Money alert: Low personal-loan rates

Lenders have this week trumpeted record low personal-loan deals.

Both Marks & Spencer and the Clydesdale and Yorkshire Banks have launched 4.7 per cent APR deals while the AA cut its typical rate to 4.8 per cent, matching a similar rate which was launched last week by Sainsbury’s.

The personal-loan market has been as competitive for months with rates creeping downwards by 0.1 per cent every other month or so. So with the Bank of England keeping base rates on hold on Thursday for yet another month, there is likely to be further price-cutting in the loan market. That means there’s no need to rush to take advantage of the latest low rates. They are likely to be around for some time and could easily go even lower.

But you should not be persuaded to apply for a loan just because they seem cheap. The decision to borrow should be based on need. You may need to raise cash to pay for improvements to your home, for example. The truth is that no matter how low the rate, borrowing money is costly.