Cheapest loans down to just 6%

Personal loans are set to become highly competitive again after M&S Money reduced its loan rate down to 6% APR, the lowest level for a personal loan in four years.

The 6% rate applies to loans between £7,500 and £15,000 over 12 to 60 months, with the option to deter payments for three months. However, applicants must be a UK resident aged 30 or over or a homeowner.

The last round of rate competitiveness for loans took place in the autumn, with Nationwide and Sainsbury’s both involved.

M&S Money’s recent move has also triggered a response, as Tesco has slashed its rate on equivalent loans down to 6.1%. This demonstrates that, after a slow 2011, creditors are becoming interested in topping tables again for personal loan products.

Evidently, it is the financial arms of retailers and supermarkets that are leading the way, as they look to diversify on the one hand, and to increase market share through complementary products and measures of price- and non-price competition on the other. Sainsbury’s have offered lower rates to Nectar Card holders, and credit card deals similarly benefit regular shoppers at their stores.

Rates remain higher for smaller loans, however. Sainsbury’s leads the way for loans between £1,000 and £7,500 at 7.8%.

If you are searching for a smaller loan to consolidate debts, it may be worth asking yourself whether there are better options. Certainly, a personal loan can offer considerably better rates than the premium credit card rates, which average 17-18%. It is also worth noting that the best loan rates tend to favour those with perfect credit histories.

However, a 0% balance transfer credit card can now offer up to 24 months without interest to pay off an existing credit card balance (Barclaycard Platinum).

Making the right decision on large sums can save hundreds each year. Find the best personal loan deal (or credit card alternative) on Which4U this year, and make the savings that matter.

Bret Clement