Today the average rate on a £5,000 loan stands at 12.7%, the highest level since May 2000.
Michelle Slade, spokesperson for Moneyfacts.co.uk, commented:
"Unlike on a mortgage, there is no security a personal loan debt will be repaid. In a market where household finances are being stretched the risk of customers not repaying the loan increases and this is passed onto customers through higher loan rates.
"A few years ago lenders offset low loan rates by recouping revenue through payment protection insurance, but recent judgements mean this is no longer possible. Advertised representative loan rates only have to be offered to half of successful applicants, so some customers could find they are offered higher rates than those shown.
"With £1,194 difference between the cheapest and most expensive £5,000 loan, shopping around is key. However, borrowers need to be wary of making multiple applications as this will reduce their chances of being accepted.
"Most people's first port of call for a loan is their bank, but in most cases this is far from the cheapest option. The price war between supermarkets isn't just on groceries, it has spilled over into the personal finance market.
"On nearly all loan amounts the supermarkets have the most competitive rates."
