Interest rates on unsecured loans are expected to rise, experts have warned, as a result of the calls for stricter rules on payment protection insurance, as well as the continuing impact of the credit crunch. A recent investigation by the Competition Commission revealed that banks make a £1.4 billion profit from Payment Protection Insurance (PPI) every year – findings which have encouraged the watchdog to seek a cap on PPI premiums.
New research from Defaqto.com has revealed that an increasing number of unsecured loan applications are being rejected, whilst those that are successful are issued with a higher interest rate than previously. Nationwide, for example, are rejecting roughly 60 per cent of applications according to the research, and are instead focusing on acquiring higher quality businesses.
Payment Protection Insurance is sold to customers as a form of insurance against illness or redundancy, with the insurance subsequently covering the cost of missed payments. However, banks have been found to severely overcharge customers, charging £3,000 in PPI for a £7,500 loan when the actual cost to them is around £500.
Unsecured Loan Rates Set to Rise
Mon, 23 Jun 2008
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