There's good news for borrowers looking to take out a personal loan this year as a price war starts between some of the biggest providers.
In the last two weeks, six big financial firms have cut the rates on their unsecured personal loans, according to research from Moneynet. However, the reductions are only targeted at borrowers requiring larger loans.
The biggest reduction comes from M&S Money which has cut its APR from 9.9% to 7.5% on loans from £7,500 to £15,000. The 2.4% reduction will see borrowers save £522 on a five-year loan of £7,500 or £695 on a five year loan of £10,000.
Other cuts come from Barclays which has reduced the APR on its Barclayloan Plus from 10.9% (existing customers only) and First Direct which has reduced the rate on its loans from 8.9% to 7.5% on loans of £7,000 to £15,000 (existing customers only). For the same size loans Tesco Bank has reduced its rate from 7.9% to 7.6% (or 7.5% for existing Tesco loan customers).
Sainsbury's Personal Finance has also reduced its rate from 7.7% to 7.4% but for Nectar card holders only.
The current best buy is from Nationwide, which is offering 7.2% on loans of between £7,500 and £14,999, but it is only available to Flex Account customers.
Rates are much higher on smaller loans, up to £3,000, with rates often getting close to 20%. This is typically because the loans are considered to be higher risk by lenders. The cheapest conventional personal loan for £2,000, for example, is available from Black Horse at 17.9% Cheaper rates may be available through social lending and borrowing sites including Zopa and Yes-Secure.
In some instances for small loans, it may be better to opt for a 0% credit card, so long as you can repay the debt within the interest-free period. The best deal is currently available from Tesco Bank - it's offering 0% on new purchases for 13 months.