Thursday 17th of December 2009
If you have taken out a number of loans this year to see you through the recession then you may have noticed the interest rates have shot up on such unsecured borrowings, although an individual voluntary arrangement (IVA) could freeze the interest on your debt.
At the start of 2009, a personal loan of £5,000 over three years had an interest rate of 12.0 per cent, at a time when the official base rate was three per cent, Moneyfacts.co.uk states.
When the base rate dropped to its current level of 0.5 per cent, you may have thought any subsequent loans you took out would enjoy a lower interest rate.
But the average rate on the same £5,000 loan now stands at a typical 12.4 per cent, which could have pushed your household coffers further into the red.
You may find an IVA proves to be the answer to climbing interest repayments. An IVA can freeze the interest on your unsecured loans, which can allow you some breathing space so you can start repaying what you owe.
"As unemployment continues to rise, the risk of customers defaulting on payments increases and this increased risk is being reflected in higher rates," says Michelle Slade, spokeswoman for Moneyfacts.co.uk.
By Ashley Littley
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- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- Information on IVAs may benefit cash-strapped graduates
