Personal loans drop to record low - but only for Nectar Card holders
Personal loans have followed the base rate to new record lows, with Sainsbury’s Bank now lending at an unprecedented 3.1%, but only to people with a Nectar Card.
The rate is available to people borrowing between £7,500 and £20,000 who opt for a repayment period of three years or less.
Non-Nectar Card holders, or people who choose longer repayment periods will be offered 3.2% APR, which also is matched by Ikano Bank.
Sainsbury’s Bank has also cut the rates on its loans of between £20,000 and £25,000, from 3.4% to 3.2% for people repaying over three years or less, and from 3.5% to 3.3% for people choosing longer repayment periods.
These rates are representative, meaning most successful applicants will get the advertised rates, but others may be charged more.
This 3.1% deal is the cheapest personal loan on record, though only by a whisker. It’s 0.1% cheaper than the next best deal, which will save you about £1 on monthly repayments with a £15,000 loan.
If you’re borrowing slightly than £3,000, £5,000 or £7,500, use our loan comparison tool to check if you might repay less overall by borrowing just over these amounts.
Borrowers might also consider a 0% balance transfer card if they’re consolidating existing debts, or a 0% purchase card to spread the cost of a big-ticket purchase.
Tesco Bank has the longest interest-free term for purchases at 28 months, while Halifax has an interest and fee-free deal for 25 months for balance transfers.
If you’re looking to clear an existing loan or overdraft, Virgin Money’s Money Transfer Card lends at 0% for 32 months, though the card has a 1.69% fee, equivalent to £50.70 when shifting a £3,000 balance.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.