It has been revealed by a leading financial company, that consumers are paying nearly a 10% premium for their personal loan, and to make matters even worse, lenders are keeping their best deals for existing customers only.

New research has shown that borrowers looking for a personal loan have to pay around 10.32% APR, yet the Base Rate remains at only 0.5%.

Therefore, those looking to borrow £5,000 or less are being hit the hardest, whereas loans of £10,000 or more attract lower rates, nearly 2% less.

In August 2008, the gap between the average loan and base rates was 3.4%, meaning the rates are worse now.

Tim Moss, head of loans and debt at the economic firm said: "Despite the Bank of England slashing Base Rate to 0.5 per cent in March, loan rates have continued to rise, leaving consumers paying through the nose for their personal loans. Borrowers looking for a smaller loan of around £5,000 will be hit harder than those looking to borrow more."

The leading financial group also found that lenders were restricting the best rates for existing customers only:

Competition heating up

"We have seen a recent glimmer of hope as loan rates crept down slightly in August. Competition seems to be returning to the loan market which is great news for consumers; however lenders will need to continue reducing rates if they want to draw customers back, particularly those who want to reconsolidate their debt.

"Banks and building societies are more cautious about who they'll lend to than in pre-credit crunch days, which has made it much harder for consumers to get loans. Some lenders are introducing market leading deals, but these are restricted to customers who have an existing relationship.

"The clampdown on the sale of payment protection insurance (PPI) has caused providers to hike up prices to recoup lost revenue. As a result is has become increasingly difficult to get a competitively priced loan.

"An example of a bank using lower rates for existing customers is Nationwide. With a typical APR of 7.70% (on borrowing between £5,000 and £14,999) the deal was highlighted as the "lowest rate on the market".

Chris Rhodes, product and marketing director at Nationwide, said: "We are rewarding our current account customers with the lowest personal loan rate in the UK. This will be the first of many offers for Nationwide current account customers over the coming months."

There are worries however, that whilst banks favour stable and secure customers, consumers with bad credit history will be left outside in the cold: "It's all part of banks' and building societies' wider cherry-picking strategy", Moss said.

Bag a bargain

Moss reminded customers that the best way to find a bargain personal loan is to shop around and to research what is available on the market.

Moss concluded: "Borrowers need to keep a close eye out for the best deals and ensure they only apply for products they're likely to be accepted for With lending criteria becoming more and more stringent, it's important to keep your credit record as clean as possible and not taint it with failed applications for loans."