Sainsbury’s stormed to the top of the tables with its Shopper Personal Loan
in response to a flurry of activity from other hot contenders in the market, M&S
and Derbyshire Building Society
– all trying to outdo the other by pegging rates downward.
This is all great news for consumers of course, who are becoming spoilt for choice in the personal loan arena. Nevertheless, you will still need to do your homework as the terms and conditions of each deal vary.
Here we take a closer look at Sainsbury’s new ground-breaking offering and see how it stacks up against the competition.
What's the deal?
As with all the best personal loan rates on the market, Sainsbury’s new all-time low APR of 5.4% only applies to ‘medium-sized’ borrowing of between £7,500 and £15,000.
To benefit from the market-leading rate, the loan must also be taken out over a period of between one and three years. If you want to borrow for longer (over four or a maximum of five years) the rate will increase to a representative 5.5% APR.
To qualify for the loan, you must be a Nectar card holder (although these can easily be picked up in store for free). You must also be aged 18 or over, have a bank or building society and a good credit record – for example, you will not be accepted for the loan if you have been declined for credit in the past month.
It’s also worth noting that, unless you include a home telephone number, your application will not even be considered – something that could be very easily overlooked.
As already mentioned, the main catch is with the Sainsbury’s loan is that the 5.4% rate only applies to borrowing of between one and three years – and that you will need to be armed with a Nectar card to get it.
That said, even if you want longer over which to repay your debt – up to a maximum of five years – the representative APR only climbs to 5.5%, which puts the loan in joint lead with rival providers, M&S and Derbyshire anyway.
What's the verdict?
The 5.4% APR offered by Sainsbury’s Bank marks an historic low. So for anyone looking to borrow a medium sized loan – perhaps to fund a new car, pay for home improvements or consolidate other debts – and is able to repay the debt within three years, it’s certainly the best deal.
As soon as you get into repayment territories of between four and five years, however, there are other options to consider.
M&S Bank, which triggered the recent spate of rate falls by reducing its representative personal loan rate from 5.8% to 5.5%, is one. Again the rate applies to borrowing of between £7,500 and £15,000 but for a broader repayment term of between one and five years. However, you will need to be either aged 30 or over, or a homeowner to qualify.
Derbyshire Building Society quickly followed M&S’ lead by pegging down the rate on its personal loan to a representative APR of 5.5%, but from a previous leaner 5.6%. The rate applies on borrowing of £7,500 and £14,999.
If you are borrowing over four and five years and meet the criteria of all three providers offering a market-leading 5.5%, look carefully at the smaller print. For example, while M&S gives applicants the option to defer payment for the first three months, Sainsbury’s only allows a maximum of two.
It goes without saying there is no point borrowing more than you need to – or paying more than you need to borrow it.
And the good news is that anyone with an excellent credit score can avoid interest altogether on smaller amounts by opting for a credit card offering an introductory rate of 0% instead.
Depending on what you need to borrow money for, options include the Barclaycard Platinum Credit Card with Extended Balance Transfer, which offers 23 months at 0% on transfers (subject to a 2.8% fee) while the Tesco Clubcard Credit Card for Purchases, gives new customers 16 months at 0% on everything they buy.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct. We're free, independent and compare all UK credit cards, as well as offering exclusive deals you can't get anywhere else. Contact MoneySupermarket.com at Moneysupermarket House, St David's Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2012.