5.9% personal loan rate marks a 5yr low

The launch of a new personal loan rate of 5.9 per cent from Sainsbury's Bank for borrowing between £7,500 and £15,000 taken over 1-3 years, marks the first time rates have fallen below 6.0 per cent since September 2007.

The average interest rates for the top 10 unsecured personal loans have fallen to 6.27 per cent, the lowest rate since May 2007 when the average was 6.28 per cent, according to analysis by MoneySupermarket.com.

Tim Moss, head of loans and debt at MoneySupermarket.com, said:

"There is no doubt the credit crunch has had a significant impact on the personal loans market. Although there has been healthy competition over the past two years, this rate reduction by Sainsbury's Bank is a real landmark - there hasn't been a rate below 6.0 per cent since the financial crisis began.

"Although it is unclear at this stage how other providers will react, it is good to see rates coming down despite the country falling back into recession. This year, we have seen demand for personal loans remain high as consumers look to consolidate debts from other forms of borrowing.

"To qualify for this market leading loan rate from Sainsbury's Bank you have to take it out over one - three years and be a Nectar cardholder. The other key thing that affects the rate of loan you are offered is your personal credit score. This low rate of 5.9 per cent will only be available to those with excellent credit histories. Anyone who doesn't fit this profile may be declined or charged a higher rate of interest."