M&S Money Drop Personal Loan Rate To 6%

M&S Money has fired the first shot in what looks likely to become the first pricing war of 2012 in the unsecured loan market.

In the Autumn we reported how Nationwide had cut its rates to 6.1% in a bid to out do Sainsury’s in the run up to Christmas and now M&S Money have started the new year by cutting its rate to 6% APR, making it the lowest rate offered in the UK for 4 years. This time last year a loan for £10k would have cost you 8.4% APR

Don’t get too excited though, to qualify for this low interest rate you will need to be a UK resident over the age of 30 or be a homeowner. Even then, much will depend on your credit rating and you can expect a higher interest rate if yours isn’t 100% squeeky clean.

As well as meeting the above criteria, the 6% is only on offer for unsecured loans between £7,500 and £15,000 taken out over 1 to 5 years.

Tesco Money reacted yesterday by cutting its rates to 6.1% and it can’t be long before someone drops their rate below the 6% mark – which hasn’t been seen since 2007.

Rates still haven’t dropped for loans around the £5000 mark though and the cheapest we could find was Sainsbury’s Finance at 6.9%. It may actually work out cheaper to borrow more and put yourself in the £7,500 bracket as it may well cost you less overall assuming your credit history is A1 and you qualify for the 6% rate offered by M&S Money of course.

The M&S Money move has caused quite a stir in the industry with many speculating 2012 could be a better year for the consumer thanks to the competition in the loans market and most of that competition is coming from retailers who want to diversify their business further as reported in Which4U.

“Evidently, it is the financial arms of retailers and supermarkets that are leading the way, as they look to diversify on the one hand, and to increase market share through complementary products and measures of price and non price competition on the other. Sainsbury’s have offered lower rates to Nectar Card holders, and credit card deals similarly benefit regular shoppers at their stores.” Source

A total of 7 lenders have cut their rates already since the start of the new year according to MoneyFacts and anyone looking to consolidate their debts will find these rates very tempting but with the rate war sure to heat up and develop on an almost daily basis you must shop around for the best deal you can. Whilst M&S Money lead the way today, it is only a matter of time before another lender decides all the free publicity – not to mention extra business – justifies breaking the 6% barrier.

For those needing a small loan over a much shorter period, the options are definitely limited. In fact we could only find one lender prepared to borrow us £1000 for 6 months and that was the Bank of Ireland. They quoted an interest rate of 29.6% and also wanted another £65 for what they called an arrangement fee.

No wonder payday loans are seeing an increase in business when the banks and other mainstream lenders don’t want to know unless you want to borrow a substantial amount, over a several years AND have a perfect credit record.