BORROWERS are facing a boost in costs, with a few loan rates hitting their highest in six years.
It comes just days before the Bank of England is anticipated to hike the base rate again and for the seventh consecutive time.
Financial specialists at MoneyFacts have released new data on the price of charge cards and unsecured personal loans in their Unsecured Lending Trends Treasury Report.
The figures come more than a month following the Bank of England hiked the bottom rate to at least one.75% – the largest increase seen since 1995.
The central bank has increased the speed to assist control rampant inflation which is currently sitting at 9.9%.
However, the cost of borrowing often rises when the base rate increases, as banks usually pass it on to customers.
In turn, this reduces people's disposable income, which in turn drives down demand, assisting to slow any price rises.
But it means individuals will face higher rates when they need to take a loan.
How has got the price of personal loans increased?
Rachel Springall, finance expert at Moneyfacts, said: "In the middle of an expense of living crisis there's been a rise in the cost of borrowing for new applicants on short term loans, with a few average rates hitting their highest levels in over six years."
Several providers increased rates and the lowest rate for new customers stands at 3.1% compared to 2.8% in June 2023, she said.
"Lenders would typically keep this tier competitive as it is popular on your behalf APR, but we're able to see further rises in the future if the danger for borrowers to default is elevated and lenders perhaps being more subdued with pricing competitively."
Individuals hoping to borrow lb3,000 within the next three years face a typical rate of 14.5%, compared to 14.3% this time last year.
Those wanting to borrow lb5,000 over three years are facing an average rate of seven.7% when compared with 7% last year.
The average rate on the lb7,500 loan tier now stands at 5.6%, compared to 4.4% in September 2023, and the highest since January 2023 if this was 5.7%.
And the typical annual interest rate around the lb10,000 loan tier sits at 5.5%, versus4.5% last year.
The figures are average and consider a number of rates available, so you could still borrow at rates which are lower, or higher, depending on your needs.
How have credit card rates of interest changed?
Rachel said: "Consumers who need to borrow within the short-term will discover interest rates on charge cards rose during the third quarter of 2023."
The average rate across all kinds of charge card and including fees has hit a new a lot of 29.6%, she said
"In the last quarter, the market witnessed a brand new high purchase card enter the arena from American Express, charging 439.9% APR, which, along with rate of interest rises from other providers, pushed the average APR to
The average annual rate of interest for charge cards at this time has risen from 26% in September 2023 and 26.6% just last month.
Again the figures are average and consider a variety of rates available, so you your rate might be higher or lower still.
Rachel also said: "Interest-free terms also fluctuated between June and September and both the 0% introductory terms for purchases and balance transfers fell slightly.
"One area that has worsened for borrowers is balance transfer fees, where the average stands at 1.99%, up from 1.95% in June."
Borrowers should carefully compare these upfront fees and the period of any 0% offer before investing in taking out a brand new charge card.
How can one reduce borrowing costs?
Rachel said: "Because the cost of living rises it is vital consumers maintain your loan payments and switch deals if they are being charged interest if they can.
"It is wise consumers check their credit rating before they make any applications for a financial loan or card and seek advice if they're struggling with the money they owe."
The very first thing borrowers can do is try to enhance their credit rating.
Boost your credit score
Get on the electoral register is a must with regards to creating a decent credit score.
This proves what you are where you reside meaning it's easier to get credit if you're out there.
It can also be check the electoral role for any errors. You can sign up by registering to vote.
Don't make a lot of credit applications as possible seen as an sign of bankruptcy – and each application is going to be recorded on your file.
Use a "soft-search" eligibility calculator to exhibit how likely you're to become accepted.
Always pay your bills as late payments will also be recorded in your file.
Try and reduce your overall debt before applying for brand new credit as lenders may be reluctant to give loan to you should you already a lot of debt.
Lighten your loans
If you took out financing a few years ago, it may be worth searching for a better deal.
Using a new loan on a lower rate to pay off an old it's possible to sometimes seem sensible.
But remember, not everyone gets the rates advertised by lenders, because these are restricted to individuals with good credit ratings.
Check which loans you're probably to get with no damage your score by using an eligibility tool like the one on Compare The Market or MoneySavingExpert.com.
Blitz your charge card balance
Do not let credit card debt linger. If you are just make payment on minimum every month, it could take decades to pay off.
Only making the typical 2.5% minimum monthly payment on the lb5,000 balance means it might take you nearly 38 years to pay back and cost nearly lb15,000 as a whole, on the typical rate of interest of 22%.
Switch to a balance transfer credit card to get a window as high as 34 months without any interest charged.
Break the total debt down into monthly payments and set up an immediate debit to ensure you wipe the total amount in that time. If that's impossible, try to switch again to a different card.
But not everyone could possibly get the very best balance transfer deals, as they require an excellent credit rating.
Find out which cards you're probably to get using the eligibility checkers on Go Compare or Uswitch.
Obliterate overdraft charges
Dipping into your overdraft can be one of the priciest ways to borrow, with some banks charging 40% interest – almost double the amount average credit card rate.
Move to some bank with a free overdraft. To pay off larger overdraft debts, a money transfer charge card may offer you an interest-free respite, but beware of high fees.
Most of them can offer you free guidance and help in person, over the telephone or online.
- Money Helper – 0800 138 7777
- Citizens Advice – 0808 800 9060
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000