All is not lost on personal loans

For borrowers the credit crunch is offering no let up. Average rates on unsecured loans of £5,000 and £7,500 have increased by up to one per cent in the past six months despite the Bank of England cutting rates three times by a total of 0.75 per cent

However, the personal loan market is by no means totally barren, and there are plenty of affordable deals available. Certainly the trend for so-called ‘logbook loans’, where borrowers are charged sky-high APRs (over 400% in some cases), and forced to put their cars up as security, paints a bleaker picture than is necessary.

If you’re after a non-secured personal loan for whatever reason, then can offer some top advice.

Bigger is better

When it comes to borrowing it often pays to ask for more. Research from found that the average rate for a £5,000 loan is now 10.16% compared with 9.45% in November 2007. The average rates on a £7,500 loan have also increased, from 7.97% in November 2007 to 8.88% now, but clearly remain more competitive in terms of the APR being charged.

If you can see a way to restructure your payments efficiently, then, taking out a slightly larger loan could be a better option. It certainly makes sense to take one large loan rather than a number of smaller ones.

Timing is everything

One of the advantages of personal loans over secured loans is their flexibility. Generally speaking the highest sums will require some sort of security but most lenders will offer anything from £500 to £25,000.

The flexibility isn’t limited to the amounts involved either. With a personal loan you should be able to structure your repayment period according to what suits you best – whether it is over a number of years or just three months. It’s important to work out how much you can afford and wish to pay every month and then select chose the period accordingly.

One additional factor to consider is the possibility of an early redemption fee. This is a charge made by some lenders when the loan is paid off before the repayment period is over. If you think that clearing your debt early is a possibility then you should look to avoid loans with these charges.

Top of the table

Loan rates offered tend to be specific to the individual making the application. The better rates will inevitably be offered to those with the best credit ratings. Nevertheless lenders do advertise typical APRs to give an idea of how competitive their products are. For a £5,000 loan those currently heading the table include the likes of MoneyBack Bank offering 7.8%, Abbey and Alliance & Leicester at 7.9% and, the AA with a typical APR of 8.2%.

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