By Max Clarke
Consumers pay an average of 12.7% APR on a £5,000 loan- the highest sum in a decade.
At a time of depressed consumer confidence, inflation far exceeding the Bank of England’s target, and reduced household incomes, the public are less able to repay the loans.
This, moneyfacts spokesperson Michelle Slade explains, is the driving force behind the rising costs:
"In a market where household finances are being stretched, the risk of customers not repaying the loan increases and this is passed onto customers through higher loan rates," said moneyfacts spokesperson Michelle Slade.
"A few years ago, lenders offset low loan rates by recouping revenue through payment protection insurance,” continued Slade, “but recent judgements mean this is no longer possible."
The research also showed there is currently a £1,194 difference between the cheapest and most expensive £5,000 loan.
With advertised representative loan rates only having to be offered to half of successful applicants, Ms Slade said some customers could find they are offered higher rates than those shown.