Focus on: Santander launches leading 4.5% loan

The personal loan war rages on, with Santander now taking top-of-the-tables with its new market-leading 4.5% loan.

The cost of personal loans between £7,500 and £15,000 has plummeted over the past few months, with several providers slashing their Annual Percentage Rates (APRs).

Here, we take a look at what Santander’s latest offering entails.

What’s the deal?

Santander has introduced the lowest ever personal loan rate for borrowing of between £7,500 and £15,000 with an APR of just 4.5%. The bank’s 123 current account and credit card holders will be able to borrow up to £20,000 at this rate.

Although Sainsbury’s offered the same rate earlier this year, it was only a short-term deal and was withdrawn on January 31, leaving Santander the only lender to offer a rate this low.

Borrowers can choose a loan repayment term of between 12 months up to five years, and the loan comes with no set-up fees. Monthly payments for someone wishing to borrow £10,000 over five years would cost £186.19, meaning the total amount payable is £11,171.40.

Who’s it good for?

If you’re looking to make a big one-off purchase this year, such as a new car when the registration plates land on March 1, this could be the deal for you.

If you’re an existing 123 customer, you’ll have the advantage of being able to borrow up to £20,000, making this an especially good option for those who already bank with Santander, or who are considering switching. Monthly repayments are fixed, so you know exactly what you have to repay each month, making it easier to budget effectively.

This loan could also be a good option for anyone looking to consolidate existing debts. Moving all your borrowing into one loan means that rather than making lots of separate payments to different lenders every month, you’ll only have to make one – and at a keen rate of interest.

Any catches?

You will need to have a 123 current account or 123 credit card to borrow up to £20,000 at this rate. If you aren’t, the maximum loan amount you can borrow is £15,000. Loan rates are higher if you want to borrow less than £7,500, regardless of whether or not you are a Santander customer. It’s also worth bearing in mind that only those with excellent credit ratings will qualify for the best loan deals, so you are unlikely to qualify for the Santander loan if you have ever defaulted on any debt payments in the past.

Remember too that if you are turned down for a loan, this can have a negative effect on your credit rating, which in turn can hamper your chances of getting credit in the future.

If you want to limit the chances of your application being rejected, you can use MoneySuperMarket’s Smart loan search tool to get an idea of how likely you are to be accepted.

If you want to pay your loan off ahead of the agreed schedule, you will be charged 28 days’ interest if the agreement has less than a year to run and 58 days’ interest if the remaining term is between 12 and 60 months.

Under Consumer Credit Directive (CCD) rules introduced in June 2010, however, all customers can pay up to £8,000 within any 12-month period without having a penalty applied.

What’s the verdict?

This is the market-leading loan rate for anyone looking to borrow between £7,500 and £15,000, or up to £20,000 if you are a 123 customer. The best rates are almost always capped at borrowing up to £15,000, so this is a great deal for 123 customers who need to borrow a large lump sum up to £20,000.

The only time we have seen a rate as low as this before is the aforementioned temporary deal from Sainsbury’s, and that had a maximum loan term of up to three years.

Remember, however, that the longer the loan term you choose, the more interest you will end up repaying overall.

Although the Santander loan is not a temporary deal, remember that loan rates change frequently, so don’t hang around if you are interested as this rate may not be around for long.

But there are other options worth considering if you are looking for a low-cost loan, at only marginally higher rates. For example, the AADerbyshire Building Society and Clydesdale and Yorkshire Banks are all offering a rate of 4.6% APR on loans of between £7,500 up to £15,000 with a maximum repayment term of five years, while Sainsbury’s bank now offers the same rate over three.

Top tip!

Loan rates tend to be higher the less you borrow, so in some cases it can actually be more cost-effective to borrow a bit more.

For example, if you need to borrow £7,000, it is worth comparing the rates you are offered with those you can get if you borrow £7,500. You might find your monthly payments are lower even though you are borrowing 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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