Competition appears to be increasing in the personal loans market, with a number of major providers slashing their rates during the past two weeks.
Six big players, including Sainsbury's Finance, HSBC and Tesco Bank, have cut the level of interest they charge on loans during the past fortnight, with rates of just 7.4 per cent now available.
The rate cuts have been targeted at loan amounts of more than 7,000, with reductions ranging from 0.1 per cent to 2.4 per cent.
The 2.4 per cent reduction by M&S Money would save someone who borrowed 10,000 over five years 695, according to financial website Moneynet.co.uk
But many of the reduced loan rates are only available to existing customers, while people looking to borrow smaller sums, such as 2,000 or 3,000, can still expect to be charged double figures in interest.
Andrew Hagger, of Moneynet.co.uk, said: "It's welcome news for customers to see loan rates falling at long last and from some of the largest providers in the market.
"It's a shame that the rate cutting has, apart from Tesco and M&S Money, been targeted at existing customers only.
"Smaller loans may be considered less profitable and a greater risk.
"However, if consumer spending is to remain strong despite the VAT hike, then lenders need to do their bit by trimming the cost of borrowing across the board."
The personal loan market has been hit hard by the credit crunch as providers have struggled to raise funds for lending, while unsecured borrowing is considered riskier than secured debt.
There has also been a fall in demand among consumers, as people focus on paying down their existing debt, rather than taking on new borrowing.
Figures from the British Bankers' Association show that personal loan advances made by the major banks have fallen to around 1.1bn a month, well down on sums of more than 3bn regularly seen during the first half of the last decade.
Once repayments are stripped out, borrowing through loans and overdrafts has actually contracted during most months of the past two years.
Samantha Owens, insight consultant at Moneyfacts.co.uk, said: "Lenders have raised the rates they charge on loans quite high above base rate to compensate them for the risk they faced.
"But they have now started to re-evaluate that risk, and bring rates down for consumers."
She added that many providers had introduced extra measures to help reduce the risk they faced, such as having higher minimum age limits for borrowers who were not homeowners.