lost their job, so we can expect to see many more people struggling with severe debt problems as the recession continues,” he added.
Personal loans still available
According to analysts Defaqto, the average interest rate on a personal loan for someone with a good credit record is now just over 12%, which is a 1.5% raise from September of last year. But things are not all bleak, particularly if your credit rating is still good.
The Co-Operative Bank is leading the market currently with a personal loan interest rate of 7.8%, which has only risen marginally in the last six months.
An analyst from Defaqto warned those looking for good value personal loans to take into consideration both their credit scores and news that banks will now longer be making profit on PPI deals and may well pass these losses on to customers.
“Lenders are under more funding pressures now and they are reluctant to lend to all but those with top credit scores. The imminent loss of payment protection insurance sales will also hit lenders' profits so they are looking to stretch their margins.,” said David Black from Defaqto.
So if you maintain a good credit record there are still good deals out there on personal loans, which are especially good when compared to high interest short term 'pay-day' loans or using your credit card to rack up debt.
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