Loan rates getting more expensive

Lisa Taylor, analyst at Moneyfacts.co.uk, comments: “Although not directly linked to base rate, a trend has emerged that loan rates are being tweaked quite quickly following base rate rises. However, the size of the rate rises do not always correlate with the increase in base rate, take the examples below, where the loan increases are anything up to one per cent for certain loan amounts. So with that said there must also be other factors contributing towards these rises. Perhaps it’s a combined effect of rising costs and bad debt provisions.

“Despite the rises we have seen over the last 12 months, there are still some very competitive deals to be found, especially if you are looking for loans of £5K or above.

“However smaller loans are becoming far more expensive, with rates of 20% now commonplace - almost 3.5 times the level of base rate. If you’re looking to borrow under £5K, then it’s worth looking at other forms of credit. For short term borrowing a 0% credit card deals should be first choice, but for those looking to spread their debt repayments over a longer term, low standard rate cards with purchase rates under 10%, are a competitive alternative. Marks and Spencer money are still offering a balance transfer for life rate of 4.9% APR on their & more credit card with no balance transfer fee, which looks extremely good value in the current market.”