The UK's cheapest personal loans


Updated on 19 January 2017 | 13 Comments

Sainsbury’s Bank has launched a record low rate of 2.8% on medium-sized loans.

If you need to borrow a larger sum of money, then a personal loan could be a good option.

Lenders have been engaged in a price war for many months, dragging loan rates to record lows in the process.

Sainsbury’s Bank is the latest to slash rates down to 2.8% on borrowing between £7,500 and £20,000 over three years.

The record low rate is available to Nectar cardholders. Those without one can get a rate of 2.9% instead.

Compare personal loans

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.

Compare personal loans

Medium loans (£7,500-£15,000)

Here are the lowest rates when borrowing £10,000 over 3 years.

Loan

Representative APR

Monthly repayment

Total amount repayable

Sainsbury's Bank
Nectar Personal Loan
*

2.8%

£289.78

£10,432.08

Sainsbury's Bank
Personal Loan

2.9%

£290.20

£10,447.20

TSB Personal Loan

2.9%

£290.41

£10,454.76

Clydesdale Bank/Yorkshire Bank Personal Loan - Online Exclusive 3% £290.63 £10,462.68

Cahoot Low Rate Personal Loan

3%

£290.81

£10,469.16

M&S Bank Personal Loan

3%

£290.63

£10,462.68

Ratesetter 3-Year Loan

3% £290.82 £10,469.82

Santander
Personal Loan

3.1%

£291.23

£10,484.28

Zopa Personal Loan

3.2% £291.49 £10,493.64

Hitachi Personal Finance
Personal Loan

3.2%

£291.51

£10,494.36

Ikano Bank Personal Loan

3.3%

£291.92

£10,509.12

HSBC

3.3%

£291.92

£10,509.12

*Nectarcard holders only

**Clubcard holders only

As you can see, Sainsbury's Bank is currently the cheapest personal loan provider (provided you own a Nectar car), with a lowest-ever rate of 2.8%.

Having said that, competition in the market is so fierce there's not a massive difference between Sainsbury’s and its closest rivals. For example, the monthly repayments on a £10,000 loan from Cahoot (the fourth cheapest in the table) is just £1.03 more.

Large loans (more than £15,000)

If you need to borrow more the rates are still competitive. 

Here’s what you can get when borrowing £17,500 over five years.

Loan

Representative APR

Monthly repayment

Total amount repayable

Sainsbury’s Bank Personal Loan

2.9%

£313.38

£18,802.80

Ratesetter 5 Year Loan

3% £314.28 £18,856.80

Cahoot Low Rate Personal Loan

3%

£314.44

£18,866.40

Hitachi Personal Finance
Personal Loan

3.2%

£315.65

£18,939

First Direct Personal Loan* 3.3% £316.41 £18,984.52

Zopa A* Personal Loan

3.4%

£317.14

£19,028.40

Tesco Bank Personal Loan for Clubcard Customers

3.4%

£317.17

£19,030.20

TSB Personal Loan

3.49%

£314.64

£18,878.40

Tesco Bank Personal Loan

3.6%

£318.68

£19,120.80

Santander Personal Loan

3.6%

£318.99

£19,139.40

*Existing customers only

Small loans (£5,000-£7,499)

The smallest loans on offer, which range from between £5,000 and £7,499, are also the most expensive. 

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

Loan

Representative APR

Monthly repayment

Total amount repayable

Hitachi Personal Finance Personal Loan

3.7%

£91.27

£5,476.20

Ratesetter 5 Year Loan

3.7% £91.36 £5,481.60

Zopa A* Personal Loan

3.8%

£91.48

£5,488.80

Ikano Bank Personal Loan

3.8%

£91.49

£5,489.40

M&S Personal Loan

3.8%

£91.49

£5,489.40

Cahoot Low Rate Personal Loan

3.8%

£91.57

£5,494.20

Sainsbury’s Bank Personal Loan

4.3%

£92.57

£5,554.20

Tesco Bank Loan for Clubcard Customers*

4.3%

£92.57

£5,554.20

*Clubcard customers only

Not for everyone

All of the loans in the above tables offer attractive deals 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.

Compare personal loans - rates from just 2.8%

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 Sainsbury’s Bank 29-Month Purchase Credit Card currently has the longest 0% new purchase offer on the market.

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

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:

Five ways to get a great loan

Secured loans: pros and cons

The best 0% purchase credit cards

 

 

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