The loans are out there

Among the many things the credit crunch has brought is an end to the perception that finance is freely available for any and all who want it. While in the past a consumer may have expected to be able to take out a loan with minimal fuss, the fact is that lenders are now far less willing to oblige. However, the need for unsecured loans has certainly not gone away.

Figures release by Halifax have indicated that such options can play a big part in managing financial affairs, with over half of those applying for unsecured personal loans from the bank doing so to consolidate other debts. In addition to these consolidation loans, 23 per cent were looking to finance a car purchase, while 15 per cent hoped to make home improvements.

But while consumers are unlikely to struggle to find a reason for taking out a loan, seeking out a competitive rate could prove more difficult. Sainsbury's has emphasised the need to compare loans after finding that just four companies - including itself - offer an APR of eight per cent or less on deals worth between £5,000 and £15,000.

This is compared to a grand total of 42 one year ago, when the Bank of England's base rate was a full 4.5 percentage points higher than it currently is at five per cent.

Steven Baillie, head of loans at Sainsbury's Finance, remarked: "Our current analysis highlights the fact that the loans marketplace is actually much less competitive than it was 12 months ago. Anyone considering taking out a loan today needs to ensure more than ever before that they shop around to take advantage of the best rates out there."

The findings follow a report by Moneyfacts.co.uk earlier this month, which indicated that unsecured personal loan rates have risen by as much as 44 per cent over the last two years. The price comparison site revealed that this "staggering" increase has affected the typical £5,000 offering, while the average £25,000 loan now carries an interest rate 26 per cent more expensive than in May 2007.

Commenting on this, analyst Michelle Slade noted that loans for people with bad credit histories will not be offering very competitive rates, as only those with "perfect" records are likely to get the best deals.

However, the Sainsbury's research has shown that good rates are still available for those who can find them. So for those eyeing up that new car in the showroom but wondering where to find the money to fund it, Ms Slade offers a simple piece of advice: "Shopping around is key."