If you need a personal loan for £7,500, Sainsbury's is the new market leader with a rate of less than 6%!
With a number of bank holidays on the horizon, many of us may be thinking of doing some decorating. However, if you are planning some more significant home improvements, how you pay for that work needs to be thought through carefully.
Saving up will take a long time and an overdraft is often simply not enough to cover the expense. One of the best ways to get large amounts of money quickly is an unsecured personal loan.
Unsecured personal loans
An unsecured personal loan (where you don’t need to put up any collateral as security) can come in various sizes and can be taken out over a number of years, depending on how much you think you can afford to pay back in fixed repayments each month.
If you are in the market for an unsecured personal loan then you have chosen a great time to start looking - some lenders are embarking on a rates war. M&S Money cut its personal loan rate back in January to 6% and now Sainsbury’s has gone one step further.
For loans of £7,500 and above taken out over three years Sainsbury’s is offering a typical rate of 5.9% making the retailer the market leader against high-street heavyweight banks like HSBC and NatWest.
The catch is you have to be a Nectar card holder and have used it within the last six months to apply. But given it's free to get a Nectar card, and there's loads of places to collect Nectar points besides Sainsbury's, it's not the most testing of hoops to jump through.
Borrowing £7,500
To see how other lenders are competing take a look at our round up of the best loans around for borrowing £7,500 over three years, ranked by lowest typical APR.
|
Provider |
Typical APR |
Total amount repayable |
Monthly repayment |
|
5.9% |
£8,182.80 |
£227.30 |
|
|
6.0% |
£8,194.32 |
£227.62 |
|
|
6.1% |
£8,206.20 |
£227.95 |
|
|
6.2% |
£8,217.72 |
£228.27 |
|
|
6.8% |
£8,287.20 |
£230.20 |
|
|
6.9% |
£8,298.72 |
£230.52 |
|
|
7.9% |
£8,414.64 |
£233.74 |
*Offer available for existing customers only
You can see that supermarkets like Tesco and Sainsbury’s are giving banks a run for their money but the competition is close. For a loan of £7,500 you could be paying between £682.80 and £914.64 in interest payments, depending on whether you get the best rate.
When taking out a loan you should bear in mind that the advertised rate is not necessarily the rate you will be given. Lenders are only obliged to give the listed price to 51% of people who apply while the rest can expect to receive a higher rate. So if you have any adverse information on your credit history you can expect to be part of the 49% that miss out.
One way to keep on top of your credit profile is to take advantage of a free 30-day trial with Experian, via lovemoney.com. You should also read What REALLY damages your credit rating.
Spread the cost
If you need to spread that cost over a longer term than three years, you can cut your monthly repayments, as the table below - again for a £7,500 loan - demonstrates.
|
Provider |
Typical APR |
Total amount repayable |
Monthly repayment |
|
6.0% |
£8,666.40 |
£144.44 |
|
|
6.1% |
£8,686.20 |
£144.77 |
|
|
6.2% |
£8,706.00 |
£145.10 |
|
|
6.8% |
£8,825.40 |
£147.09 |
|
|
6.9% |
£8,845.20 |
£147.42 |
|
|
7.6% |
£8,990.40 |
£149.84 |
|
|
7.9% |
|
£150.74 |
And if you need to borrow an even larger amount, at £10,000, these are the best deals.
|
Provider |
Typical APR |
Total amount repayable |
Monthly repayment |
|
6.0% |
£11,555.40 |
£192.59 |
|
|
6.1% |
£11,581.80 |
£193.03 |
|
|
6.1% |
£11,581.80 |
£193.03 |
|
|
6.2% |
£11,608.20 |
£193.47 |
|
|
6.8% |
£11,767.20 |
£196.12 |
|
|
6.9% |
£11,793.60 |
£196.56 |
|
|
7.7% |
£12,016.80 |
£200.28 |
**Offer available for existing customers only
You can see from the tables that it costs less each month to take out a loan for a longer period of time. So if you really needed it, taking out £10,000 over five years would cost less in monthly repayments than it does to take out a loan of £7,500 over three years.
Of course, the larger the loan the bigger the total amount you'll pay. What's more, if you wanted to pay this debt off early you may not be able to afford it or be worse off as there is often a penalty for early repayment on personal loans. So make sure you only apply for as much as you need.
Other options
Of course an unsecured personal loan is just one of the many borrowing options available to you.
If you are looking to borrow less than £5,000 then a credit card is probably your best bet. If you get a 0% purchase card you will avoid paying interest for a few months, giving you a bit of breathing space and ensuring every penny of your repayments goes directly towards reducing your debt.
With a credit card you also have more flexibility, as you can pay off the debt ahead of schedule and not be charged for it!
More on borrowing:
OFT launches review into payday lending
The smallest interest rate may not equal the cheapest loan
Uproar as Wonga targets students with payday loans
Three ways to get an interest-free loan