Best personal loan rates | Evening Standard

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f you are looking to borrow a large sum to pay for home improvements, a car or wedding, say, a straightforward personal loan can be an attractive option.

Interest rates for loans for amounts between £7,500 and £15,000 are usually the lowest. Below £7,500, lenders need to charge a higher amount to make it worth their while. Above £15,000, they charge more because their possible losses are that much higher.

We’ve taken a look at loans in this range and identified the ones with the lowest rates which perform well against various other criteria.

Our personal loan star ratings are determined solely by our editorial team. For information, see our methodology section below.


MBNA

1. MBNA

APR (representative) 2.80%

Early Repayment Charges* Yes

Late Payment Charge** £0

Our verdict

There are no fees for paying additional off your balance if you wish, but charges apply to complete early repayment. Up to two months’ payment holiday per year are obtainable for eligible borrowers.

MBNA loans are obtainable via Lloyds Bank.

  • Lowest APR
  • Up to 2 payment holidays per year

Cahoot

2. Cahoot

APR (representative) 2.80%

Early Repayment Charges* Yes

Late Payment Charge** £0

Our verdict

Cahoot has this leading representative APR of 2.8% on loans up to £20,000 – although the availability of larger loans at a low rate shouldn’t encourage you to borrow more than you need or can provide.

You can overpay on your Cahoot loan at no additional cost, although the lender charges a fee for early repayment in complete. There’s no charge for a missed payment either (although your credit score is likely to take a hit).

  • Leading rep APR
  • Loans up to £20k at 2.80%
  • Minimum age 21
  • No branch network

M&S Bank

3. M&S Bank

APR (representative) 2.80%

Early Repayment Charges* No

Late Payment Charge** £0

Our verdict

At a representative APR of 2.8%, personal loans from M&S are almost market-leading. But the same rate also applies from 12 months all the way up to seven years which offers a good measure of flexibility too.

You can overpay on your M&S loan free of charge but will be charged a penalty to settle the complete balance ahead of your chosen term.

  • Same rate on terms up to 7 years
  • Near to market-leading APR
  • £10,000 minimum income requirement

Sainsburys Bank

4. Sainsbury’s Bank

APR (representative) 2.80%

Early Repayment Charges* Yes

Late Payment Charge** £25

Our verdict

Sainsbury’s has the lowest rate but requires borrowers to have held a Nectar card for at the minimum six months. Non-Nectar card holders are charged a higher representative APR and can only borrow for up to three years.

Overpayments may be made for free, but there is a fee for clearing the loan ahead of schedule.

  • Leading rep APR
  • Opportunity to top up loan at same rate
  • Need a Nectar card to qualify
  • £25 late payment fee

Tesco Bank

5. Tesco Bank

APR (representative) 2.90%

Early Repayment Charges* Yes

Late Payment Charge** £12

Our verdict

At a representative 2.90%, Tesco charges just a whisker above the top loan rates on the market. While that rate only applies to terms of between 12 and 60 months, it is possible to take a loan over as long as seven years.

Tesco Clubcard holders can ‘positively affect your application’ according to the lender’s website, although it’s not mandatory to have one to apply.

  • Near-to leading APR
  • Terms as long as 7 years
  • Rep APR only up to a max of term of 3 years
  • £12 late payment fee

*Based on a settlement figure as set out under the Consumer Credit (Early Settlement) Regulations 2004. This states that if you have less than 12 months remaining of your loan, providers can charge up to 28 days’ interest. An additional 30 days’ interest can be additional on if there is more than one year of the loan term remaining, taking the total maximum penalty to 58 days’ interest.

** Late or missed loan payments will negatively affect your credit score


Methodology

We looked* at these factors when working out our star ratings for the best lenders for loans in the £7,500 to £15,000 range:

  • Interest rate: we looked at representative APRs – fixed for the duration of the loan
  • Term: the duration of the loan and the interest rate charged
  • Flexibility: the availability of an option to repay in complete within the term without incurring a fee
  • Fees: fees for late or missed payments, if applicable
  • Other factors: other factors, including availability of payment holidays

(*Research undertaken in October 2021)


What is a personal loan?

A personal loan is another name for an unsecured loan. This method it’s borrowing that’s taken based on your income, personal circumstances and credit score. It’s not secured against an asset, like your house or car.

This method that borrowing limits on personal loans are usually lower.

How much interest is charged on a personal loan?

Interest rates are at historically low levels at the moment, meaning you can borrow an amount between £7,500 and £15,000 for under 3%. Loans for amounts higher or lower than this band usually cost more.

It’s important to observe that you won’t always get the rate you see advertised. The regulations average lenders only have to give the advertised rate to 51% of those who apply. That’s why it’s described as the ‘representative’ annual percentage rate (APR).

Can I get a loan with bad credit?

Lenders offer their best (lowest) rate to people with strong credit scores, so if yours isn’t as good as it might be, you’ll be offered a higher one, or possibly not offered a loan at all.

What is a soft search?

The best way to find out how you stand is to use an eligibility checker to see which deals you’re likely to be accepted for. This is also known as a ‘soft search’ and it doesn’t leave a trace behind on your credit profile.

How long can I take a loan for?

You can borrow over 12 months or over a number of years (usually up to 5 years, or sometimes 7). If you borrow for longer, the amount you pay each month will be lower, but the amount you pay back overall is likely to be higher.

How do loans work in practice?

If your application is approved, the money should be in your account within hours in many situations, and certainly within a associate of days. You’ll have to start making monthly repayments a month later.

It’s really important to make your payments in complete and on time to avoid being hit by a late or missed payment fee. in addition as the cost, missing a payment can also inflict damage on your credit score.

What should I do if I struggle to make my payments?

If you’re struggling to repay your loan, contact your lender in improvement. It may offer you a one-month payment holiday if you have met all your past payments.

If you have more serious financial problems which average you cannot provide the debt repayments, again contact the lender to discuss the issue. It is much better to be open with than to ignore the problem.

It may be able restructure the debt to give you longer to pay. You can also contact a charity such as National Debtline or Citizens Advice for guidance.

Can I repay the loan early?

If you find you are in a position to clear the debt ahead of schedule, that is your privilege, but the lender may charge an early repayment fee, which could amount to a month’s interest.

Tips on how to borrow smart

Use an eligibility checker: You’ll have nothing to lose and it will keep your credit score protected should you be turned down for a personal loan

Shop around for the best rate: A comparison website will permit you to see APRs side-by-side. Remember that these are only representative, so you may be offered higher

Consider borrowing slightly more: In most situations representative APRs drop when you hit borrowing of £7,500. If you are in the market for a loan of this size it could make sense to borrow slightly more to access the better rate. However, ensure you play this to your advantage instead of borrowing more than you truly require

Look at alternatives: For example, a 0% buy credit card which doesn’t charge interest at all. However, APRs are considerably higher on credit cards if you fail to repay what you owe within the interest-free period, so tread with caution.

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