Personal loans still offering record low rates
Personal loan providers have been locked in a price war for some time now, dragging loan rates to record lows in the process.
Sadly, research from Swedish challenger bank Ikano found that many borrowers aren't taking advantage of these cheap deals. In fact, as many as two thirds of us opt for the easy option of either sticking with our own bank or choosing the first deal we find.
Doing that could add hundreds of pounds to the total cost of a loan, so it's essential you take the time to compare offers before making a decision.
The good news is we've done the hard work for you and picked out the best rates.
Medium loans (£7,500-£15,000)
Here are the lowest rates when borrowing £10,000 over five years.
Loan | Representative APR | Monthly repayment | Total amount repayable |
3.1% | £179.94 | £10,796.40 | |
3.2% | £180.37 | £10,822.20 | |
3.2% | £180.55 | £10,833.00 | |
3.2% | £180.58 | £10,834.80 | |
3.3% | £180.79 | £10,847.40 | |
3.3% | £180.80 | £10,848.00 | |
3.3% | £180 | £10,848.00 |
*Clubcard holders only
As you can see, Ikano Bank is currently the cheapest personal loan provider, with a lowest-ever rate of 3.1%.
Having said that, competition in the market is so fierce there's not a massive difference between Ikano and it's closest rivals. For example, the monthly repayments on a £10,000 loan from Zopa (the fifth cheapest in the table) and Ikano is just 85p!
Large loans (more than £15,000)
If you need to borrow more the rates are still competitive.
Here's what you can get when borrowing £17,500 over five years.
Loan | Representative APR | Monthly repayment | Total amount repayable |
3.2% | £315.65 | £18,939.60 | |
3.2% | £315.95 | £18,957.00 | |
3.4% | £317.14 | £19,028.40 | |
3.4% | £317.17 | £19,030.20 | |
First Direct Personal Loan* | 3.4% | £317.47 | £19,048.21 |
3.5% | £318.30 | £19,098.00 |
*Existing customers only
Small loans (£5,000-£7,499)
The smallest loans on offer, which range from between £5,000 and £7,499, are also the most expensive.
Here are the best buy personal loans, using the example of £5,000 repaid over five years.
Loan | Representative APR | Monthly repayment | Total amount repayable |
3.8% | £91.48 | £5,488.80 | |
3.8% | £91.49 | £5,489.40 | |
3.8% | £91.49 | £5,489.40 | |
3.8% | £91.57 | £5,494.20 | |
4.2% | £92.36 | £5,541.60 | |
4.3% | £92.57 | £5,554.20 | |
4.3% | £92.57 | £5,554.20 |
*Existing customers only
Not for everyone
All of the loans in the above tables offer attractive deals 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 two years or more.
The Sainsbury's Purchase Nectar Credit Card offers 28 months of 0% interest on spending.
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.
Compare 0% purchase credit cards
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.
