Sainsbury’s cuts personal loan rate to 4.4%

The supermarket is offering a market-leading rate on medium-sized loans, but only for a limited time.

Sainsbury’s Bank has cut the rates on its medium-sized Standard and Reward personal loans, by 0.1%.

Sainsbury’s Standard loans are available to Nectar cardholders who have swiped their card at least once in the last six months and offer Sainsbury’s top loan rate, which comes armed with a price promise to undercut rivals.

Meanwhile Sainsbury’s Reward loans won’t promise you the best rates but offer 5,000 bonus Nectar points and double Nectar points for two years.

The changes

Those looking to borrow between £7,500 and £15,000 over one to three years stand to benefit the most as they can now get a rock-bottom rate of 4.4% with the Sainsbury’s Standard Nectar Loan or 4.7% with a Shopper Reward loan.

Those that need to spread repayments over four to five years can get a rate of 4.5% on a Standard loan or 4.8% on a Reward loan.

And for borrowers that require more than five years to spread out their repayments a rate of 6.5% is now available with the Standard loan.

However, these rates have only been temporarily reduced and will be withdrawn on Friday 28th March 2014

How Sainsbury’s compares

Sainsbury’s move has pushed its Standard deal to the top of the table for the cheapest provider of loans between £7,500 and £15,000 taken out over one to two years.

Below are the top five lenders for a loan of £7,500 taken out over two years.

However, over three years the supermarket’s Standard deal is joint market-leading with peer-to-peer lender Zopa which also offers a rate of 4.4% on medium-sized loans over this term.

Below are the top five lenders for a loan of £7,500 taken out over three years.

But from four years up Sainsbury’s Standard deal is less competitive, with Zopa taking the lead and offering 4.4% on terms all the way up to five years.

Below are the top five lenders for a loan of £7,500 taken out over five years.

For terms lasting six years or more Sainsbury’s Standard deal, which is available with an APR of 6.5%, is the sixth best rate on offer. However the top four deals ahead of it are only open to existing customers.

Below are the top six lenders for a loan of £7,500 taken out over six years.

*Existing customers only

So Sainsbury’s 0.1% reduction  has pushed it to the top of the leaderboard if you are prepared to borrow over a short term or if you can’t get a better deal as an existing customer.

However, as mentioned earlier all Standard deals come armed with a price promise, which means rates could be driven even lower if you are offered a better deal elsewhere.

Price promise could mean lower rates

The price promise attached to the Sainsbury’s Bank Standard Nectar Loan guarantees to undercut your best offer on a like-for-like loan by 0.1%.

You need to have applied for the Sainsbury’s Bank Standard Nectar Loan and been accepted, but not signed the loan agreement. You also need to provide proof of a better offer within 28 days of receiving your Sainsbury's deal.

So if you manage to get the 4.4% APR on the Zopa loan over three years and also get accepted for the Sainsbury’s loan at 4.5% you can bargain your rate down to 4.3%!

However, this involves applying for two loans which doesn’t look great on your credit record, though with Zopa you get to do a ‘soft search’ which doesn’t leave a footprint on your profile.

Health warning

Sainsbury’s, like all other loan providers, only has to offer its headline rates to 51% of those that apply and are approved. So you could be part of the 49% that gets offered a worse rate.

Compare personal loans with lovemoney.com

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