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Cost of borrowing has surged in last 12 months

The cost of borrowing has soared in the last year as the days of cheap credit seem to have come to an end, new research has shown. Data conducted by price comparison site found that unsecured personal loans for small amounts have been subject to the most pronounced increases, with the cost of a loan of £1,000 surging by 4.1 per cent in the last year. The rise has brought the average interest rate charged on a loan of this sum to 18.5 per cent - up from 14.4 per cent in March 2007. However, many providers are charging much more, in particular Black Horse, which offers a £1,000 loan with an interest rate of 27.9 per cent. Michelle Slade, an analyst with, said: "Anyone looking to take out a loan in 2008 is going to find themselves faced with having to shell out more by way of monthly repayments than they would have done over the last couple of years. "The ongoing credit crisis has seen institutions concentrating on getting money in the door and becoming more expensive and selective when lending money out."

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