It's as though the credit crunch was an event in the dim and distant past. Boosted by a strengthening economy and aided by huge sums pumped into the system by the Bank of England, personal loan providers are engaging in a price war.
Borrowing with a personal loan has been getting cheaper in recent months thanks to a surge of rate cuts as providers try and undercut on another in order to reach the summit of the best buy tables. 18 months or so ago, rates were around the 6% mark, today they have tumbled to 4.5% .It has never been cheaper to take out a personal loan, although the lowest rates are available on unsecured loans for those wanting to borrow between £7,500 and £15,000. According to data analyst Moneyfacts, six lenders are offering rates of less than 5% on sums of between £7,500 and £15,000.
As things stand Zopa, the peer to peer lender, has triumphed in the battle and currently heads up the best rate league table with a rate of 4.4% on three to five-year loans between £7,500 and £15,000. Zopa is a service which brings together individuals who have money to lend, and individuals who want to borrow money. The added advantage with this deal is borrowers can pay back what they owe at any time without the penalty of needing to pay an early repayment charge. With the Zopa offering, if you were to take out a loan of £8,000 over a three year period, you'd pay back a total of £8549.28, with monthly repayments of £237.48. The key restrictions are they will not accept applications from anybody who is unemployed or under the age of 20. You must also have a good track record of repaying debt, and good credit history.Another positive feature of the Zopa platform is they offer a personalised quote which enables you to find out whether you're likely to be accepted and the rate they'll charge you without them undertaking a search of your credit report.
If you want to borrow less than £7,500, you're likely to find lenders offering rates much higher with double digit figures the norm. "Smaller loans are still quite expensive – that market hasn't really returned since the credit crunch – but loans over £7,500 have fallen to record lows," says Paul Lawler from financial comparison site MoneySupermarket.com.
Aside from the size of the loan, the other factor which will impact on the interest rate is your credit history. If you've never borrowed before or if there are any blemishes on your credit record, you are likely to be disappointed. The best rates tend to be available only to those with a squeaky clean credit record.The law states that only 51% of applicants need to offered the headline rate, meaning 49% can be offered a higher rate - so it's possible you could end up applying and being charged a rate higher than you anticipated.