The Ultimate Personal Loan Guide Part 2: Chapter Four - UK Interest Rates on Unsecured Loans

Searching for an unsecured personal loans with a good UK interest rates?
Personal Loans Now looks at lenders habits and important information of what to look out for when applying for a loan.

UK interest Rates - Personal Loans Now

Learning Highlights
  • High competition to sell personal loans
  • Best interest rates are at an all time low
  • How to search for the best interest rate on loans
  • Low credit scores and interest rate on loans
  • The employed, self-employed and age limits
  • Finding Reputable and ethical lenders
  • Alternative solutions, credit unions and peer to peer lending.

UK Interest Rates On Unsecured Personal Loans

There is a vast array of lenders, both banks and other types of financial organisations, which are all trying to sell as many loans as possible. This means that if you have an excellent credit record, lenders could offer you very low rates of interest. Those who have a low credit score or their credit records show details of late payment or defaults; it can be difficult to find a good deal.

Interest Rates Continue To Fall

During the latter part of 2016 and in the early part of 2017 personal loan interest rates in the UK have been steadily falling.

In 2010 the average personal loan rate was 12.4% which was an astounding 11.9% above the bank base rate.

Rates for early 2017 are as low as 3.3% which is the lowest ever recorded and a rate that is better than some mortgages. This rate is on offer for loans of between £7,500 and £15,000 over a term of five years.

The latest figures show that inflation rates are steadily creeping up. As Brexit is approaching, there is a real chance that the Bank of England will decide to raise base rates.

UK interest Rates - Personal Loans Now

This might easily push up rates for loans. So, with low rates currently available, is this the right time for you to consider taking out a fixed rate unsecured loan?

Interest Rate: What is the Right Kind of Personal Loan For You?

The type of loan that will be right for you will depend upon a lot of factors. These include the amount you want to borrow and over what term, what the loan is required for, your credit status and whether you want a revolving credit loan (one that offers top up amounts) or whether you want a fixed term loan for a set amount.

How Do I Find The Best UK Interest Rates For A Personal Loan?

Having established that you do want a loan, you might be tempted to go to your bank and make a straightforward application. This could be a mistake. Banks will rarely offer existing customers the same low rate deals that they will offer new clients. After all, you are already an established client, and banks are trying to increase their customer base. One way that they achieve this aim is by offering lower rates of interest to new customers.

UK Interest rates - Personal Loans Now

There are many money advice comparison websites where you can check out the latest deals on offer. All lenders must quote the Annual Percentage Rate for loans. This way, you can easily see which ones are offering the best UK interest rates.

However, it is also important to look at what is included in the loan. Check the terms and conditions of any loan and any extras such as set up fees or insurance that may be included in the headline rate. In this way, you will be fully aware of the total cost of the loan.

UK Interest Rate: What Happens If I Have A Low Credit Score?

If you are unfortunate enough to have a low credit score, the UK interest rates for loans will be more than advertised. Even if companies advertise ‘bad credit personal loans with guaranteed instant approval’, be prepared for a very high-interest rate.

Some lender’s websites include a loan eligibility calculator. You can enter detailed information about your circumstances as well as the amount you want to borrow and the term of the loan. Making use of this kind of calculator tool allows you to see what you will be offered before making an actual loan application.

UK Interest Rates - Personal Loans Now

Remember that every time you make an application to borrow money, this information is recorded on your credit file. Lenders regard multiple applications as an indication that you are a risk. Many applications made at the same time to different lenders will cause your credit score to go substantially lower.

Employed And Self Employed Applicants For Personal Loans

Both people who are in regular employment and the self-employed can apply for a loan. Once again the financial and employment circumstances will affect what interest rate is on offer. Some lenders specialise in loans for the self-employed, and if this is your situation, you may get a better interest rate offer using one of these.

What are the Interest Rates for Age Limits For Unsecured Loans?

Age limits are another feature that you could come up against when applying for a loan. Lenders have different criteria when granting personal loans. Some businesses specifying a minimum age limit of 21 whereas others will accept applicants from the age of 18.

Maximum age limits can also vary. Some lenders only accepting applicants up to the age of 60. This means even those employed over 60-year-olds and well able to afford the repayments.

UK interest Rates - Personal Loans Now

Both younger and older borrowers will usually be asked to pay a higher rate of interest than applicants within the ‘normal’ age limits of 18 to 65.

While being younger or older may prove restrictive when it comes to getting a low rate of interest, it does pay to look around as the loans market is still fiercely competitive

Interest Rate and Changing Attitudes

Being older does not mean that people stop needing loans. Lenders are gradually realising that the population of the UK is both living and working longer. Many retired people may want a loan to pay for some home improvements and do not want to cash in an ISA. Or, they may have money in a savings account that requires some months given notice of withdrawal.

Lenders appear to be more reluctant to accept an applicant who is over 70. This is because the loan is unsecured and they could experience a problem if the customer is suddenly deceased. So, if you are close to the minimum or maximum age limits you may be able to get an unsecured personal loan. Be aware that it would probably include a higher rate of interest.

UK interest Rates - Personal Loans Now

Older applicants will need to show proof of income in retirement. If the older borrower had paid off their mortgage before the credit data began to be collected and shared, the credit reference agencies might not have a credit record for them.

Finding An Ethical Lender Offering Best Interest Rates

The Financial Conduct Authority regulates all reputable lenders. But, not all of them are ethical lenders. Ethical lenders may very well refuse you for an unsecured loan. These are trustful lenders that provide ethical and responsible lending, operating under a code of conduct.

The trusted lender will always take into account your full personal circumstances. If they feel that it is not the right choice for you at present, they won’t offer a high-rate loan but instead will turn you down. If this happens, there are other routes to lending money including peer to peer lending and credit unions.

High Interest Rates? What Are The Alternatives To A Personal Loan?

There are several alternative routes to go down if you are unable to get a low-interest rate loan.

In the UK (and other countries) there are credit unions. These are non-profit making cooperations where you can borrow money at low-interest rates. Search on the Internet or look in your local newspaper for information about these kinds of lenders. Alternatively, a debt charity like Shelter Debt Management or the Citizens Advice Bureau will be able to help you find out more about this kind of borrowing.

Peer to Peer Lending is a new form of borrowing and lending which is gaining acceptance in the UK. The people providing the loans are individuals. The Peer to Peer Lending website will put you into contact with people lend money. They will sometimes lend at lower UK interest rates than those offered by banks or building societies.

In the UK alone, the P2P industry has lent £7,976,097,445 in just over ten years. That’s enough to fund the entire Manchester United first team squad for more than 28 years.
– FundShare

Of course, the lenders also perform the usual credit checks. Each P2P agency applies its own rules as well. One of the advantages of this kind of borrowing is that, unlike banks and financial organisations, there is often no lower borrowing limit. This means that you can borrow a small amount and sort out your financial problems without getting into large amounts of debt.

Fee for Service

Just be aware that peer to peer lenders websites will charge a fee for the service. The Financial Conduct Authority regulates peer to peer lenders. This means that you can be secure in the knowledge that your lender is reputable.

No one wants to pay more for a loan than they have to. If you can only get a loan at a very high rate of interest then maybe the time is not right to borrow. Also, if you do decide to go ahead then make sure that you take a loan with a fixed interest rate. Current indications are that personal loan rates will rise sometime in 2017.

The alternative borrowing choices mentioned may be of some help. But perhaps a rethink about whether you really need to borrow is a better option. Unsecured loans have many benefits especially if the rates are low. Paying back high amounts in interest can lead to financial problems.

Summary: Interest Rates

In this chapter, Personal Loans Now looked at interest rates for personal loans. There is a great deal of competition amongst lenders, but they will only give low rates to the low-risk customers. UK Interest rates are at an all time low if you have a good credit score. Interest rates may rise soon though. We also looked at ways on how to find the best UK interest rates.

Furthermore, employed and self-employed applicants and age limits affect interest rates on unsecured loans. Ethical lenders will often refuse your application if they feel you will not be able to repay. Next, we looked at other alternatives to the standard loans. These were credit unions and peer to peer lending. Finally, we mentioned the problems that could occur if you borrow money at high rates of interest.

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