Clydesdale and Yorkshire Banks launch market-leading personal loans

If you're in the market for loans of between £7,500 and £15,000, these loans from Clydesdale and Yorkshire Bank are top of the tree.

If you’re on the hunt for a loan between £7,500 and £15,000, perhaps for a home improvement or even a new car, you’ll be happy to hear that lenders are locked into a race to the bottom at the moment.

Last week we reported that Derbyshire Building Society and Sainsbury’s Bank had slashed their personal loan rates to 5.9%. You can see market-leading loan rates fall below 6% for more.

Now Clydesdale and Yorkshire Banks have followed suit and launched a rate of 5.9% on all borrowing between £7,500 and £15,000 over a choice of terms up to seven years.

So let’s take a look at how this has changed the leader board across five-year and seven-year terms ranked by lowest typical APR.

Borrowing £7,500 over five years

* Does not include two month payment holiday

** Must be aged 30 or over to apply

Borrowing £7,500 over seven years

* Does not include two month payment holiday

** Only available to existing customers

Borrowing £15,000 over five years

* Does not include two month payment holiday

** Must be aged 30 or over to apply

Borrowing £15,000 over seven years

* Does not include two month payment holiday

** Only available to existing customers

Decisions, decisions

Clydesdale, Yorkshire and Sainsbury’s Bank are consistent table toppers on all loans between £7,500 and £15,000.

In fact the leader board doesn’t actually change unless you look to borrow over a shorter term of between one and three years (where Sainsbury’s comes top with loans that cost 5.8% whereas Clydesdale and Yorkshire Banks' 5.9% deal drops to second place).

For loans between four and seven years a clear winner is harder to detect.

So how do you choose between them if you need to borrow for longer?

Look beyond the headline rate

A good way to see if you’re applying for the leading deal is to check the small print and calculate the total amount repayable rather than looking solely at the headline APRs.

For example, the Sainsbury’s range includes a two-month repayment holiday on all loans, which sounds like a perk but just means that the term of your loan is longer than you may realise.

With a Sainsbury's Standard Personal Loan of £7,500 taken out over 60 months (five years) you actually end up borrowing £7,500 over 62 months with the payment holiday included. This means that the total you repay is really £8719.39- over £72 more than the £8,646.60 that is advertised on search engines and even on the supermarket’s website. This is because interest is calculated as soon as you take out the loan even though you get a holiday for two months.

As far as I can tell Clydesdale and Yorkshire Banks do not have this payment holiday that costs you more, but whichever lender you pick make sure you check the details of the repayments to ensure you have got the best overall deal.

Don’t assume

Another danger when looking at the headline rate is to assume you will get it when you apply.

The best rate on offer from a lender will only be available to an average 51% of those who make an application.

The great value 5.9% deals require you to have a good credit history. So if you don’t, you might be part of the 49% that are not offered the most competitive rate and could end up with a more expensive loan, which may force you to look elsewhere.

That's fair enough but remember, you want to avoid making too many applications as this could damage your credit rating so make sure you check your credit report for free and learn how to build an excellent credit history before reaching for the best rates.

A flexible alternative

If you don't like the thought of making fixed payments for four years or more there are a range of other options.

One alternative to a loan that could suit your borrowing needs a bit better is a 0% credit card that is interest free for a set period and where your repayments can vary in size from month to month as long as you pay the minimum charge.

For more ideas read  the best ways to borrow £5,000.

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