Money Insider: Want a loan of £5,000 or less? Shop around
Saturday 13 October 2012
Interest rates on personal loans may be close to record lows for those borrowing five- figure sums but it's not all good news, with some lenders charging 20 per cent APR plus to customers who only want a loan of £5,000 or less.
The battle for personal loan business is as intense as ever, but many lenders are cherry picking and concentrating on the higher value end of the market. Rates are very competitive if you want to borrow £7,500 or £10,000, with five lenders currently fighting to be top dog and advertising representative interest rates of between 5.6 per cent APR and 5.9 per cent APR.
For lower value loans it's a different story, with most lenders charging double digit rates on a £3,000 advance, and NatWest and Halifax amongst the most expensive at 20.9 per cent APR and 24.9 per cent APR respectively.
There are cheaper options available, but my research shows you'd do well to steer clear of the established providers if you want the best deals. There are three borrowing options that stand out if you want to borrow £5,000 or less:
Zopa, the first peer-to-peer lender in the UK, is now in its eighth year and RateSetter, one of the more recent lenders in the peer-to-peer market, both offer some of the best value deals at 9.5 per cent APR and 9.7 per cent APR respectively for a £3,000 loan over three years. Just because you're not familiar with the names doesn't mean you should discount them — the peer-to-peer market has quickly established itself as a credible alternative to the big banks — and the interest rates are much better than you'll find on the high street. Zopa has already lent more than £230m and RateSetter has advanced more than £36m to personal customers.
Another option is the Rate for Life card from MBNA. Although not strictly a personal loan, there's nothing to stop you using this long-term fixed-rate credit card in the same way you would as a loan. If you transfer your balance to the card and set up a monthly standing order for your current account, it works exactly the same as a personal loan. The interest rate is 5.9 per cent APR, and even with the one-off 1.5 per cent balance transfer fee it is one of the cheapest ways to borrow a smaller sum over three or five years.
On a loan of £3,000 the low rate options mentioned here could potentially save you up to £22.79 per month, and as much as £821 in total over a three-year term when compared with the personal loan with Halifax, charging 24.9 per cent APR. For £3,000 over five years the savings are even greater, at up to £24.88 per month and more than £1,400 over the full term.
Don't just sign up with your own bank without looking at all the alternatives, as you could pay way over the odds and end up out of pocket.
Shop around for the lowest rate, and by thinking outside the box or taking deals from new lenders you can save a small fortune.
How to home in on a bargain mortgage rate
It may be a wretched time for savers with rates continuing to slide over the last couple of months, but for mortgage borrowers the deals seem to be getting cheaper by the day.
For homeowners currently on their lender's standard variable rate, who may be worried about their rate increasing following moves by some of the biggest lenders this year, Barclays is offering an enticing deal.
The interest rate on its Great Escape 2-year fixed mortgage has been cut to just 3.29 per cent for those with a 30 per cent deposit, plus it comes with extra sweeteners including no product fee, no legal costs, a free valuation and £300 cashback.
The good news is that rates are falling for all borrowers, across a wide range of loan to values. The five-year fixed rate market is a prime example. In the last week we've seen new deals from Tesco Bank at 3.19 per cent with £1,295 fee up to 60 per cent LTV, Co-operative Bank down to 3.99 per cent with £995 fee to 85 per cent LTV, and Yorkshire Bank doing its bit for first-time buyers with a cut-price 4.79 per cent fixed for five years with a £995 fee for those with just a 10 per cent stake to put down.
Andrew Hagger is an independent personal finance analyst from moneycomms.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
- 2 Stamford Hill council removes 'unacceptable' posters telling women which side of the road to walk down
- 3 Kim Kardashian 'nude pictures' leaked on 4chan weeks after Jennifer Lawrence 'The Fappening' scandal
- 4 Alex Salmond: 'The rocks would melt with the sun before I'd ever set foot in the House of Lords'
- 5 Ice Bucket Challenge: US firefighter Tony Grider dies after participating in charity craze near power lines
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize