According to MoneyExpert.com, average rates for personal loans of less than £5,000 have increased dramatically in the past six months while rates for £5,000 or more have fallen or barely moved.
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And it is people classed as having poor credit records who are suffering around 60 per cent of searches on MoneyExpert.com in the last three months for loans of under £5,000 were by people regarded as having adverse credit records.
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Sean Gardner, Chief Executive of MoneyExpert.com, said: The less well-off and those with poor credit records are being stung with higher charges for loans as banks and building societies cash in on rising interest rates.
It really is the case for the customer that bigger is better when it comes to personal loans. The more you borrow the better the deal you get. The less you borrow the more the lenders cash in.
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MoneyExpert.com analysis shows that average rates on loan values under £5,000 have increased in real terms by around 1.4 per cent in just six months – a proportional increase of some 10.27 per cent.
The average APR of a £1,000 loan has increased from 14.63 per cent in November 2006 to 16.1 per cent now. A typical £2,500 loan used to cost on average 14.13 per cent but now costs around 15.41 per cent, and rates on a £3,000 advance have risen from 12.35 per cent to 13.8 per cent.
However, MoneyExpert.com research shows that £5,000 personal loans have actually got cheaper with average rates dropping from 8.74 per cent to 8.62 per cent while rates on the largest amounts have remained relatively static at around 7.5 per cent despite four Bank of England base rate increases.
Gardner said: Lenders have kept rates down on larger loans despite Bank of England increases while pushing up rates on smaller amounts.
The fact that loan firms are focusing on keeping their big borrowing competitive suggests those looking for modest loans are seen as small fry. Fortunately there are still some very good deals to be had so the trick is to keep abreast of market developments and shop around.
Loan firms offering deals below 7 per cent on sums of £2,500 include Zopa, Yourpersonalloan.co.uk, Northern Rock and Norwich & Peterborough Building Society.
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According to MoneyExpert.com research, more than six million people have consolidated their debts in the past three years in a bid to get their borrowing under control.
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