Following Nationwide's reduction in loan rates last week, Sainsbury's launched a market-leading representative annual percentage rate (APR) of just 6.1% for people looking to borrow between £7,500 and £15,000 over one to three years.
Nationwide's representative APR on loans of this size is now 6.3%, although if you have a FlexAccount with the building society, you'll be eligible for a lower rate of 6.2%.
Here, we examine the small print of the new Sainbury's and Nationwide offers to see if either of them could be the right loan for you...
What's the deal?
Sainsbury's is offering a representative APR of just 6.1% on loans of £7,500 up to £15,000 which are repaid between one and three years.
If you want to pay off the loan over a longer period, between four and five years, the bank is offering a marginally higher rate of 6.2%.
A lower rate is offered to those who can clear their debt more quickly because they are considered lower risk than those who need more time. You must be a Nectar card holder to apply for these rates.
Nationwide's 6.3% representative APR is available for loans between £7,500 and £14,999, and is available if you are borrowing for a term of up to five years.
If you are a FlexAccount customer - Nationwide's current account - you can benefit from a 0.1% discount which sets the rate at 6.2%.
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, unlike other lenders, Nationwide only conducts a 'soft' search when assessing applications.
As a result if you decide not to proceed with the application 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.
Any catches?
Sainsbury's lowest 6.1% rate is only available on loan periods of one year up to three years, so you must be certain you will be able to clear your debt within a relatively short time frame.
The rate is also only available to Nectar card holders, but you can pick up a card free of charge in your nearest Sainsbury's.
Nationwide's rates are only on offer until December 1, so if you are interested you will need to act quickly.
Remember that in both cases the representative rate must be offered to at least 51% of successful applicants, meaning up to 49% of people could be offered a much higher rate if their credit score isn't up to scratch.
If your financial circumstances change and you want to pay either of these loans off early, there may be an early redemption penalty.
Verdict
The Sainsbury's and Nationwide deals are both fantastic offers for people looking to borrow between £7,500 and £15,000, although Sainsbury's just has the edge with it 6.1% offer.
The only drawback of this loan is that to qualify for this rate you have to be able to pay back what you owe between one and three years.
With loan rates now at the lowest they've been for four years, don't hang around if you want to take advantage of either of these deals - Nationwide has already said its deal will be withdrawn on 1 December and Sainsbury's offer isn't likely to be around for long either.
Top tip
Bizarrely, you can sometimes save yourself money by borrowing more. Loan rates on smaller amounts below £7,500 tend to be much more expensive.
Therefore, 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 more.
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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