Money Insider: Want a loan of £5,000 or less? Shop around

 

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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Finacial products from our partners
Property search
  • Get to the point
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: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

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

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

    'We will not sit down with Nicola Sturgeon'

    In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
    VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

    How ordinary Britons celebrated VE Day

    Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
    They came in with William Caxton's printing press, but typefaces still matter in the digital age

    Typefaces still matter in the digital age

    A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
    Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

    'Missing link' between Earth's two life-forms found

    New microbial species tells us something about our dark past, say scientists
    The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

    Pan Am Experience: A 'flight' back to the 70s

    Tim Walker checks in and checks out a four-hour journey with a difference
    Humans aren't alone in indulging in politics - it's everywhere in the animal world

    Humans aren't alone in indulging in politics

    Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
    Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

    Crisp sales are in decline

    As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
    Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

    Ronald McDonald the muse

    A new wave of artists is taking inspiration from the fast food chain
    13 best picnic blankets

    13 best picnic blankets

    Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
    Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

    Barcelona vs Bayern Munich player ratings

    Lionel Messi scores twice - but does he score highest in our ratings?
    Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

    Explosive batsman who sets the range for Kiwis' big guns

    Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'