More personal loan pain for borrowers

Michelle Slade, analyst at Moneyfacts.co.uk, comments "It's not only mortgage rates that continue to increase, so too have the rates and monthly repayments on personal loans.

"In the last two weeks alone we have seen Barclaycard (+0.50%), Lombard Direct (+1.0%), The AA (+0.10%), NatWest (+2.50%) and Tesco Personal Finance (+0.6%) all push selected rates upwards. On top of this Barclaycard has pulled the one time best buy product offered through its Masterloan brand.

"Since the beginning of the year more than half of lenders offering personal loans have made changes to their rates. Black Horse has increased rates for those looking for smaller loans by as much as 11.0%, adding £52.68 in additional interest over a year. NatWest has increased rates on the largest loans by 1.5%, adding £1,015.20 to the total cost.

But not all lenders have increased rate.....

"Thankfully it's not all bad news; some lenders have in fact bucked the trend and reduced rates in the last few months. Moneyback Bank, Britannia BS, Yorkshire Bank and Clydesdale Bank have all reduced selected rates since the beginning of the year. In fact anyone looking to take out a £5K loan with Yorkshire Bank or Clydesdale Bank will have seen rates reduced by as much as 7.0%.

What should borrowers be aware of?

Typical rates - Most lenders advertise typical rates but, for some lenders this is the typical rate for larger loan amounts. The rate for a smaller loan may be much higher, so check the rate they offer for the appropriate amount you want to borrow.

Don't assume the rate you see is the rate you will get - A typical rate has to be offered to at least 66% of accepted customers. This means 34% of customers may be charged a higher rate.

Payment Protection Insurance - Taking PPI from the loan provider is very expensive and can add thousands of pounds to your loan. If you do require protection, opt for an independent loan provider such as paymentcare.co.uk or britishinsurance.com.

Shop around - Don't just assume your bank will offer you the best deal. However, don't make multiple applications as these will leave a mark on your credit file which may mean you get offered a higher rate or get declined completely.