Personal loan interest rates keep on falling

By Joel Stanier

Personal loans are now available with as little as 5.7% interest - as lenders battle to win borrowers' business.

Only a few months ago, loan rates of less than 6% would have been unthinkable - and a few years before that they were much higher.

But after Sainsbury's Bank announced earlier this month that it would be cutting its best personal loan rate to 5.8%, fellow supermarket brand Tesco Bank has trumped that with a 5.7% interest rate.

Borrowers have benefited from increasingly low rates since the Bank of England cut its base rate to an all-time low in 2009. Bank of England figures show that the average rate on a £10,000 currently stands at 8.3%, and we have to look back to March 2008 to find a lower average rate (7.9%). And between 1995 (when records began) and 2002,the average rate never fell below 10%.

To put this into perspective, repayments on a £10,000 loan over four years at 5.7% would cost £233.48 a month, compared with £245.54 at 8.3% and £253.63 at 10%.

A loans expert at Think Money commented: "Now could be a great time to find a personal loan if you want to borrow money, with the top rates better than they've been in years. However, people should bear in mind that the very best rates will only be available to those with perfect credit scores, and the actual rate offered can vary.

"Nonetheless, loans remain one of the cheapest ways to borrow money over the longer term."

Tags: personal loans, bank, Sainsbury, loans

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