Personal loan interest rates reach new low

By Joel Stanier

Borrowers with a squeaky-clean credit record can now find personal loans with interest rates as low as 5.5% - as lenders continue to battle for customers.

M&S Bank has reduced its best loan rate by 0.3%, and now offers the lowest interest rate on the market. The deal applies to loans of between £7,500 and £15,000, repaid over one to five years.

According to Moneyfacts.co.uk's best buy table, the closest competitors are Derbyshire Building Society and Sainsbury's Bank with 5.6% interest - but a number of lenders now offer loans under the 6% mark.

And it was in fact M&S Bank which started the current price war, when it reduced its personal loan rate to 6% back in January.

Figures from the Bank of England show that the average personal loan rate for loans above £7,500 is currently 7.49%. The last time rates were this low was way back in September 2007 - just before the financial crisis. And prior to 2002, interest rates of less than 10% were very rare.

A loans expert at All About Money said: "Now could be a great time to find a personal loan if you're looking to borrow. The rate cuts we've seen over the last year could make a real difference to the monthly repayments.

"But don't forget that these headline rates are only available to those with a very good credit score. If you have a less-than-perfect credit rating, you may be offered a higher interest rate, or your application may be turned down.

"It's important to be realistic. Being refused for credit will leave a mark on your credit history, so applying for a loan with the very lowest rates may not be worthwhile if you've missed any credit repayments in recent years.

"With that in mind, it's well worth comparing the latest deals or seeking advice from an expert to find out which deals could be available to you."

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