Competition is heating up again among the personal loan providers as the Derbyshire cuts its rate to 5%. But this loan is only available for a week.
Derbyshire Building Society has slashed its personal loan interest rate again to 5%, putting it back in the top spot as the market-leading provider of loans between £7,500 and £15,000. However, this rate is only on offer for seven days.
Therefore borrowers who want to take advantage will need to act within the next week as it won't be available after Monday 25th March.
Falling prices
Personal loan rates have been steadily falling for the past year as providers compete to offer the cheapest loans.
At the end of January Derbyshire lowered its rate to 5.1%. At the time only two other providers, Clydesdale and Yorkshire Banks, were offering the same rate.
Now it’s pushed the rate down again, it’s the cheapest loan on offer... for now. But given the way providers have been acting it wouldn’t surprise me if another were to follow suit.
How does it compare?
The new rate from Derbyshire is not that much different to existing rates on offer. If you took out a five-year loan of £10,000 with Derbyshire at 5% it would cost you £188.20 a month and a total of £11,292.
Our comparison tables give a full view of the market and here I’ve picked out the next best deals on offer for a £10,000 loan repaid over five years.
|
Loan |
APR |
Total cost of loan |
Monthly repayments |
|
5.1% |
£11,318.40 |
£188.64 |
|
|
Yorkshire Bank Online Personal Loan |
5.1% |
£11,318.40 |
£188.64 |
|
First Direct Personal Loan* |
5.1% |
£11,318.40 |
£188.64 |
|
5.2% |
£11,344.80 |
£189.08 |
|
|
5.2% |
£11,344.80 |
£189.08 |
|
|
5.4% |
£11,397.60 |
£189.96 |
*You must open a First Direct 1st current account to be eligible
Will I be approved?
[SPOTLIGHT]As with any kind of credit the headline rate, 5% in the case with Derbyshire, will only be available to borrowers with a good, and in some cases excellent, credit record. Therefore if you apply you might not get it and the rate you're actually offered could be a lot higher.
You can get a free credit check which should give you a good indication as to whether you'll be accepted through a credit reference agency such as Experian. It offers a free 30-day trial, but you'll need to cancel this after the first month if you don't want to be charged.
The best alternatives
Balance transfer credit cards with an interest-free period may be an alternative to stave off hefty interest payments but these are only suitable if you’re actually going to be able to pay the debt off during the 0% period.
Peer-to-peer lending is another alternative, and the loan rates are competitive, again depending on your credit rating. This sector is not currently regulated by the Financial Services Authority but this is planned for the near future.
Before you take out credit you need to make sure you can meet the monthly payments as if you miss one you could face a penalty, the interest rate may be increased and you’ll get a black mark on your credit record.