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Urgent Stock Market Message

UK Personal Loan Rates Tumble to Significant Lows

Personal_Finance / Debt & Loans Jan 26, 2016 - 12:08 PM GMT

By: MoneyFacts


Personal loans have seen considerable rate cuts since the start of the year resulting in some of the lowest rates ever seen, records show.

Providers have been competing against each other for a place in the best buys, with Yorkshire and Clydesdale Bank most noticeably slashing rates by as much as 2.0%. Lenders are even cutting rates within days of each other in order to beat their rivals to the top spot.

Since the start of January, the following 13 providers have already cut their loan rates: AA, Cahoot, Clydesdale Bank, HSBC, M&S Bank, Nationwide, NatWest, RBS, Sainsbury’s Bank, Santander, Tesco Bank, TSB and Yorkshire Bank.

A small handful of cuts were for loans of £5,000, but the vast majority focused on the advertised tier of £7,500 to £15,000 - pushing average rates for mid-tier borrowing to significant lows. Currently, HSBC and M&S Bank offer a rate of 3.3% for loans of £7,500 over five years, the lowest rate ever recorded.

Rachel Springall, Finance Expert at, said:

“There is now a full-on war between providers who are slashing their loan rates to attract new borrowers. Starting a new year is the perfect time for consumers to re-visit their finances and see whether using a competitive loan to consolidate more pricy debts can be a money saver.

“Using a personal loan to get on top of debts can be a cost-effective option, but it remains to be the case that the best rates are for customers who need £5,000 or more. Advertised rates (APRs) on loans start from £7,500 which may be much more than some people need, plus only 51% of successful applicants may get the advertised rates, so customers should never assume that they are guaranteed the best deals.

“Borrowing slightly less than this could result in being charged unnecessary interest. For example, borrowing £3,000 over three years on a rate of 7.4% would leave borrowers more than £250 out of pocket, compared with a 40-month 0% balance transfer card with a 2.95% fee. As long as customers make sure to pay off the credit card before interest applies, it’s clear to see how there could be hundreds of pounds to be saved.

“However, borrowing larger amounts through a personal loan could still be cost-effective. Similar to a January sale, these low rates may not stay around forever, so anyone considering a loan would be wise to check their credit report and see if they can get a good deal before rates rise.”

*Moneyfacts average loan data spans back to June 2006. APRs = Annual Percentage Rates.

The best loan for borrowing £3,000 over three years is from Sainsbury’s Bank at 7.4% APR, total interest £342.60. Comparing this with the best balance transfer card, which is Halifax’s 40-month interest-free deal with a 2.95% fee (£88.50), the difference in cost would be £254.10. - The Money Search Engine is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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