Money Insider: Don't dismiss peer-to-peer options for personal loans

Even though the base rate has been stuck fast at 0.5 per cent for the past 27 months, the interest rate charged by banks and building societies for personal loans is at the highest level for over a decade.

If you're in the market for a larger loan of between £7,500 and £15,000 the average rate is currently 8.6 per cent, and for those seeking a smaller loan of £3,000 the average rate is a wallet-crunching 19.1 per cent.

Lenders will argue that the processing and administration costs are the same whatever the size of the loan, but the profit margin on lower value and shorter-term loans is much smaller, hence the higher rates levied.

Other lenders claim that the default and non-payment rate on loans of £2,000 to £3,000 tends to be greater than for bigger loans and this is also factored into the pricing.

So if you're looking to finance your new car purchase or refit the kitchen, where do you go for a low-cost loan?

The best loan rates I could find on the high street this week were 6.8 per cent from Nationwide Building Society for a loan of £7,500 and above or 12.9 per cent from Sainsbury's Finance if you're in the market for a smaller sum of £3,000.

If you're looking for £3,000 or less, your best option may be a credit card offering a promotional deal for interest-free purchases. As long as your credit record is in good nick and you get allocated a big enough credit limit, you can borrow at 0 per cent for up to 15 months on new purchases with credit cards from Marks and Spencer Money or Tesco Bank.

These days, however there are other less-traditional borrowing alternatives in the form of peer-to-peer lending sites such as Zopa and RateSetter.

The rates on Zopa change on a daily basis, but when I checked on Monday it was quoting just 9.9 per cent for a £3,000 loan over five years and that included the one-off lending fee of £130, a deal that easily beat the rate being offered by mainstream lenders. On the other hand the Zopa rate for a loan of £7,500 was not quite so competitive and slightly above the market average at 8.9 per cent.

With all personal loans the rate advertised must be given to at least 51 per cent of successful applicants, usually those with the very best credit record. If your credit file is less than perfect you may find that you end up paying a higher rate on your borrowing as the lender could assess you as a higher risk.

So next time you're looking for an unsecured personal loan, don't just rely on your own bank – make sure you check out the full range of options.

Rates fall again on five-year mortgages

swap rates have been slipping and are down by 0.25 of one per cent in the last month with these reductions now being reflected in cheaper mortgages.

There have been lower rates across all fixed terms, but a couple of the best examples I've seen in the last couple of weeks have been in the five-year fixed market.

If you're a first-time buyer, your choice of mortgages is normally quite narrow, usually restricted to variable rate or fixed terms of just two or three years.

However, Coventry Building Society has just launched a new five-year fixed-rate mortgage for loans of up to 90 per cent loan to value. This new product comes with a competitive rate of 5.99 per cent and a low fee of just £199.

For first-time buyers the security of a fixed monthly repayment is a key requirement and helps with budgeting in those costly early years of home ownership. The new Coventry BS mortgage offers excellent flexibility with unlimited overpayments allowed, plus the ability to move to a different product at any time without having to pay an early repayment charge.

I think a five-year mortgage, with such flexibility, is an ideal product for the first-time buyer segment. It's possible to get a similar rate with other lenders for a two-year fixed-term, but with interest rates predicted to rise next year, you could be faced with a hike in repayments when your short-term deal comes to an end.

For borrowers with a larger deposit, there was good news in the form of a five-year fix at 3.99 per cent from Yorkshire Building Society (pictured). The rate is available for advances to 75 per cent LTV and comes with a fee of £995. For borrowers who want to reduce their upfront costs there is an alternative deal at 4.39 per cent and a £95 fee, with both options available as an offset mortgage if you want it.

Andrew Hagger – Moneynet.co.uk

News
A boy holds a chick during the Russian National Agricultural Exhibition Golden Autumn 2014 in Moscow on October 9, 2014.
news
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
News
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
people
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
tv
News
i100
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Christine McCleave: FP&A Analyst

    £36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
    Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

    What is it like to live with Alzheimer's?

    Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
    The Internet of Things: Meet the British salesman who gave real-world items a virtual life

    Setting in motion the Internet of Things

    British salesman Kevin Ashton gave real-world items a virtual life
    Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

    Election 2015: A dead heat between Mr Bean and Dick Dastardly!

    Lord Ashcroft reveals latest polling – and which character voters associate with each leader
    Audiences queue up for 'true stories told live' as cult competition The Moth goes global

    Cult competition The Moth goes global

    The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
    Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

    Pakistani women come out fighting

    Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
    Leonora Carrington transcended her stolid background to become an avant garde star

    Surreal deal: Leonora Carrington

    The artist transcended her stolid background to become an avant garde star
    LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

    Education: LGBT History Month

    Pupils have been discussing topics from Sappho to same-sex marriage
    11 best gel eyeliners

    Go bold this season: 11 best gel eyeliners

    Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
    Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

    Cricket World Cup runs riot to make the event more hit than miss...

    The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
    Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

    Katarina Johnson-Thompson: Ready to jump at first major title

    After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot