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
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?
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.
And 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
Lending Works and lend-to-save provider, Ratesetter, offer the cheapest deal at 5.2 per cent rate for someone borrowing between £3,000 and £5,000.
Zopa charges a slightly higher 5.3 per cent on the same amount and Ikano Bank follows at 5.8 per cent.
Loans for £5,000 to £7,499
M&S Bank and Ikano Bank charge 3.8 per cent to borrow between £5,000 and £7,499.
Zopa charge the next cheapest rate on amounts between £5,000 and £7,500 at 3.9 per cent.
Hitachi Personal Finance and Ratesetter both apply a 4.2 per cent rate for someone borrowing £5,000 to £7,499.
Sainsbury's Bank has a 4.3 per cent rate for someone borrowing £5,000 to £7,499 (4.2 per cent for Nectar cardholders repaying over 36 months, see below).
Cahoot, owned by Santander, offers a rate of 4.4 per cent. Tesco Bank also offers this rate to anyone with one of its Clubcard loyalty cards.
Loans for £7,500 to £15,000
Lenders typically offer the best rates to those borrowing between £7,500 and £15,000 as this is the bracket most banks typically advertise.
Sainsbury's Bank charges just 3.1 per cent to Nectar card holders borrowing over one to three years, however the rate jumps on terms between four and five years or for anyone without a supermarket loyalty card to 3.2 per cent.
Challenger bank, Ikano, also charges 3.2 per cent on mid-sized loans over one to five years.
Hot on its heels sits HSBC with a rate of 3.3 per cent on amounts between £7,000 and £15,000.
M&S Bank, Ratesetter, Zopa and Tesco Bank (Clubcardholders only) offer the same 3.3 per cent rate for someone borrowing £7,500 to £15,000.
Nationwide and Cahoot also has a 3.4 per cent rate for someone borrowing £7,500 to £15,000.
To qualify for the Nationwide loan 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.
First Direct has a 3.4 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?
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 3.4 per cent for those wanting £7,500 to £14,999.
This mean borrowers who bank with Nationwide could bag themselves a rate of under 3 per cent in theory, using Ikano Bank's 3.2 per cent deal.
Do you have a Sainsbury's loyalty 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 3.1 per cent on amounts between £7,500 and £20,000 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 3.3 per cent.
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.
- Find out more about how to protect your credit rating
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.
This is Money has written a separate guide to your options if you need to take out a large loan which you can read here
Sainsbury's Bank charges Nectarcard holders 3.4 per cent for amounts between £20,000 and £25,000 if you repay over three years.
Repay over a longer term or don't have a loyalty card and you will pay a rate 0.1 per cent higher.
Santander-owned, Cahoot offers new and existing customers a rate of 3.4 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.
Anyone with a Tesco Clubcard can take out a loan of up to £25,000 for 3.4 per cent repaying over a term lasting up to eight years. It charges 3.6 per cent for anyone without a supermarket loyalty card.
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 only) and Hitachi Personal Finance and TSB are charging 3.9 per cent on amounts between £15,000 and £25,000 repaying over one to five years.
Borrow up to £40,000.
Sainsbury's Bank actually offers personal loans up to £40,000. Again there are slightly different rates depending on how long you need to repay and whether you have a loyalty card.
Nectar card holders pay 6.7 per cent over a three year term, 6.8 per cent for amount repaid over five years and 8.8 per cent on loans over seven years.
Anyone without a Nectarcard will pay 6.8 per cent on loans repaid over up to five years and 8.8 per cent over a maximum of seven years.
Tesco Bank offers Clubcard customers borrowing up to a maximum £35,000, repaying over a maximum term of eight years at a rate of 6.7 per cent.
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