Focus on: Nationwide offers cheapest loan

Competition in the loans market continues to be rife with rates the lowest they have been for more than three years.

The most competitive rates are available to those wanting to borrow between £7,500 and £15,000 and Nationwide is topping the best buy table with a representative annual percentage rate (APR) of 6.5% for those who have a FlexAccount with the building society, and 6.6% for everyone else.

Nationwide cut its loan rate in response to Alliance & Leicester’s decision to reduce the rate it is offering to 6.6%. The rate war we’re seeing in the loans market at the moment is great news for borrowers. 

What’s more unlike other lenders, Nationwide will tell you what rate you qualify for without it leaving a mark on your credit file....

What’s the deal?

Available for loans between £7,500 and £14,999, the representative APR of 6.6%, is available 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 a market-leading 6.5%.

The representative rate must be offered to at least 51% of successful applicants, meaning up to 49% of people could be offered a higher rate.

In most cases, you won’t know what rate you’ll qualify for until a ‘hard’ credit card search has been done, which means that if you then decide not to proceed with your application because the rate you’re offering is much higher than that you saw advertised, a record of the search will remain on your credit file.

This is where Nationwide differs. Unlike other lenders, it 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?

The minimum loan size is £7,500. Nationwide doesn’t advertise rates below this amount so you will need to contact it directly for a personal quote. However, this still won’t affect your credit file until you agree to proceed with your application.

If you like the having the option of taking a payment holiday or deferring your payments at the start of the loan, again this product won’t be best suited to you as payment breaks aren’t allowed.

The rate of 6.6% (6.5% for FlexAccount customers) is a representative rate so only those with the best credit scores will qualify, if your credit score isn’t up to scratch then you may be offered a higher rate up to 24.9%.

If your financial circumstances change and you want to pay the loan off early, there may be an early redemption penalty: you’ll be charged 30 days’ interest if you have more than 12 months left to run on the term.

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Verdict

With competition heating up between loan providers now is a great time to start shopping around for a great deal, but be quick as this rate may not be around for long.

Nationwide is the best deal for those looking to borrow between £7,500 and £14,999. But if you want to borrow less consider Sainsbury’s Finance which offer a rate of 8.1% for loans of £5,000 and above - although you need to be a Nectar Card holder to apply for this deal.

Top Tip

To qualify for the 6.6% rate you will need a great credit score however, unlike most providers, Nationwide will inform you of your rate without leaving a footprint on your credit file.

Use our loan comparison tool to search for the right loan for you.

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 loans, 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 2011

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