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Cheap loans getting harder to find
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The number of cheap loans available in the UK is getting smaller, new figures reveal.
There are now just four unsecured loans available charging less than six per cent interest, and as the government cracks down on loan insurance these could well disappear as well.
"At this time of year, when many of us are still recovering from the after effects of our Christmas spending or perhaps trying to commit to our new year's resolutions to sort out our finances, personal loan rates are creeping up again," said Michelle Slade, personal finance analyst at Moneyfacts.co.uk.
Figures from the comparison service show since the start of January eight lenders have upped their interest rates, some by as much as eight per cent.
Currently 40 per cent of £5,000 three-year loans charge more than eight per cent interest and 16 per cent of loan providers charge more than ten per cent.
"With a difference of 14.8 per cent APR, between the most and least competitive rates, shopping around for the best deal is an absolute must," Ms Slade said.
"Choosing the wrong deal could be the difference between paying £180 per month or £151 and incurring almost £1,044 extra in interest over the three year term."
For people moving smaller amounts of money, she recommended credit cards with a life of balance deal - considering these are available charging just 3.9 per cent for the life of the balance with no up front fees - rather than looking for a cheap loan.
But she warned these deals might not always be better value.
"If you do opt for one of these credit card deals, as opposed to a personal loan, the real way these will save you money is to maintain a repayment level similar to that on a structured loan, otherwise making only the minimum repayments will extend the loan term, incurring more interest," Ms Slade said.
"Remember if you are shopping around for a personal loan, first check out other options available to you. Dependent on the loan size and term, other forms of lending such as credit cards, flexible loans or, in some cases and for larger amounts, a further advance on your mortgage may be more suitable.
"Secondly, always check you are getting the most competitive deal, for both your interest rate and if applicable any insurance cover. You will be committing to a long term deal, so making sure you get it right at the start can save you hundreds of pounds in interest."
Source: http://www.myfinances.co.uk
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