APR on £5,000 loan soars to 13.9%

Story link: APR on £5,000 loan soars to 13.9%

It appears that despite interest rates being held for one year at the historic low of 0.5%, rates on personal loans continue to soar.

Research carried out for The Independent by personal finance group Defaqto found the average annual percentage rate (APR) has soared in the last two years.

http://www.independent.co.uk/money/loans-credit/massive-rise-in-interest-rates-on-personal-loans-1917782.html

Banks and building societies have raised the cost of unsecured borrowing even as the Bank of England base rate has plummeted – between March 2008 and this month, the Bank’s benchmark fell from 5.25 per cent to a 300-year low of 0.5 per cent. Over the same period, the cost of servicing a £5,000 loan on a three-year term, for example, has increased by £352 to £1,143.

During the same two years, which includes the six-quarter recession that ended in September, lenders have increased their APR on credit cards to a 12-year high of 18.8 per cent.

Banks are believed to be using the high rates to discourage unsecured borrowing, as they repair damage done to their balance sheets by reckless lending that threatened to push several into bankruptcy.