There's never been a better time to get a personal loan

Lenders battling to offer the most competitive deals on medium-sized borrowing are driving rates down.

This year there's been a sharp increase in the number of personal loans being taken out, according to the latest figures from the British Bankers' Association (BBA).

David Dooks, Statistics Director at the BBA, puts the trend down to people feeling more confident about borrowing to fund things like home improvements and car purchases.

There's also the fact that the battle to attract customers is keeping interest rates down, which is making personal loans much more affordable.

Driving rates down

This month a raft of providers have cut their loan rates in order to attract new borrowers.

The biggest changes have been on medium-sized loans between £7,500 and £15,000.

Sainsbury’s Bank has knocked 0.1% off the cost of borrowing between £7,500 and £15,000 on its Standard and Reward Shopper loans, pushing some rates as low as 3.9% APR when borrowing over one to three years.

This rate sale was due to end on 23rd September but has been extended by a week to 30th September, so there's still time to take advantage.

Zopa, a peer-to-peer lender, moved to match Sainsbury's offer by cutting 0.1% off borrowing between £7,500 and £15,000 to 3.9% APR over three years.

Also following Sainsbury’s move Hitachi cut 0.1% off borrowing between £7,500 and £10,000, bringing its rates down to 4% APR.

At the same time Nationwide reduced its rates by 1.7% for new and existing customers to 4.5% APR and 4.2% APR respectively on borrowing between £7,500 and £14,999.

Personal loan best buys

Here's how the various loan rate changes have impacted the best buy tables for medium-sized personal loans.

Below are the best rates for borrowing £7,500 over three years

And here are the best rates on offer for borrowing £10,000 over five years.

*Available to HSBC current account customers only

**Available to 1st Account customers only

***Available to existing bank customers only

How rates have tumbled

Around this time last year the best rate on a medium-sized personal loan was 4.9% APR.

Today, as you can see from the table above, you can get a medium-sized loan for as little as 3.9% APR.

The 1% difference means a saving of over £260 if you're borrowing £10,000 over five years.

This rate of 3.9% is a record low and could be driven down further if other providers retaliate.

So if you want to borrow a larger sum of money it looks like there's never been a better time to get a personal loan!

How to get the top rates

However, you should bear in mind that loan providers only have to offer their headline, or representative, APR to 51% of those that apply and are accepted.

So you could be one of the 49% that gets offered something worse.

Applicants with the best credit records are most likely to get the best deal.

To improve your chances of securing the best deal read How to build an excellent credit history.

Compare personal loan rates

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