Rates on personal loans are at a seven year high

Interest rates on personal loans are at a seven-year high, according to financial analyst Moneyfacts. In wake of the credit crunch, lenders have tightened their belts and passed the cost of higher risks to their customers.

Michelle Slade, of Moneyfacts said: "Since August 2006 the average rate on offer for a 5,000 loan over three years has increased from 8.1% to 11%. With no signs that conditions are going to get better in the near future, rates could move much higher."

The cheapest deals on a 5,000 loan are similar to seven years ago. Back then, the best deal was from Northern Rock at 8.5%; the best today is from Moneyback Bank at 8.4%.

If you borrowed 5,000 over 5 years with Moneybank Bank, your monthly repayment without payment protection insurance would be 101.69, with the total amount payable being 6,101.40. So your total interest charges over the 5 years would be 1,101.40.

In the past month or so Bank of Ireland, Bradford & Bingley, Lloyds TSB and Marks and Spencer have all hiked the rates on their personal loan products.