Lenders cut loan rates making it easier to get one if you need to borrow cash
TESCO Bank has slashed the rate of its loans for those borrowing £7,500 or more, which means there are now five lenders offering market-topping rates.
The move by Tesco sees its rate fall from 3 per cent to 2.9 per cent.
This brings it in line with Admiral, John Lewis, M&S Bank, and Sainsbury’s Bank, which were already sitting in the best buy position with their 2.9 per cent rates for £7,500-plus loans.
So take out a £7,500 loan over five years with any of these lenders and you’ll repay £8,059 in total with monthly repayments of £134.
On a larger £10,000 loan, meanwhile, you’d repay £10,744 in total over five years with monthly repayments of £179.
The fact so many lenders are offering this top rate should mean it should be easier for borrowers to find a cheap loan.
So if you were planning to take out a loan anyway, now could be the time do it, according to Rachel Springall, personal finance expert at comparison site Moneyfacts.
She said: “Tesco Bank now joins several other providers as the joint-lowest rate for its £7,500 loan tier.
“Its rate cut comes at the perfect time for any borrowers looking for a loan either to consolidate debts or make home improvements over the summer.”
Of course, you should always check how long the lender is willing to lend to you before applying – and the longer the term the more you’ll repay in total.
And if you’re hoping to make early repayments, do check you won’t be charged a fee to do so – only the John Lewis loan comes without these fees.
You should also always use an eligibility tool to check your chances of being accepted for a loan before you apply.
That’s because if you apply for too much credit in a short time frame and you’re rejected, it could hurt your credit score, which in turn could hurt your chances of being accepted by a different lender.
MoneySavingExpert.com has a handy free tool you can use before applying.
But be warned that only 51 per cent of successful applicants will be offered the headline interest rate.
You may be given a much higher rate and this will in turn affect how much you repay in total.
In addition, Ms Springall points out that borrowers looking to take out smaller loans may be better off elsewhere.
She said: “It’s quite typical for loan providers to drop rates for the loan tier of around £7,500 as this usually the advertised loan rate tier they use.
“This means that borrowers looking for a smaller loan may not find rates as appealing.”
For example, the lowest rate on a £5,000 loan over three years is Clydesdale Bank’s higher 3.3 per cent. But over the term you’d repay £5,255 with monthly repayments of £146.
More on loans
Check out our round-up of the cheapest personal loans.
And see our guide to the cheaper alternatives to high-cost credit that could save you a small fortune.
And if you’re looking for the best way to repay debts, we compare balance transfer cards to personal loans.
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