Good news for loan borrowers

Things have got an awful lot better for those that need to borrow a loan.

Not so long ago the personal loans market looked a pretty bleak place. As has been the case with a fair few financial products of late, the best deals were only available to those borrowers who already had some form of account with the lender in question.

The banks were effectively saying: "Got our current account? Then we can offer you a cheaper personal loan. Bank somewhere else? Bad luck. Get lost!"

However, that may be changing, with a number of loans now open to all borrowers, irrespective of whether you are an existing customer or not.

So let’s take a look at them and see whether they are any good.

The Tesco personal loan

Anyone who has read one of my articles in the past will know that I spend what feels like most of my life in Tesco. So unsurprisingly I am somewhat pleased to see that my supermarket of choice has come forward with the Tesco personal loan for new customers, as well as its existing offering for existing customers.

If you are a new customer of Tesco Bank then you will be looking at a typical APR of 7.9%. Sadly this is slightly worse than if you are an existing customer, in which case you could expect a typical APR of 7.8%, but in truth the difference is pretty minimal:

On a loan of £10,000 over a five-year period, with the Tesco personal loan for new customers, you would be looking at monthly repayments of £200.99 – 45p a month more than if you were an existing customer.

Unfortunately, the big sales point for many Tesco financial products – the ability to accrue Clubcard points – does not apply with the loan, but nonetheless it does look a pretty attractive option.

The AA personal loan

The other good news is that the AA has launched into the market with a new loan offering for both new and existing customers.

But sadly, again, the typical APR on the AA loan is significantly higher than that on offer from Tesco at 8.9%.

On a £10,000 loan over a five-year period, that comes to monthly payments of £205.44 – essentially £5 a month more than the Tesco loan. And over the full life of the loan, that extra £5 a month can certainly stack up, a difference of £267.

The best deals for new customers

How do these loans compare to the other personal loans that are available to new customers?

Here are the top five, including the monthly and total cost of a £10,000 loan over five years:

Other loans available at 8.9% to all customers from lenders include Virgin Money, Smile and Stroud & Swindon.

What’s clear is that you will end up paying a fair chunk of cash more if you get your loan from anyone bar Alliance & Leicester or Tesco Bank.

The existing customer advantage

It’s been the case for quite some time that the best personal loans tend to only be available to existing customers of the lender. Now we’ve seen the best deals for new borrowers, let’s take a look at how those on offer to existing customers compare.

Here are the top five, again based on a £10,000 loan over five years.

Again there are many more lenders offering loans to existing customers at 8.9% APR - but very little competition at lower rates.

The table shows that while existing customers still have a marginally wider choice of products at under 8%, things are not quite as bad for new customers as they once were – and broader choice can only be a good thing!

For smaller borrowing

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Of course not everyone needs to borrow sums as high as £10,000, in which case a personal loan is not necessarily your best bet. However, even for those borrowing smaller sums, say £5,000, there’s even more good news in the form of changes to the Barclaycard Simplicity credit card.

This has long been a popular card at lovemoney.com, as it offers a great low rate on both purchases and balance transfers for the entire life of the card, and so has always been a good option for those looking to borrow a decent stack of money.

It did have a rate of 7.9% but was recently usurped by the Halifax Easy Rate credit card, offering a rate of just 6.9%. However, the Barclaycard Simplicity has once again moved to the forefront by slashing its rate down to 6.8%. That 1% change can make a significant difference on large balances, so is great news for borrowers planning a big spend.

So no matter what amount of money you need to borrow, things have just easier!

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