There's a price war going on so here's a round-up of the best personal loans on the market right now.
If you want to borrow a larger sum of money, a personal loan is a good option for many people. The good news is there is loads of competition in the personal loan market right now and this means rates on the top loans are falling.
Here's our guide to the cheapest rates right now.
A reminder of how personal loans work
These loans are normally for 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 although the cheapest rates can be found in the medium range.
Medium loans (£7,500-£15,000)
The best rate available on medium-sized loans of 4.1% is now offered by Hitachi Personal Finance, the financial arm of the well-known electronics giant. You can repay it in between two to five years.
If you prefer, you can get a rate of 4.2% from Sainsbury's Bank, but this has to be repaid within three years. If you want to pay it off over up to five years, the rate increases to 4.3%. Cahoot offers a rate of 4.2% that can be paid off over up to five years.
Here are the best buys using the example of borrowing £10,000 over five years.
|Zopa A* Personal Loan||4.1%||£184.49||£11,069.40|
|Sainsbury's Bank Standard Nectar Cardholder Loan||4.2%||£184.89||£11,093.40|
|Sainsbury's Bank Non Nectar Cardholder Standard Loan||4.2%||£184.89||£11,093.40|
*Current account customers only
Small loans (£5,000-£7,499)
The smallest loans on offer, of between £5,000 and £7,499, are also the most expensive, but Hitachi is top of the pile here too.
Here are the best buys using the example of £5,000 repaid over five years.
|Zopa A* Personal Loan||5.4%||£95.09||£5,705.40|
|Sainsbury's Bank Non Nectar Cardholder Standard Loan||5.5%||£95.28||£5,716.80|
|Sainsbury's Bank Standard Nectar Cardholder Loan||5.5%||£95.28||£5,716.80|
Large loans (more than £15,000)
With the largest loans the top rate is reserved for existing customers. But there's still plenty of choice beneath that.
Here are the best rates you can find on a loan of £17,500, taken out over a five-year term.
*Only available to existing First Direct customers
Not for everyone
All of the loans in the above tables offer attractive rates 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.
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 as long as 18 months.
The current market leaders in this category are the Tesco Clubcard for Purchases card, Santander Purchase card and Santander 123 credit card, which all offer an 18-month 0% period.
Let us imagine you want to buy some new furniture for £1,500. If you use the Tesco or Santander cards for these purchases, you won't have to pay any interest for a year and a half. That's as long as you make your minimum repayments each month.
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.
Compare personal loan rates