The best personal loan rates - and how to find the right one for you

 

Personal loan rates are at record lows spelling good news for borrowers who want to access funds for a car, home improvements or to clear debts and pay the money off steadily over time.

But loans can be notoriously difficult to navigate and a bit of a minefield if you are not equipped with the right information or are not the kind of borrower who will get the best advertised rate.

We highlight five of the best personal loans around below, complete with an explanation why, and explain how to go about getting the best deal for you.

New car? Many people take out a loan to cover the initial cost

New car? Many people take out a loan to cover the initial cost

When making our pick of the loans around we don’t just take the best rates from the comparison tables – we also scour the market for all-around winners.

However, you can also investigate the best loan for you personally using our deal finder, linked below. This is a highly-recommended course of action.

Powered by our partner Moneysupermarket it offers a smart loan search - helping you to compare all the top deals that match your needs.


First things first...

Are you trying to cut existing credit card debt?

RULES TO REMEMBER

If you plan to take on a loan, make sure you're up to scratch on the laws.

EU rules mean early part-repayments are allowed

Since 1 February 2011, partial overpayments are allowed on loans taken after this date.

Banks may charge you, but this is limited to a maximum of 1 per cent of the amount repaid (if the loan is for more than a year) or 0.5 per cent (if under a year).

Loan providers must allow you to pay off your loan in an early repayment. This is subject to a penalty which is usually one or two months interest.

If so, a loan probably won't be the absolute cheapest option for you - as long as you do not have a large amount of debt and can try to clear it relatively quickly.

The whole point of balance transfer deals on credit cards are to shift card debts to them at a special cheap rate.

These rates will almost certainly be cheaper than loans for less than £1,000.

For larger amounts they can still prove more cost effective. 

Providing you can transfer to a credit card, and will definitely pay it off before the 0 per cent deal ends,a balance transfer can prove the cheapest option.

If you can't, you would need to make sure you transfer your balance to another 0 per cent deal, or you will face high interest charges.

If you don;t have the financial firepower or discipline to clear the debt within a 0 per cent balance transfer period then a loan may be the best move. It sets monthly payments and as long as you keep up with them over the course of the loan, you will end up with that debt cleared. 

Use our guide to find the best 0 per cent transfer credit card for you.

Best buy loan rates at different levels

Remember: Terms and conditions apply on all these loans, particularly on how long you borrow for, and rates you are offered will vary depending on your credit history

Loans up to £5,000 

Lend-to-save providers Ratesetter and Zopa both charge 5.3 per cent for amounts between £3,000 and £5,000.

Hitachi Personal Finance has a 7.4 per cent rate for someone borrowing up to £5,000 

Loans for £5,000 to £7,499 

Clydesdale and Yorkshire Banks both offer a 4.3 per cent rate for someone borrowing £5,000 to £7,499.

Hitachi Personal Finance has a 4.4 per cent rate for someone borrowing £5,000 to £7,499 

Sainsbury's Bank has a 4.5 per cent rate for someone borrowing £5,000 to £7,499 (4.4 per cent for Nectar cardholders, see below)

Cahoot has a 4.5 per cent rate for someone borrowing £5,000 to £7,499

Loans for £7,500 to £15,000

Clydesdale and Yorkshire Banks both offer a 3.5 per cent rate for someone borrowing £5,000 to £7,499.

M&S Bank has a 3.5 per cent rate for someone borrowing £7,500 to £15,000 

Nationwide has a 3.6 per cent rate for someone borrowing £7,500 to £15,000 but you must be a main current account customer. The building society also pledges to knock 0.5 per cent off the rate if you can prove you have been offered a cheaper like-for-like loan.

Sainsbury's Bank has a 3.6 per cent rate for someone borrowing £7,500 to £15,000 (0.1 per cent reduction for Nectar card holders borrowing over one to three years) 

Tesco Bank has a 3.6 per cent rate for someone borrowing £7,500 to £15,000 

Cahoot has a 3.6 per cent rate for someone borrowing £7,500 to £25,000 

First Direct has a 3.6 per cent rate for someone borrowing £7,000 to £25,000 but you must be a current account customer.

Use your loyalty to get a better rate

Savvy borrowers with a Nationwide current account or those with a Sainsbury’s Nectar loyalty card can take advantage of existing customer deals and price guarantees to bag themselves even lower interest.

Remember, taking advantage of either the Nationwide or Sainsbury’s Bank price promise will require applying for multiple loans at the same time, which can leave a mark on your credit file and make it harder to be accepted in the future. 

Do you have a Nationwide current account? 

Last month, Nationwide Building Society guaranteed to its current account customers that it would undercut any personal loan offered to them by 0.5 percentage points.

The lender also already offers a low rate of 3.6 per cent for those wanting £7,500 to £14,999.

This mean borrowers who bank with Nationwide could bag themselves a rate of just 3 per cent in theory, using any of the market-leading 3.5 per cent deals.

Do you have a Sainsbury's loyalty card? 

Exclusive deal: cut your interest rate by taking out a free Nectar Card

Exclusive deal: cut your interest rate by taking out a free Nectar Card

Those with a free Sainsbury’s Nectar card can apply for a rate of 3.4 per cent on amounts between £7,500 and £15,000 when repaying over one to three years.

This loyalty-rate is 0.1 per cent lower than it offers to new customers.

Loans lasting over four or five years come with a higher interest rate of 3.6 per cent while lending over five to seven years carries a 5.6 per cent headline rate.

Although the process may seem a little long-winded for a reduction of 0.1 per cent, it could be worth signing up to the free loyalty scheme before you apply for a Sainsbury's loan as savings will add up over time. 

Nectar card holders must simply swipe it in store or use it online within six months of applying for the loan, to qualify for the deal.

Don't forget the Price Promise

As an added bonus, Sainsbury's Bank has included a price promise which states if you can get a better deal elsewhere, it will beat it by 0.1 per cent.

To qualify, successful applicants must provide a written offer from the other lender in the same name as the loan offered by Sainsbury's within 28 days of the Sainsbury's Standard Loan being approved.

You must not have accepted the standard loan offer by signing and returning the Sainsbury's Loan agreement.

The loans must be compared on a like-for-like basis, based on features such as, but not limited to, length of loan, fixed loan amount and repayment structure (including interest and set up fees - if any). 

However, bear in mind that multiple credit searches impact your credit footprint - if you do sign up to this deal you will have effective applied for two loans. 

The offer may be higher depending on your personal circumstances, credit assessment procedures and other related factors.   

Best for loans of more than £15,000

If you need to take out a loan for more than £15,000 there are several options.

Ratesetter has a 3.5 per cent rate for borrowing between £7,000 and £25,000, repaying over three years.

Santander-owned, Cahoot and offers the next best deal open to new and existing customers at 3.6 per cent (APR) per cent on amounts up to £20,000. 

The lender offers the low rate to those borrowing between £7,500 and £20,000, repaying over one to five years. 

First Direct 1st Account customers can grab the same deal but on up to £25,000 over a repayment term of up to seven years. 

Nationwide current account customers are charge 3.9 per cent on amounts between £15,000 and £25,000 repaying over one to five years. 

ARE YOU ELIGIBLE FOR AN INTEREST-FREE SOCIAL SECURITY LOAN?

If you don't have any personal savings, before going for commercial debt it's worth seeing if there are any loans available from the government's social fund available to you.

The first are crisis loans, which are for emergencies or disasters - basically anything that endangers your house or family.

The next type are budgeting loans, which are interest-free loans for those receiving benefits. The minimum you can borrow is £100 and it can be used to spend on things like school uniforms or furnishings.




 

 

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