Jeff Christensen
Banks have hiked their personal loan rates by as much as 1.7% since the Bank of Enlgand cut interest rates to a record low in March, new figures have shown.
The Bank of England made the drastic cuts to the base rate in a bid to grease the gears of the economy and get cautious banks lending again.
However, it seems many have taken this opportunity to further hike their profits margins.
Source: Moneyfacts
Costs keep rising
According to finance site Moneyfacts, lenders have added £335 to the cost of the average £25,000 personal loan in the last six months alone.
This means the cost of a £25,000 personal loan has risen a staggering £1,804 since the crunch began, and Moneyfacts spokesperson Michelle Slade warns that further hikes are on the cards.
"Lenders have continued to tighten up their lending criteria, with only customers with blemish-free credit records likely to be accepted for a personal loan," she said.
"It is highly likely that new customers are paying an increased premium to cover the defaulting customers who took out loans the previously more competitive rates.
"The upward trend in rates looks set to continue. Anyone in need of a personal loan really needs to ensure they do their homework to find the best deal possible or they will be left severely out of pocket."
Scrappage fuels loan demand
What will further compound public anger is the fact that these increases are occurring at a time when many people are looking for loans.
Figures from Sainsbury's Finance show a 37% increase in value of personal loans for cars due to the government car scrappage scheme, which offers a £2,000 discount to anyone trading an old car for a more economic version.
An estimated £61.2 million worth of loans a month have been taken out to purchase cars in the UK since May 18, compared with a monthly average of £44.7 million in 2009 before the introduction of the scheme was introduced.
Source: Moneyfacts
Loan not always the best deal
One final thing to keep in mind is that, if you're only looking to borrow a small amount, then personal loans are often a bad deal.
As the first table in this article shows, the average APR on a £1,000 loan is over 19% - that's even higher than the typical APR on a credit card.
A far cheaper option would be to opt for a 0% new purchases card and pay off the debt as soon as quickly as possible.
If you still owe money by the time that interest-free offer expires (the top 0% new purchase offers last around 10 months), you can switch the debt to a balance transfer card.
The Banks are ripping us off once again. The Bank of Scotland informs us that new interest charges are being introduced in respect of overdrafts on current accounts as from 6th December 2009. On an arranged overdraft of up to £2500 the banks will charge £1 per day for every day you are in overdraft. On arranged overdrafts over £2500 charges are £2 per day and in you happen to go into debit on an unarranged overdraft then the banks intend to charge us £5 per day. In essence a small borrowing from the Bank means astronomical interest being charged which can result in a sizable headache for the unwary or the poorer customer who has no other means of securing monies to get them over a period of time. These potential interest charges can be even higher than those charges being metered out by illegal loan sharks and in my own (and of course humble) opinion are tantamount to theft.
These fat cat greedy rats (Bankers) ought to be put up against a wall and shot given the state they have left us in. The Banks should not have been bailed out with our public funds and should have been left to go to the wall given their greed and I would hazard to say frauds of recent years. Shame on you Bank of Scotland and others who will no doubt follow suit.
I agree whole heartedly with Areasonthinker.I wish there was someone out there, with a bit of clout and dosh to spend, to actually take on this bank with a landmark THEFT case as it is really tantamount to theft.
Thank God we moved on from them as they were really rubbish.
Abbey use to "deliberately" plunge us into overdraft on our Current Account for years,so that we can incur a CHARGE of 39.00Pound. Normally as a result of either WITHHOLDING Debit orders for a specific day or switching the timeline of transactions to suit them and plunge us into overdraft.
My wife once phoned telephone banking, and had a bitter fight with some bimbo who obviously had a fat hang-over, and/or her periods,was downright rude, and flatly refused to CREDIT OUR £39.00.
A few hours later she tried phoning again,got through to a very helpful gentleman,who recognized the bank`s mistake immediately, and instantly CREDITED our Account with the £39.00 charge.
The NORMAL excuse is always "computer says nooooo" however on various occasions it was pointed out that, although the whole system maybe electronic, there IS ALWAYS SOMEBODY HUMAN PUTTING THESE INPUTS into the computer. Most of the time we were met with total silence when you point this out to the operators. GREED is unfortunately one of the biggest 7 deadly sins....