Cracking new rate from Sainsbury’s Bank comes armed with a price promise that could drive it down even further.
The personal loans market is heating up once again, with Sainsbury’s Bank the latest to make a cut.
The supermarket is now offering a rate of 4.9% on loans between £7,500 and £15,000.
It’s a top rate that comes with a price promise to undercut rivals, but there’s a few hoops to jump through to get it.
Getting the best rate
To access the best rate of 4.9% from Sainsbury’s Bank you need to have a Nectar card, which must have been used to collect points within the last six months.
That shouldn’t be too much trouble as getting a Nectar card is free and you just need to spend £1 in Sainsbury's to start collecting points.
One other condition you have to commit to is a shorter term for borrowing the cash.
Loans between £7,500 and £15,000 must be taken out over one to three years to get the top rate of 4.9%. Those that need four or five years to repay what they borrow will attract the higher 5.1% rate.
Reducing the time you have to pay back a loan means you pay less overall but end up with beefier monthly payments.
Below is a table showing what the monthly repayments and total amount repayable will come to over one-, two– , three-, four- and five-year terms with a Sainsbury's Bank Shopper Standard loan of £10,000.
|
Term |
APR |
Monthly repayments |
Total amount repayable |
|
One year |
4.9% |
£855.13 |
£10,261.56 |
|
Two years |
4.9% |
£437.79 |
£10,506.96 |
|
Three years |
4.9% |
£298.78 |
£10,756.08 |
|
Four years |
5.1% |
£230.22 |
£11,050.56 |
|
Five years |
5.1% |
£188.64 |
£11,318.40 |
As you can see you pay over £550 less a month if you go for the three-year term, but save nearly £500 on the total amount repayable with the one-year term.
Taking on the 5.1% rate over four or five years drops the size of repayments even further, but the overall cost of the loan shoots up dramatically.
You will need to decide which timeframe is more worthwhile and which could fit into your budget.
Also bear in mind that Sainsbury’s, like all other loan providers, only has to offer ther headline rates to 51% of those that are approved, so you could be one of the 49% that gets offered a worse rate anyway.
How it compares
If you’re able to borrow between £7,500 and £15,000 over one to three years there is only one provider that can beat Sainsbury’s 4.9% deal and that’s Zopa, with a rate of 4.8%.
Zopa is a peer-to-peer lender that is growing in popularity as an alternative to the banks. Peer-to-peer lending involves savers who want to earn interest on their cash lending directly to those that need to borrow. And because there is no middle man the rates tend to be more competitive for both parties. You can read more about it in our article What is peer-to-peer (P2P) lending?
Again the 4.8% headline rate only has to go to 51% of applicants so it pays to shop around to keep a tab on what other deals are out there.
Our comparison centre can give you a wider view of the market, but below I have listed the top five cheapest rates on offer for a loan of £10,000 taken out over three years.
|
Provider |
Representative APR |
Monthly repayments |
Total amount repayable |
|
4.8% |
£298.35 |
£10,740.60 |
|
|
4.9% |
£298.78 |
£10,756.08 |
|
|
5.0% |
£299.21 |
£10,771.56 |
|
|
5.0% |
£299.21 |
£10,771.56 |
|
|
5.1% |
£299.64 |
£10,787.04 |
*Must hold a Nectar card and have used it within the last six months
**Existing M&S customers only
Price promise could mean 4.7% rate
The price promise attached to the Sainsbury’s Bank Shopper Standard Loan means you can get your best offer beaten on loans between £7,500 and £15,000 taken out over one to five years.
It guarantees to undercut your best offer on a like-for-like loan by 0.1%.
You need to have applied for the Sainsbury’s Bank Shopper Standard Loan and been accepted but not signed the loan agreement. You also need to provide proof of a better offer within 28 days of receiving your Sainsbury's deal.
So if you manage to get the 4.8% APR on the Zopa loan and also get accepted for the Sainsbury’s loan you can bargain your rate down to 4.7%.
However, this involves applying for two loans which doesn’t look great on your credit record.
More on borrowing
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