Personal loans ‘price war’ sees rates slashed

A “price war” to attract personal loan customers was stepped up yesterday, as a supermarket launched a deal with the lowest rate seen in a decade.

Tesco Bank reduced its interest rate on personal loans between £7,500 and £15,000 to 5.2 per cent APR, which according to research from Defaqto is the lowest rate on a deal of its kind seen in around 10 years.

Rachel Springall, spokeswoman for financial information website Moneyfacts, said there has been a trend of supermarkets and building societies being particularly active in slashing their personal loan rates in recent months.

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She said: “There has definitely been a recent price war on personal loan rates. M&S Bank, Sainsbury’s Bank and Tesco have been taking part in much of it and the Co-operative Bank and other building societies have also been coming in.”

Tesco’s loan is available online or over the phone. The rate is a representative one, meaning that it has to be offered to at least half of customers and it will vary according to someone’s circumstances and how much they want to borrow.

In November, M&S Bank launched a personal loan deal with the lowest rate seen in six years.

The Co-op also recently re-vamped its loan range, offering rates from 5.6 per cent APR for new customers and from 5.4 per cent for existing account holders on loans of £7,500 to £14,950.

Record low interest rates have helped lenders to offer some of their cheapest ever deals, but the British Bankers’ Association (BBA) has said that customer demand for loans remains weak amid the uncertain economy.

The Government launched a multi-billion pound scheme to kick-start lending to households and businesses in August.