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Personal loan rates continue to rise

While the financial press would appear to indicate that all is well in the UK financial sector, with lower mortgage rates and other offers often championed in the press, this is not a situation which is replicated throughout the financial world. A recent survey has shown that the average cost of a £5000 loan repaid over three years has increased by one percentage point from 11.2% to 12.2%. Even though this increase may sound insignificant at face value, it can have a marked impact in the longer term. So why is the cost of borrowing going up?

As we have mentioned are numerous occasions, the increase in the likes of personal loan rates is something of a double edged sword. The financial companies are concerned about clients defaulting on their payments and are therefore increasing rates to protect their profits and their investment, while at the same time placing yet more pressure on other customers as well. This is something of a self-fulfilling prophecy because the higher loan rates creep, the more pressure this puts on UK consumers and the more people will fall into arrears.

The problem is that with rates across the board rising, it is difficult to find value meaning that more and more people are paying a higher and higher price for their personal loans.

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