Cheap Loans: The Party That Had to End ; BUSINESS & MONEY

Article excerpt

For some years, many people have predicted that the days of personal loans that charged less than 6 per cent interest would come to an expensive end.

This now looks almost certain after the last remaining loan below this level vanished from the market last week. While providers spent much of last year battling for top spot in the "best-buy" tables, rates have edged upwards this year, as companies have decided they can no longer afford to offer low rates.

Since March, there has been just one provider with a rate below 6 per cent: Masterloan, with an annual percentage rate (APR) of 5.9. But last week it crumbled, and went up to 6.1 per cent.

"With rising bad debts and interest rates, plus economic instability, it is no surprise that rates have been increasing," says Michelle Slade of the financial analyst Money-facts. "Our best- buy loans now include rates ranging from 6.1 to 8.9 per cent."

The lowest rates currently on offer include Moneyback Bank, charging 6.1 per cent, and Northern Rock at 6.2 per cent - both of which are dependent on credit rating.

The scarcity of low-rate deals means Nationwide building society makes it in to the best-buy table with a rate of 8.9 per cent.

Ms Slade warns that the rates on personal loans do not react to a base-rate rise straight away. …