Personal Loan Rates War Hots Up For Christmas

Personal loan rates are at an all time low as the lenders battle it out for our custom in the run up to Christmas. Nationwide just dropped their rate to a new 4 year low of 6.1% in a bid to out do rivals Sainsbury’s.

The rate though is only available to Nationwide current account holders who require between £7,500 to £14,999 for up to 5 years.

Nationwide’s Director of Banking Graham Pilkington says:

“The personal loan market remains highly competitive. Nationwide continues to lead the way with the introduction of this market leading headline rate of 6.1%, the lowest rate ever offered by the Society.”

“Family finances continue to be stretched and this great rate will appeal to customers looking to consolidate debt or spread the cost of home improvements or other purchases.” Source: Money Expert

What he doesn’t say is that you are not going to qualify for this ‘best ever’ rate unless you have a really good credit score. These rates are great for grabbing the financial headlines but if you qualify for the lowest rate on offer you aren’t likely to be someone who is going to require a loan to consolidate debt, do some home improvement work or to see you through Christmas.

In order to able to advertise their best personal loan rates a lender only needs to offer it to 51% of the people applying and they are able to insist on the amount you can borrow as well as set a minimum term for you to qualify – Most of the lenders in the current rate war are insisting you need to borrow between £7,500 and £15,000 for a minimum of 5 years AND already be a customer of theirs to qualify.

For instance, before Nationwide cut theirs the previous lowest personal loan rates available were offered by Sainsbury’s but to qualify you needed to be a holder of their Nectar card and again want to borrow between £7,500 and £15,000 for a minimum term of 5 years.

Despite record low personal loan rates on offer if you are just looking for a loan to help get you through Christmas then these types of unsecured loans aren’t really going to be suitable for your needs. Mirror Money recommends you look at short term options including credit cards and told their readers:

“If you took out a 0% on purchases credit card, you could make a big purchase with your new card and not pay any interest on the resulting debt for up to 15 months.”

“At the moment, the best 0% on purchases cards are the Tesco Clubcard Mastercard and the M&S Credit Card. They both offer 15-month 0% periods. Be careful though – the 15 month period begins when you take out the card, not when you make the purchase.”

For those who require a more substantial loan over Christmas and who can’t get access to one these cheap personal loan rates on offer because of a less than perfect credit rating Mirror Money suggest a secured loan taken out on your home:

“For a larger sum, you could consider borrowing some extra cash via your mortgage. If you want to do this, approach your lender and ask for a further advance.”

“This is a tempting route in some ways as the interest rates on most mortgages are so low at the moment. The problem, however, is that mortgages are long term loans, so you may end up paying more interest than you expect – unless you’re allowed to overpay and you can pay off the debt quickly.”

Whichever type of loan you go for, if it is to help you pay for Christmas you need to be sure you really need it. Even if you qualify for one of the lowest personal loan rates you still have to take it out for a minimum period. This means you will be paying close to £200 a month for the next 5 years on a £10,000 loan.