The cheapest-ever personal loan has been launched by Hitachi, at a rate of 4.9%. But it's only available to borrowers with a perfect credit score.
Loans of between £2,500 and £15,000 are available but only around 10% of customers will actually be accepted for a loan at 4.9% and most will actually get 5.4%.
Borrowers taking out this loan with Hitachi, the financial arm of the Japanese conglomerate, will have between six months and five years to pay the debt back.
They will also get a free savings account with Ffrees which offers discounts such as a 4% rebate on anything spent at Waitrose, 3% at B&Q and 10% with Lastminute.com. Read more in Save as you spend with the new Frees Family Card.
It is an attractive rate, and it's interesting that the bank is able to offer it despite not having access to the Bank of England's Funding for Lending Scheme (FLS), which has been designed to boost lending to individuals and banks.
However, the advertised rate for this loan is 5.4% which at least half of all customers must be offered. This rate is not market leading, and in fact comes after deals from Derbyshire Building Society and M&S Bank, which both offer 5%, and Clydesdale Bank, Sainsbury's Bank and Tesco Bank – all at 5.1%.
Personal loan competition
Across the personal loan market there has been a lot of action this year as competitiors try to cement their place at the top of the tables.
Hitachi's loan may undercut deals from other providers – but it's not going to be an option for most people.
Our comparison tables give a full view of the market and here I've listed the top five alternatives on the market when looking at loans between £7,500 and £15,000.
|M&S Bank Existing Customer Personal Loan||5%||£11,095.05||£184.92|
Alternative ways to borrow money
Headline rates on personal loans may look attractive but they will only be available for borrowers with good, or in some cases exceptional, credit scores.
There are other ways to borrow cash though and these all depend on your circumstances. You could opt for a higher interest rate, as even though it's not market-leading it still could be the lowest rate on offer to you.
If it's interest payments you're dealing with on a credit card you could try a balance transfer deal, which will give you a break from payments for around two years giving you the chance to clear the debt. Read The best 0% balance transfer credit cards.
For those in real financial trouble, the best thing to do is approach a charity such as StepChange. It provides free, confidential advice for those struggling and it can speak to lenders to try to arrange interest holidays as well as providing free debt management plans. It's not the only free debt charity though. Read Where to get free debt advice.