16 January, 2009

It has been reported that the personal loans have turning out to be increasingly expensive as lenders seek to protect profit margins.

According to a study of personal loan providers carried out by MoneyExpert, the average repayment rate on a personal loan is now increased to 11.4 per cent from just 10.62 per cent.

The rises come as banks are struggling under the pressure of the credit crunch, which has in turn impelled them to increase rates on personal loans and to be more choosy about to whom they lend money.

According to Sean Gardner, chief executive of MoneyExpert, "Over 180,000 people looks forward to merge their numerous debts every month, and the enormous majority planning to seek out an unsecured personal loans in order to avail the assistance to have control over their finances.

"However lenders are cautious of customers' capability to pay off what they owe so are turning out to be more and stricter when it comes to selecting who they lend money to in the form of unsecured personal loans, which do not cater any obligation of pledging collateral against the loan amount. By getting financial assistance through these loans borrowers can easily fulfill their all personal requirements on time."

However, it has been indicated that among the largest rise in the rates have been on small personal loans, with those borrowing £2,500 can subject to a rate of 10.11 per cent, as compared with just 9.93 per cent.