As if the UK debt market isn't at busting point already, there
are several Loan companies vying for new customers and the year
has just begun. January is the busiest month of the year for
loan applications so it is basically a feeding frenzy for the
loan companies. What is the UK debt situation going to look like
at the end of the year?
Personal loan rates are dropping all the time and at the time of
this article being written one of the more competitive rates
being promoted in the market is 5.5%. This applies to loans from
as little as £1,000 to a max of £25,000. On the face of it that
looks like a good deal but always remember that most lenders
will reserve their best rates for those that are borrowing over
There is a base rate drop on the cards this year and all the
loan companies are factoring this into their rates on offer. The
rates may seem attractive but if the interest rates drop then
you may be a % point worse off if you have locked yourself into
one of these low rate loans now.
There are a lot of people that are still paying off their debt
from last years Christmas season. The attractive rates on offer
at the moment are just going to perpetuate the borrowing cycle.
Is this not what the banks want? If you take out a loan you are
going to get the hard sell in order to take out payment
protection. This is entirely up to the borrower but in many
cases it has been shown that the cost of the protection is
extremely expensive and should you need to be covered you will
find that there are several conditions that apply so beware.
Banks make an absolute fortune from this as only a small % of
people actually end up having to claim. Think of it this way:
You get a loan for 5.5%, you take out payment protection and
that extra charge on your card every month in real terms
actually pushes your interest rate up by about 0.5%. This means
you are actually paying 6%. There has been a lot of press lately
about the mis selling of PPC so again be cautious.
I won't mention all the companies that are fighting for your
business but you can be certain that when you open that magazine
you have just bought about 2 lbs in weight of loan brochures
will fall from the covers.
The general rule of thumb in the industry is that two thirds of
all applicants should qualify for the APR advertised but
unfortunately only those with excellent credit ratings will get
this rate. Others will be hooked into slightly higher rates so
what you see advertised is not necessarily what you get.
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