The personal loan market is heating up again as Zopa cuts its rates to just 4.8%.
Zopa has dropped the rate on its medium-sized personal loans by 0.1%.
The peer-to-peer lender is now offering a rate of 4.8% for those looking to borrow between £7,500 and £15,000.
The move makes Zopa the cheapest provider of loans in this sphere.
Zopa takes the lead
With Zopa you can now borrow between £7,500 and £15,000 over a period of two to five years for just 4.8% .
Only Hitachi is offering a rate this low for loans between £7,500 and £10,000 over the same timeframe, but its top rate is reserved for existing customers. Others have to apply for the more expensive 4.9% deal and you can only get access to these rates until the end of October.
Zopa and Hitcachi sit at the top of the personal loans market in this sphere ahead of traditional banks like Clydesdale and Derbyshire, who have access to cheaper funding from the Funding for Lending Scheme, but can only muster a rate of 5% for borrowers.
If you are looking for an even better rate, Zopa also has a tiny window of opportunity to bag a lower rate of 4.7% if you borrow between £7,500 and £7,800 over two years. However, monthly repayments would work out at £327.70, which might not fit into your budget as smoothly as spreading the cost over a longer period.
Zopa says it is helping to drive down loan rates in the market and it plans to offer the low rate of 4.8% for the forseeable future. So the move is likely to encourage some retaliation from lenders wanting to get back to the top of the table.
You can find the best rate for the amount you want to borrow using our comparison tables. But below I have set out the best rates on offer if you borrow £8,000 over five years
|
Loan |
Representative APR |
Total amount repayable |
Monthly repayment |
|
4.8% |
£8,991.60 |
£149.86 |
|
|
4.9% |
£9,012.60 |
£150.21 |
|
|
5.0% |
£9,033.60 |
£150.56 |
|
|
5.0% |
£9,033.60 |
£150.56 |
|
|
5.0% |
£9,033.60 |
£150.56 |
Cutting out the middle man
Peer-to-peer websites like Zopa act as a marketplace where savers willing to lend money can be matched with borrowers in need of credit. And because the middle man in the shape of a bank or building society is cut out, both parties tend to benefit from better rates.
Peer-to-peer platforms which offer these mutually beneficial relationships have grown in popularity over the last few years as an alternative to traditional banks with poor value deals.
However, the regulation around the industry has been lacking, until now.
People who borrow and lend money through peer-to-peer firms are about to get more protection under new plans from the Financial Conduct Authority (FCA).
The regulator plans to introduce new rules including a 14-day cooling off period, better credit checks for borrowers and plainer information on the risks, when it takes charge of the consumer credit market in April 2014.
Watch out for headline rates
Lots of lenders are boasting attractive headline rates at the moment.
But the interest rate advertised on a personal loan won’t apply to everyone who successfully applies. This is because lenders are only required to offer their best rate to 51% of people who are approved.
The interest rate you’re offered will depend on your own financial situation so it’s worth checking out your credit score before applying.
You can get a 30-day free trial with Credit Expert which will give you an idea of how likely it is that you'll get the loan at the advertised rate.
Compare personal loans with lovemoney.com
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The best 0% purchase credit cards
Three ways to get an interest-free loan