UK Money News
19th June 2008
Borrowers hit by higher loan rates
Borrowers seeking unsecured loans are being by increasingly higher repayment rates, as loan providers act to shore up their profit margins in the face of the credit crunch.
According to financial products rating company Defaqto, in December 2006, which was the last time that the base rate of interest was at five per cent, the average paid in interest on a £2,000 loan over 24 months was £95.85.
However, as of June 2008 this sum stood at £98.90.
Repayments on longer term loans for higher sums have also increased, with a £10,000 loan over 48 months now accruing interest repayment of £296.75 - up from £292.01.
David Black, principal consultant of banking for Defaqto.com, said: "Lenders have tightened up their lending criteria and the rejection rate for unsecured loan applicants is higher than it has been in previous years with Nationwide reporting that they're now declining about 60 per cent of applications.
"Many lenders' annual reports now say that they're focussing on the acquisition of better quality business."
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