Consumers looking for a competitive unsecured loan deal are seeing their options narrowed as lenders continue to hike their rates despite a static base rate.
Comparison website uSwitch.com has detected that in the last four weeks, seven unsecured loan providers have increased their rates by a whole one per cent for new customers, taking the average rate up to 9.07 per cent, from 8.74 per cent this time last year.
A one per cent rate hike on a £10,000 loan over a five year period, can mean a total interest payments will rise from £2,283 to £2371 for the average loan, uSwitch.com has calculated.
Those who use unsecured lending to consolidate their debts in one place will face a significant rise in their repayments as a result of the increased interest rates, uSwitch.com warns, with 1.3 million people taking out an unsecured consolidation loan last year.
Those who take out an unsecured personal loan in 2009 could be facing interest rate payments of £100 more than this time last year.
Lenders who have increased the rates they charge customers in the last month include the Co-operative Bank and its online banking arm Smile, Bradford & Bingley, and Cheshire Bank.
Existing customers are benefitting from lenders' policies of offering them preferential rates, but new customers are being charged higher interest rates, despite calls from the Government for lenders to make credit more widely available to consumers.
Louise Bond, personal finance expert at uSwitch.com, comments: "At the moment, loyalty really is king and many consumers could find a preferential loan rate with their existing provider. It's definitely worth finding out what they can offer you before you search the rest of the market.
"Hiking loan rates in the current climate is just making an already difficult situation practically impossible for consumers."
And, Ms Cuming adds, while mortgage lenders are being put under increasing pressure to lend, they have managed to avoid scrutiny when it comes to unsecured loans. "Much as we understand that the banks are struggling, these are big hikes for people to swallow," she said. "With all eyes on mortgages and savings, it seems loan providers are slipping under the radar slightly."
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