Personal loan price war sees rates tumble to lowest level since 2006
Personal loan rates are now at the lowest level for eight years.
The cost of a personal loan has tumbled over the last few years.
Research from financial information website Moneyfacts shows that the average interest rates on loans over £7,500 have dropped significantly, with most of the larger borrowing tiers ending the first quarter of 2014 at the lowest levels seen since 2006.
All tiers above £7,500 have seen substantial drops, especially in the last three months.
The biggest reduction has been seen in the £15,000 band. In December the average APR was 7.1%, but rates have ended the quarter at 6.6%.
The lowest APR on borrowing at the moment is in the £10,000 tier with an average rate of 6.2% - a drop of 0.3% since December.
There's a price war going on!
The personal loan price war
For evidence of the personal loan price war, look no further than Hitachi, which has slashed the price of its personal loans for the second time this month.
Just last week the lender cut its small personal loans (between £5,000 and £7,499) by 0.3% to offer a top rate of 5.6%. This time round the lender has targeted medium-sized loans, knocking 0.7% off the cost.
Now borrowers can get a representative APR of 4.5% (down from 5.2%) when they borrow between £7,500 and £10,000 over a term of between two and five years.
However, for those that need to borrow over £10,000 and up to £15,000, a higher rate of 6.5% will apply.
How Hitachi compares
Here I’ve picked out the top five rates available when borrowing £10,000 over five years.
|
Provider |
Representative APR |
Monthly payments |
Total amount repayable |
|
4.4% |
£185.80 |
£11,148 |
|
|
4.5% |
£186.02 |
£11,161.20 |
|
|
4.5% |
£186.02 |
£11,161.20 |
|
|
4.5% |
£186.02 |
£11,161.20 |
|
|
4.6% |
£186.46 |
£11,187.60 |
If you want to borrow £10,000 over five years, the best rate available is from peer-to-peer lender Zopa.
In fact, Zopa is offering the cheapest medium-sized loans overall at the moment. Borrowing between £7,500 and £15,000 over three to five years attracts a representative APR of 4.4% with the lender.
Meanwhile Sainsbury’s Bank is offering a leading rate of 4.4% on borrowing £7,500 to £15,000 over a shorter term of one to three years. Those that need four to five years can get a rate of 4.5%. However these rates are only available until 28th March.
The next best deal on medium-sized loans comes from Santander, which is offering a rate of 4.5% when you borrow over one to five years.
Hitachi’s rate cut means it takes joint second spot with Santander and Sainsbury’s (when borrowing over four to five years) with its 4.5% rate, though only on borrowing between £7,500 and £10,000.
To find the best rate for your borrowing needs you should use our loan comparison centre.
Not for everyone
However, you should bear in mind that lenders only have to offer 51% of successful applicants their best rate. The rest are likely to be offered something higher.
The best rates will go to those with perfect credit records, so make sure yours is up to date. You can get a free 30-day trial with Experian thanks to lovemoney.com.
More on borrowing:
The best 0% purchase credit cards
The best 0% balance transfer credit cards
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