Research by MoneySupermarket reveals that the average rate for the top ten loans between £7,500 and £15,000 is now just 6.79%, a 1.48% drop compared to the same time last year.

Rates on this level of borrowing haven’t been so low since the start of the credit crunch in November 2007.

While this is great news for those wanting to borrow this amount, anyone looking for smaller sums is being stung by rates more than double this.

Here, we take a look at what is going on in the loans market, who is offering the best deals and what you can do to improve your chances of being accepted.

Top personal loans

Nationwide Building Society currently offers the market-leading rate on loans between £7,500 and £14,999.

It offers a representative annual percentage rate (APR) of just 6.2%, although if you have a FlexAccount with Nationwide, you’ll be eligible for an even lower representative rate of just 6.1%.

So, for example, if you borrow £10,000 over four years at a fixed representative APR of 6.2% you would pay £234.99 a month. The interest payable would be £1,280 making the total cost of the loan a reasonable £11,280.

These rates are only on offer until December 1, so if you are interested you will need to act quickly.

One of the advantages of opting for a loan through Nationwide is that they can tell you upfront what rate you will qualify for, without it leaving a record on your credit file.

The reason they can do this is because they only conducts a 'soft' search when assessing applications, so if you decide not to proceed because the rate you are offered is higher than you were expecting, it won't show up on your credit report.

It is only if you complete the application that it will be logged.

Other competitive deals on offer at the moment are Alliance & Leicester’s personal loan at a representative rate of 6.3%, and Tesco Bank and Marks & Spencer’s loans, which both have a representative rate of 6.4%, again on borrowing between £7,500 and £14,999.

If you are interested in any of these deals, don’t hang around.

Tim Moss, head of loans and debt at MoneySupermarket, said;   “As we move into the Christmas period, it is likely that we will see rates rise as lenders tighten their books before reducing rates again in the New Year, when we can expect to see some more inventive propositions entering the marketplace for 2012 as competition increases.”

Borrowing less costs more

Rates may be low if you want to borrow at least £7,500, but consumers looking to borrow smaller sums of money are paying considerably more, with average rates on loans for £3,000 at the highest level for six months.

Anyone looking to take a loan for £3,000 will pay an average of 15.15 per cent, a staggering 4.55 per cent higher than the average rate four years ago.

That means someone borrowing this amount will now pay £701 more in interest than in 2007 - an 8.66 per cent increase, while someone borrowing £8,000 now will pay, on average, £385 less compared to the market high in 2009.

It may sound odd, but because rates are so high on small loans, you can sometimes save yourself money by borrowing more. 

If the amount you’re looking to borrow is close to the crossover point to the next tier where a lower rate is charged, ask for a quote for an extra £500 and see if the total repayments make it more cost-effective to borrow a bit extra.

Improve your chances of getting the best rates

Unfortunately you won’t qualify for the most competitive loan rates if your credit history isn’t up to the mark and you may be offered a much higher rate than you were expecting.

Tim Moss said; “Remember, the best personal loan rates are still reserved for those with excellent credit records and the introduction of Consumer Credit Directive (CCD) rules earlier this year means that only 51% of consumers will get the advertised rate."

There are a few things you can do to improve your chances of getting a better deal. First, make sure you are registered on the electoral roll. Contact your local council and ask for a registration form, or sign up online, if you’re not.

Check your credit report carefully to see if there might be any errors which could affect your loan application. If your credit file shows a period of late payments, it is worth knowing that you can place a Notice of Correction against this explaining the background to any arrears.

So, for example, if you lost your job unexpectedly but got back on track quickly lenders may be more sympathetic if you state this is why you missed payments.

You should also close any credit accounts you no longer use, as these will also have an impact on your credit rating.

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.

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