Borrowers should steer clear of established providers to get the best rates

Interest rates have never been cheaper if you want a five-figure personal loan but for lower-value loans it's a very different picture

Loans can be expensive if you;re borrowing a relatively small sum, but new contenders are coming up on the rails (Getty Images)

Interest rates have never been cheaper if you want a five-figure personal loan from your bank – but if you're borrowing a smaller sum, it's far more expensive; it's the higher- value end of the market in which lenders are interested.

Rates are at rock bottom if you want to borrow £10,000, for example, with deals as low as 3.6 per cent APR from Sainsbury's Bank, M&S Bank and Nationwide.

For lower-value loans it's a very different picture, with many lenders charging double-digit rates on a £3,000 advance. Barclays and Halifax are among the most expensive at 22.9 per cent and 18.9 per cent APR respectively.

There are cheaper alternatives, but my research shows you'll do well to steer clear of the established providers if you want the best deals.

A handful of options stand out if you're if you're looking to borrow a relatively small sum. Zopa, the biggest peer-to-peer lender (P2P) in the UK, and RateSetter, one of the fastest-growing firms in the same market, offer some of the best-value deals at 5.8 per cent and 8.8 per cent APR respectively for a £3,000 loan over three years. Lending Works, a relatively new P2P player, is charging just 5.7 per cent.

Just because you might not be familiar with the names, it doesn't mean you should discount them – the P2P sector is now regulated and has established itself as a credible alternative to the big banks – and the rates are much better than you'll find on the high street.

Another option to consider is the Low Rate credit card from MBNA. Although this isn't strictly a personal loan, if you make purchases with the card and set up a monthly standing order from your current account, it works in exactly the same way as a personal loan. The interest rate is 6.6 per cent APR and, unlike with many deals, there's no balance-transfer fee to pay. It is one of the cheapest ways to borrow a smaller sum over three or five years.

The potential cost saving on a loan of £3,000 at 6.6 per cent is £742 over a three-year term; the personal loan with Barclays, for example, charges 22.9 per cent APR.

The golden rule with personal loans is not to sign up with your own bank without checking some of the less obvious alternatives, as there's a good chance that you'll be paying over the odds.

What homebuyers want

An interesting survey was released by Santander Mortgages this week looking at people's key priorities when considering buying a new home.

As you'd expect, more space was high on the list. However, it seems that proximity to work and to public transport have become far more important than living close to family members.

There was also a big increase in homebuyers looking for a strong broadband signal and to be near sports facilities and bars and restaurants.

There seems to have been a move towards people wanting a shorter commute and an all-round better quality of life. Respondents said they would be prepared to pay an extra £7,000 to live in a safe neighbourhood and £6,000 to live next to nicer neighbours.

On the mortgage product front, there was some excellent news for first-time buyers from Tesco Bank, which launched two new 95 per cent loan-to-value deals: a five-year, fee-free fix at a rate of 4.69 per cent, or 4.19 per cent fee-free on a two-year option.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk