Personal loan rates increasing as Christmas approaches, analysis finds

Personal loan rates are on the increase – just as households start to feel the squeeze from Christmas debts.

The average rate advertised on a £7,500 loan over five years stands at 4.8% in December – the highest level since 2016, according to analysis from financial information website

Average rates on other loans on offer have also crept up in recent months, it found.

The typical rate on a loan at £5,000 over three years is now 6.8%, up from 6.7% in October.

A £25,000 loan paid back over five years has an average rate of 5%, up from 4.9% in October.

  • £5,000 over three years, 6.8%
  • £7,500 over five years, 4.8%
  • £25,000 over five years, 5.0%

Rachel Springall, a finance expert at Moneyfacts, said: “Gone are the record-low rates of unsecured personal loans, as rates have moved in an upward trajectory during the past quarter across the majority of tiers.”

She continued: “It is entirely probable that the risk of economic uncertainties has put pressure on lenders to re-think their pricing during the past quarter.

“Loan rates were pushed to their lowest levels in 2017, so it was only a matter of time before external factors crept in to stir up the market.”

Ms Springall said some borrowers may be looking to consolidate their debts after Christmas.

She said: “While rates are on the rise, there are still some good deals to be had within the ‘best buys’, so borrowers thinking about consolidating their debts shouldn’t be too disheartened.”

She highlighted, for example, a loan from Cahoot, which has a rate of 2.8% for someone borrowing £7,500 over five years.

Ms Springall also said that in general borrowers should bear in mind that the rate they may be offered could differ from the representative APR (annual percentage rate) – as this will depend on assessments of personal circumstances.

Ms Springall said: “It is worth remembering that only 51% of successful applicants only need to be offered the advertised APR of an unsecured personal loan, so the rate seen at first glance right now is not guaranteed to be the same as the rate offered after the application process.”