Smart Loans

Should unsecured personal loan interest rates be capped?

22nd Sep 2010

Brand-new statistics which have been compiled by YouGov suggest that almost 70% of people believe that interest rates on unsecured personal loans are too high, and that they should be reduced significantly in order to make them more practical. This comes despite the fact that these types of loans are riskier for lenders to offer to their consumers.

Some of the suggestions from consumers primarily include a cap on the rates which lenders can levy to their borrowers across unsecured and secured credit outlets.

There are also criticisms from consumers that there are not enough forms of credit readily available, and that unsecured personal loans and other short-term finance solutions should be offered through more platforms, such as Post Banks and Credit Unions.

However much demand there might be for reform in the unsecured personal loan sector, there is no guarantee of such progress being made. Recent pledges by the Coalition Government gave the bodies which regulate things such as credit cards the right to question interest rates which they believe to be too high for the market. However, the powers do not extend to short-term credit solutions like payday loans, or the longer-term financial support that unsecured loans can provide.

Gavin Hayes, who has been analysing the findings, had this to say regarding the consumer response: “These findings show that the government’s plans for credit reform don’t go far enough. The public feel that just capping excessive credit and store card rates falls short – they want caps on the cost of credit to cover the whole of the unsecured credit sector that causes so much misery for thousands of people in the UK that can least afford it.

All of these findings have emerged as more insight has been provided into how much the average adult in the UK owes in debt, once the outstanding amount is distributed evenly. When unsecured debts such as unsecured personal loans are included, the figure is believed to stand at £18,000 – and this does not even begin to consider the mortgages which many consumers will be paying throughout the current economic downturn.

Comparison websites have become ever more important over the past couple of months because of the high interest rates which are being levied onto many consumers. More people than ever before are using these services in order to compare and contrast the options which are available to them: not only in the form of favourable interest rates, but the amount they can borrow, the duration they have to repay the money, and the factors which are needed to be an eligible candidate.

New suggestions for getting the best deal with unsecured personal loans include negotiating the overall APR – an approach which can be ideal for those who might be buying a new car. It has been seen that a person could save a substantial amount of money over the period of the unsecured personal loan if they are able to have the APR adjusted in accordance with their ideal budget.