What’s the deal?
Cahoot, the online banking arm of Santander, has launched a new personal loan priced at 4.2%. While Cahoot has continued to offer savings bonds in the last few years, its last personal loan was taken off the shelves back in December 2006 – so this offering, on its own, is big news. But to add to the fanfare, at 4.2% APR and over a term of up to five years, this deal also goes straight to the top of the best-buy tables. The rate is available on borrowing of between £7,500 and £15,000.
It is actually possible to get a lower loan rate of 4.1% from Hitachi. But, while the £7,500 floor is the same, the maximum you'll be able to borrow is £10,000. The minimum term is also two years and not 12 months which makes it more expensive if you were able to pay it off quicker.
As with all personal loans, the 4.2% rate with Cahoot is only representative, which means there’s a chance you won’t get it (though 51% of successful applicants will). And if you encounter any problems or issues, they will have to be resolved by telephone – you won’t be able to pop into a branch of Santander to get them sorted.
Who is it good for?
The new deal from Cahoot is available to both new and existing customers of Santander so there are no application restrictions on that front. And, as the loan is unsecured, you don’t need to be a homeowner to apply. You'll need a really decent credit score to qualify for a rate that low, though.
But you’ll have to be internet savvy as the deal is online-only.
What’s the verdict?
In terms of medium-sized borrowing over this long, the Cahoot deal is the best you are going to get at the moment. But it’s not the only one worth looking at as other personal loan providers have been upping their game too.
As well as Hitachi at 4.1%, Sainsbury's Bank has also pegged its cheapest loan rate down to 4.2% joining Cahoot in position one in terms of rate alone. But this deal is offered against a maximum term of three years (and minimum of 12 months). If you want to borrow over four or five years, as you can with Cahoot, the rate will be slightly higher at 4.3%.
A whisker behind is Clydesdale and Yorkshire banks, both of which have just reduced their APRs to 4.3% on the same size loans, again, over maximum terms of five years.
And Santander itself has also lowered rates on personal loans under its main brand. Whereas the very lowest personal loan rates are typically restricted to borrowing of £7,500 and £15,000, if you are a Select or 123 current account customer with the bank, you can borrow up to £20,000 at a newly-reduced 4.3%.
Non-current account customers will be offered the same 4.3% representative APR under the Santander brand but capped at £15,000.
Think carefully about the term you need to repay your loan from the outset. While you will be able to repay the whole loan, or just part of it, penalty-free at any time during the term, it could be less easy to extend the term once your repayments are underway.
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.