The interest charged on personal loan rates have plummeted to their lowest in 16 months, according to a comparison website.
The rate on personal loans of £7,500 and £5,000, taken over five years, have fallen by almost half since January, the analysis has revealed.
The average rate on a £7,500 loan is currently 5.71% APR according to MoneySuperMarket, which is around 44% lower than the average rate of 10.16% at the start of the year. That makes the total amount repayable £889 cheaper.
The interest charged on loans of £5,000 over five years has also fallen and at 8.3% is now more than two-fifths (44%) cheaper than it was in January. The reduction in the rate represents an £888 saving on the total repayable over the term.
According to Moneywise.co.uk/compare, the cheapest rate currently available on a £7,500 loan over five years is 4.30% from Hitachi Personal Finance. The total repayable is £8,348.50, or £139.14 a month.
Yorkshire and Clydesdale Banks have a 4.4% rate, meaning the total repayable rises by £20 to £8,368.91, or £139.48 a month.
For a loan of £5,000 over five years, Hitachi Personal Finance again has the cheapest deal at 5.60%, which means a total amount repayable of £5,744.21, or £95.74 a month. Tesco Bank is just behind with a 5.70% rate, which costs £758.08 in interest over the five years – or £95.97 a month.
Kevin Mountford, head of banking at MoneySuperMarket, said: "Over the past 16 months, we have seen loan rates steadily fall. While one or two providers have launched market-leading low rates over this period, the average for 2013 and the first few months of 2014 remained high.
"However, it is a different story now, with personal loan rates plummeting to a new low of under 5% for loans of £7,500. This just goes to show that lenders are clearly tapping into the time of year when people possibly look to purchase a new car or make improvements to their home, as well as those looking to consolidate existing debt.
"I would advise anyone thinking about borrowing to consider taking advantage of these low rates now, as there is no guarantee on how long they will stay this low, especially with Bank of England Base Rate expected to rise in the near future."
However, he reminds anyone thinking about taking out a loan that the best rates are only available to those with excellent credit histories. People with lower credit scores could have to pay interest rates 50% higher than the best advertised.