Those consumers looking to take out a low-rate loan could be well advised to apply for such a product online, it has been revealed.
Research carried out by uSwitch indicates that some 32 lenders have increased the interest attached to their personal loans since £200 loan no credit check the Bank of England raised the base rate in July. With the loan rates offered by these suppliers up by an average of 0.93 per cent – and in some instances as much as three per cent – borrowers could be on track to see more of their disposable income going towards loan repayments. However, the price comparison website suggested that those who have applied for a loan, either in person or by telephone, may develop even more financial difficulties.
Since July, those who have applied for a personal loan offline have seen the annual percentage rate (APR) they are charged rise by one percentage point to 8.7 per cent. On the other hand borrowers opting for an online loan pay some 7.7 per cent in APR. According to uSwitch, taking out a 10,000 pounds loan repayable over five years would see offline borrowers be charged some 2,273 pounds in interest, in comparison to online loans applicants who would pay 2,006 pounds – a total difference of 267 pounds.
However, research from the price comparison website also advised those considering taking out personal loans with their bank to do so with caution. Pointing to a number of financial services providers who offer ‘personal pricing’ for their offline applicants, it was suggested that consumers could be losing out on getting cheap loans as such suppliers do not advertise a typical APR, instead giving them a personal rate.
Mike Naylor, personal finance expert at uSwitch, said: “There are already huge variations in the loan rates available to consumers amongst both online and offline deals. Throwing the personal pricing smoke screen into the melting pot is just causing further confusion, making it a complete minefield for consumers to shop around and get the best deal. It is far from transparent and a perfect way for the big banks to prey on loyal customers that trust their existing bank to provide them with a competitive deal.”
Consequently, Mr Naylor advised those looking to apply for a loan to take the time to search for the right deal for them. This comes despite the warning that the availability of personal loans with interest rates of less than six per cent “is now just a distant memory”. “However, the market is vast and there are still competitive rates for those who take the time to compare the offers available,” he added.
Earlier this month, research carried out by the Resolution Foundation suggested that implementing a code of practice for price comparison websites could help borrowers search for cheap loans and other monetary products more effectively. By doing so, the firm indicated that the nation could become more knowledgeable when taking out a loan. The study also showed that 45 per cent of Britons have used such a portal over the past year to help them make a financial decision.