The credit crunch is hitting interest rates on unsecured loans hard, with many lenders becoming tougher on their loan approvals, according to research from independent financial comparison website moneyexpert.com.

A personal loan of £5,000 now has an average interest rate of 9.5%, while that offered on a loan of £7,500 is 7.97%.

Sean Gardner, chief executive of moneyexpert.com, said: “Borrowers are feeling the pinch with those wanting to borrow less getting squeezed the most.

“It may seem paradoxical but you will be charged more on average for borrowing less.

“There are fewer competitive deals around for people borrowing £5,000 than for those wanting £7,500.

“Lenders take the view that those borrowing more are in general a better risk than those borrowing less and offer better rates as a consequence.

According to its research, 1.91 million adults were turned down for unsecured personal loans in the six months leading up to September 30th, compared to 1.39 million people in the previous six months.

Gardner added: “There are still good deals out there if you need a personal loan but borrowers need to be aware that lenders are getting tough on applications and rates.”