Focus on: Clydesdale and Yorkshire banks are new leaders in loan rate reshuffle

If you are looking for a mid-sized personal loan of between £7,500 and £15,000, the pack of providers offering the best rates is reshuffling almost on a weekly basis. This means if you want the very best deal, you will need to get up-to-speed before you apply.

This week for example, Yorkshire and Clydesdale banks have become the latest joint market leaders alongside Sainsbury’s with their rate of 5.7%, while Tesco Bank has slipped back down the tables to a less attractive 5.9%. We take a closer look at what’s going on in the personal loan market and the small print behind the best deals.

What’s the deal?

Clydesdale and sister bank, Yorkshire have reduced the rates on personal loans of between £7,500 and £15,000 to a representative annual percentage rate (APR) of 5.7%.  Borrowing can be taken over between one and five years, and the rate is fixed for the duration of whichever term you choose.

To apply for the loan, you must be aged between 23 and 74 and have a minimum annual income of £15,000.

 

Any catches?

As with any advertised loan, the headline rate is representative. This means it only needs to apply to 51% of successful applicants. In other words, you may well be offered a different rate, or – especially if your credit is not up-to-scratch – turned down altogether.

While the loan is flexible which means you can pay it off ahead of the agreed schedule, you will be charged an additional 58 days’ interest if you do.

What’s the verdict?

So long as you want a loan of between £7,500 and £15,000, Clydesdale and Yorkshire banks should be your first port of call.

Sainsbury’s is also offering the same rate of 5.7% on loans of the same size but sets down a maximum borrowing term of three years. If you are looking to borrow over a four or five year period, the rate will increase slightly 5.8% (representative). You will also need to be a Nectar card holder to qualify for either loan (although these cards are free of charge and can be picked up easily in-store).

Tesco Bank has recently re-priced its personal loans of between £7,500 and £15,000 to a less-competitive 5.9%. However, it does offer borrowing at over 10 years at this rate. So if you were looking to keep monthly repayments down by spreading the cost over a longer term, this could still be a better option despite the fact it is slightly more expensive.

Top tip!

At the same time however, it’s worth keeping in mind that the longer the term you take the loan over, the more interest you will pay overall. What's more, it's always preferable to decide on the correct repayment term from the start as it will mean avoiding early repayment charges if you redeem the debt ahead of schedule.

Remember also that the rate you pay will depend on the amount you need to borrow. Loans of less than £7,500 or of more than £15,000 will come with higher interest rates, whatever lender you choose.

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.

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