Sainsbury’s cuts personal loan rate to record 4.2%

The supermarket has turned up the heat in the personal loan price war by setting a new record low.

Sainsbury’s Bank is the latest lender to cut the rates on its medium-sized personal loans.

The supermarket has knocked 0.2% off the cost of borrowing between £7,500 and £15,000 on its Standard and Reward deals, leading to a new record low rate in the market.

Sainsbury’s Standard Nectar loans are available to Nectar cardholders and offer Sainsbury’s top loan rate, which comes armed with a price promise to undercut rivals.

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

The new rates

A rock bottom rate of 4.2% is now available via the Sainsbury’s Standard Nectar Cardholder loan for those looking to borrow between £7,500 and £15,000 over a term of 12 to 36 months. If you don’t have a Nectar card a rate of 4.3% is on offer via the Sainsbury’s Bank Non Shopper Standard loan.

Both Nectar cardholders and non-Nectar cardholders that needterms of between 37 months and 60 months in order to pay off the loan can get a rate of 4.3%.

Alternatively those chasing a Nectar balance boost can opt for a rate of 4.5% over 12 to 36 months or 4.6% over 37 to 60 months with the Sainsbury’s Reward Nectar Cardholder loan.

How Sainsbury’s compares

Sainsbury’s Standard Nectar rate cut has made it the cheapest lender for borrowing between £7,500 and £15,000, but only over the short-term.

Here’s how Sainsbury’s compares on a loan of £10,000 taken out over three years.

* Open to current account holders only

However, when it comes to longer term loans Sainsbury’s Standard Nectar rate only matches current best buys.

Here’s how Sainsbury’s compares on a loan of £10,000 taken out over five years.

* Open to current account holders only

Taking on the big banks

The personal loan market is fiercely competitive at the moment, with lenders locked into a race to the bottom in a bid to attract borrowers.

Last month Clydesdale Bank and Yorkshire Bank cut their rates to 4.4% on medium-sized loans, at the time a record low. In response Hitachi and Santander cut their rates to 4.3% while Yorkshire and Clydesdale have cut rates again, this time to 4.3%.

Now supermarket Sainsbury’s has set a new precedent with a rate of 4.2% over a shorter term of one to three years, while matching the current best buy rate of 4.3% over a longer term.

And judging by past behaviour it’s only a matter of time before other lenders respond. Keep up to date on the latest developments in the battle with The cheapest personal loans.

Price promise will undercut rivals

Even if they do though, Sainsbury’s has pledged to undercut rivals with a price promise.

The price promise is attached to the Standard Nectar Cardholder Loan and 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.

However, this involves applying for two loans which doesn’t look great on your credit record.

A word of 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.

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