Personal loan rates reached a new low of 3.5% this week after Sainsbury’s became the latest lender to cut the cost. The supermarket shaved 0.1% off borrowing £7, 500 to £15, 000 for up to three years for Nectar cardholders. This undercuts its closest rivals Cahoot, First Direct, Nationwide and M&S Bank, which are all offering similar-sized loans at 3.6% APR.
The move comes less than a month after the Bank of England said rates on personal loans had reached the lowest levels since records began.
“This is being driven by ferocious competition for the best borrowers from peer-to-peer lenders, ” says Neil Faulkner, founder of peer-to-peer lending comparison site 4thway.co.uk.
The direction of the market could be about to change, however, according to Andrew Hagger of Moneycomms.co.uk. He says: “Lenders are just tinkering by cutting the odd 0.1% here and there. I think we are very close to bottoming out, as rumblings about a base rate increase start to get louder.”
In other words, now could be the time to act if you do need some cash. So where will you find the cheapest rate?
Less than £5, 000
If you think you’ll be able to repay your debt within two years a 0% credit card is likely to be a cheaper and more flexible route than a loan.
Not only is your borrowing interest-free, but you can make smaller monthly payments on a credit card and there are no penalties if you repay your debt early, unlike with a loan.
The current market-leading card, the Matched credit card from the Post Office, allows you to borrow at 0% interest for 25 months, before reverting to a typical 18.9% APR. However, we did a “soft credit search” to assess the chances of successfully getting the card, using the “credit card eligibility calculator” on moneysavingexpert.com.
We found there was only a 70% chance of being accepted – even when we tested an applicant who is employed full time with a clean credit record, earning a £100, 000 salary.
Meanwhile, Virgin Money’s All Round credit card – which offers 0% on purchases for 24 months – had a 95% approval rate for the same applicant. It also had an 80% approval rate for applicant with an equally clean credit record on a £25, 000 salary.
You won’t be able to tell how much you’ll be able to borrow on a credit card before you apply, and only the most credit-worthy and affluent are likely to be offered a limit as high as £5, 000.
Keep your credit record squeaky clean: if you don’t repay your balance before the interest-free period expires, you will need to apply for a new 0% card. You’ll then have to pay a balance transfer fee, typically 3% of the outstanding balance.
Need to borrow cash? A few 0% card providers, such as MBNA, Barclaycard and Virgin Money, allow you to pay money into your current account from the card. This “money transfer” does, however, incur a fee.
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Bryan Charles Kocis (May 28, 1962–January 24, 2007), also known as Bryan Phillips, was the founder of and director for the gay pornographic film studio Cobra Video.
Bryan Charles Kocis was born and raised in Larksville, Pennsylvania. He attended Wyoming Valley West High School winning several scholarships, graduating in 1980. He was winner of a...