Tesco Bank has cut its personal loan rate by 0.5% to 5.2%, making it the cheapest deal on the market.
Customers can now borrow between £7,500 and £15,000 at this rate for a period of 12-60 months.
This reduction makes it the cheapest loan on offer in over 10 years, according to Defaqto.
Personal loan war
[SPOTLIGHT]Competition is fierce in this market; the Co-operative Bank has also lowered its loan rates to 5.6% from 7.9% for new customers who want a loan of between £7,500 and £14.950.
It has reduced rates to just 5.4% for those customers with an existing Privilege or Privilege Premier account.
Back in November, Derbyshire Building Society cut its rates to 5.4%, and was shortly followed by M&S Bank and Sainsbury’s lowering rates to 5.5% and 5.4% respectively.
At the end of the year the AA also joined in and slashed its personal loan rate to 5.6% and 5.5% for members.
Borrowing £10,000 over five years
To get the best rate on a loan it’s important to shop around and do some research first. Our comparison tables will give a full view of the market and below I’ve listed the top five, based on a personal loan of £10,000 taken out over a five-year period.
|
Loan |
Representative APR |
Total amount repayable |
Monthly repayment |
|
5.2% |
£11,344.80 |
£189.08 |
|
|
5.4% |
£11,397.60 |
£189.96 |
|
|
5.5% |
£11,423.40 |
£190.39 |
|
|
5.6% |
£11,449.80 |
£190.83 |
|
|
5.6% |
£11,449.80 |
£190.83 |
*A rate of 5.5% is available to AA members
Personal loan alternatives
Although the advertised rate for the Tesco loan is 5.2%, not every customer will be able to get this. Lenders only have to offer this rate to 51% of approved borrowers - the rest may be offered a higher rate. So what are your alternatives?
Balance transfer credit cards are a good way of paying off an expensive debt as they allow you an interest holiday for a certain time period. The best card from Barclaycard offers two years of 0% interest, with several others not far behind. Read The best 0% balance transfer credit cards for more.
Other loan providers, such as peer-to-peer lenders, are also worth considering. These companies, like Zopa and Funding Circle, work by matching individual lenders and borrowers together and cutting out the middle man.
What's more, these firms are about to become even safer. Read Peer-to-peer lending set to be regulated for more.
More on loans:
Peer-to-peer lenders to offer Government small business loans
Overpay your loan without penalty
Amigo Loans and the dangers of being a guarantor
Three ways to get an interest-free loan