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While the recession has galvanised many Britons into trying to pay off their debts, it has also left many short of money.
Taking out a personal loan is one of the most common ways of bridging the gap, and can also prove a useful way to reduce interest payments for those with large credit card debts.
But unlike the Bank of England base rate, now at 1%, personal loan rates have moved in the other direction, with cash-strapped banks fearful of lending to consumers during an economic downturn.
What you will pay
Personal loan interest rates have increased by almost 3.5% in the past year and a half and the days of borrowing at sub-6% rates are unlikely to be seen again for some considerable time.
Currently the best loan rates are available from Alliance & Leicester, Sainsbury's, Tesco, the AA, Abbey and Lloyds.
Your credit history
The heavily advertised low rates are only available to those with unblemished credit histories - and you may not get the best rate, even if you are accepted as a customer.
For example, Platinum Loans quotes a rate as low as 7.8%, but says "typically" it is 11.4%.
This may seem confusing, as many people assume that the advertised rate is the one they will pay.
Most lenders now price for risk, in other words they examine your credit history - which gives details of your other debts and payment history - before offering you a deal.
The advertised rate must be offered to at least two thirds of those accepted by the bank or loan company.
Got a poor credit record?
People with poor credit histories can still get loans in some cases, but the interest rates they pay are much higher.
The best deal available to someone with a "fair" credit history through moneysupermarket.com, for example, is a Creditplus Car Finance loan with a typical rate of 17.9%. The bad news is that lenders have become increasingly choosy in the wake of the credit crunch.
Tim Moss of moneysupermarket.com says: "To get one of the leading deals, you will need to have a super-clean credit record without any defaults. Even being late with a £20 mobile phone bill will count against you now."
If you are unsure what is on your credit file, it may be worth sending off for a copy of your report from a credit reference agency such as Experian before applying for a loan - especially as denied applications are noted on your file and can count against you.
Experian and Equifax allow you to order a paper copy online and pay with a card. You will need to provide some information about yourself and they will post it to your current address. Go to experian.co.uk or equifax.co.uk. Callcredit has a form on callcredit.co.uk which you can print, fill in and send with a £2 cheque or postal order.
Secured or unsecured?
The interest rate is not the only deciding factor when choosing a loan, though. You must also think about what type of loan best suits your needs.
Most personal loans are unsecured, but homeowners can also borrow against the equity in their property.
Banks and other lenders are often more willing to give you a loan if it is asset-backed - especially if the amount you want to borrow is more than £25,000 - but beware.
As the adverts warn, your home could be at risk if you miss payments on a secured loan.
Paying off loans early
It sounds like a prudent thing to do - but look out for the sting in the tail. Early repayment charges, or ERCs, are the fees imposed if you want to terminate the agreement by paying off the debt before the end of a period agreed at the outset.
ERCs vary from lender to lender, but can be hefty. So it is worth checking the penalties imposed for early repayment before signing up as a result.
If, for example, you opt for a flexible deal, the lender may permit over-payments and lump-sum payments, both of which allow you to clear the debt over a shorter time period than first agreed.
But ERCs are not the only charges to check. While many lenders will penalise you for paying off a debt more quickly than first agreed, they will also charge you if you fall behind with your payments.
Missed payments will be noted on your credit file, making it more difficult to borrow from banks and other lenders in the future, so it is vital to only borrow as much as you know you can afford to pay off.
Payment protection
If you are concerned about the possibility of being unable to make the payments because of, say, losing your job, you can take out payment protection insurance (PPI). But beware: there are many circumstances in which PPI will not pay out. To successfully make a
PPI claim, for example, you must be in permanent employment when you take it out. It is useless for retired people as a result, and most PPI policies will not cover you if you are self-employed and become unable to work.
Other instances in which most lenders and insurers will refuse claims, include if you have to stop work due to stress, a bad back or a pre-existing condition that you failed to mention when taking out the cover.
If, despite this, you are still keen to protect your repayments, shop around before you buy. The vast majority of the UK's 12 million-plus PPI policies are sold alongside a loan or other form of credit, but it is almost always cheaper to take out a standalone policy that covers all your debts.
On a typical personal loan of £7,500 over three years, for example, the monthly repayments with NatWest are £284.93 with PPI or £243.45 without - meaning the PPI alone costs £41.48 per month. But if you take out the Post Office's standalone Lifestyle Protection cover the monthly cost falls to £10.95, giving a saving of £366.36 a year.
The Competition Commission recently found that many consumers are unaware that they can buy PPI from other providers, rarely shop around to compare prices and terms and conditions of PPI policies and rarely switch PPI providers.
It is now introducing measures to stimulate competition. These include a ban on banks selling PPI when selling loans or other forms of credit, and the prohibition of single premium PPI, which is paid in full at the outset.
Where to look for deals
Our website guardian.co.uk/money/debt carries a regularly updated personal loans best-buy table, and in partnership with moneysupermarket.com allows you to compare 500 loan providers. It's also worth looking at moneyfacts.co.uk for the latest deals.
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