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The cheapest personal loans

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Last updated on

07 August 2015

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43 Comments

There's a price war going on so here's a round-up of the best personal loans on the market right now.

If you want to borrow a larger sum of money, a personal loan is a good option for many people.

The good news is there is loads of competition in the personal loan market right now and this means rates on the top loans are falling.

Here's our guide to the cheapest rates right now.

A reminder of how personal loans work

Personal loans are normally offered over one to five years and aren’t secured against your home or any other asset.

It's quite a flexible market and you can typically choose between a small loan of £5,000-£7,499, a medium loan of £7,500-£15,000 or a large loan of more than £15,000.

The cheapest rates can be found in the medium range.

Medium loans

If you want to borrow between £7,500 and £15,000, can repay it within three years and have a Nectar card you could get a rate of 3.5% from Sainsbury's Bank.

If you need longer to repay, you're looking at a rate of 3.6% from Sainsbury's Bank and M&S Bank, plus First Direct and Nationwide if you're an existing customer.

Here are the best buys using the example of borrowing £10,000 over five years.

Loan

Representative APR

Monthly repayment

Total amount repayable

Sainsbury's Bank Personal Loan

3.6%

£182.11

£10,926.60

M&S Bank Loan

3.6%

£182.11

£10,926.60

First Direct Personal Loan*

3.6%

£182.11

£10,926.60

Nationwide Personal Loan**

3.6%

£182.11

£10,926.60

Cahoot Personal Loan

3.6%

£182.55

£10,953.00

HSBC Personal Loan***

3.7%

£182.54

£10,952.35

Tesco Bank Personal Loan for Clubcard Customers****

3.7%

£182.54

£10,952.40

Tesco Bank Personal Loan

3.8%

£182.97

£10,978.20

Zopa Personal Loan

3.8%

£183.15

£10,989.00

Clydesdale Bank Personal Loan

3.8%

£183.19

£10,991.40

Yorkshire Bank Personal Loan

3.8%

£183.19

£10,991.40

*Available to 1st Account customers only

**Available to Nationwide main current account customers only

***Available to HSBC current account customers only

****Available to Clubcard holders only

Small loans (£5,000-£7,499)

The smallest loans on offer, of between £5,000 and £7,499, are also the most expensive, although rates have now fallen below 5%.

Here are the best buys using the example of £5,000 repaid over five years.

Loan

Representative APR

Monthly repayment

Total amount repayable

Hitachi Personal Loan

4.4%

£92.79

£5,567.40

Zopa Personal Loan

4.4%

£92.88

£5,572.80

Nationwide BS Personal Loan*

4.5%

£93.01

£5,580.60

Sainsbury’s Bank Personal Loan

4.5%

£93.01

£5,580.60

M&S Bank M&S Cardholder Loan

4.5%

£93.22

£5,593.20

Cahoot Low Rate Personal Loan

4.5%

£93.32

£5,599.20

Clydesdale Bank Personal Loan

4.5%

£93.12

£5,587.20

Yorkshire Bank Personal Loan

4.5%

£93.12£5,587.20

£5,587.20

*Available to Nationwide main current account customers only

Large loans (more than £15,000)

As you can see, Sainsbury’s Bank, Cahoot and First Direct are the clear leaders here.

With First Direct though you have to take out its 1st Account in order to qualify. That’s not the biggest hardship when you consider it wins every customer service award going, and pays you £100 when you open the account.

Here are the best rates you can find on a loan of £17,500, taken out over a five-year term.

Loan

Representative APR

Monthly repayment

Total amount repayable

Sainsbury's Bank
Personal Loan

3.6%

£318.68

£19,120.80

First Direct Personal Loan*

3.6%

£318.99

£19,139.28

Cahoot Low Rate Personal Loan

3.6%

£319.45

£19,167

Nationwide BS Personal Loan**

3.9%

£320.96

£19,257.60

Halifax Clarity Loan**

3.9%

£320.96

£19,257.60

TSB Loan**

3.9%

£321.32

£19,279.20

Clydesdale Bank Personal Loan

4%

£322.68

£19,360.80

Yorkshire Bank Personal Loan

4%

£322.68

£19,360.80

Zopa Personal Loan

4.2%

£323.56

£19,413.60

*Available to 1st Account customers only

**Available to existing customers only

Not for everyone

All of the loans in the above tables offer attractive rates but not everyone will be offered loans at these rates. Lenders are only obliged to offer their best rates to 51% of successful applicants.

If you have a history of borrowing money and then paying off your debts on schedule, there’s a good chance that you’ll be able to borrow at a decent rate. But if you’ve never borrowed money before or you’ve been late with repayments, you may not be able to get the best deals.

Personal loan alternatives

It’s also possible that you may be able to borrow even more cheaply.

If you have an excellent credit rating, you may be able to get a 0% new purchase credit card. With one of these cards you can make a big purchase and not pay any interest on the resulting debt for two years or more.

The Post Office Matched Card is the market leader, offering a whopping 25 months with nothing to pay on purchases. Close behind is the Virgin All Round Credit Card with 24 months 0% on shopping.

There’s also the Santander 123 Credit Card , which offers 23 months as well as cashback on certain purchases, but charges an annual fee of £24. Alternatively the Tesco Bank Clubcard Credit Card and Halifax Purchase card offer 21 months with no fee.

For a full rundown, check out The best 0% purchase credit cards.

Let us imagine you want to buy some new furniture for £1,500. If you use these cards for the purchase, you won’t have to pay any interest for a year and a half. That’s as long as you make your minimum repayments each month.

Just remember that you may be offered a fairly low credit limit – if you’re only offered a £2,000 credit limit, you may want to go for a personal loan where you can borrow more.

Do you need to borrow?

Whatever kind of loan you go for, first ask yourself first whether you actually need to borrow the money. Even if you’re paying a super-low interest rate, you’re still giving up money on interest payments which you’ll never see again.

The prudent approach is to cut your spending and build up your savings, if you can. If you follow that approach you’ll be richer in the long-run.

But if you’re determined to borrow, a personal loan may well be the best option for you.

More on loans and borrowing:

Top tips for cheap car loans

Five ways to get a great loan

Secured loans: pros and cons

The best 0% purchase credit cards

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