Sainsbury’s Bank has made a further cut of 0.2% to the interest rate it charges on medium personal loans, extending its lead at the top of the Which? Best Rate £5,000 loan table.
At 7.9% APR on a £5,000 loan over three years, Sainsbury’s is well ahead of its nearest rival, the Post Office, which charges 8.4% on a similar loan. However, while Sainsbury’s Bank uses risk-based pricing, meaning you could be quoted a higher rate if you don’t have a perfect credit history, the Post Office loan is not risk-based. If you’re accepted for the Post Office loan, you’ll get it at the advertised interest rate.
Both deals are much better than the rates available from most high-street banks. Unless you bank with Santander, which offers a competitive rate of 8.6% on loans of £5,000, it pays to shop around, rather than accepting a loan from your current account provider.
Higher value personal loans
Longer repayment periods and larger amounts tend to be cheaper. For example, Sainsbury’s Bank currently tops our table for a £10,000 loan repaid over five years. Its low rate of 6.3% is just ahead of second-placed Marks & Spencer’s 6.4% deal.
Which? credit expert Martyn Saville commented: ‘A small number of providers dominate the personal loans market, with supermarkets and high street retailers leading the way. This rate cut by Sainsbury’s could well trigger a new wave of cuts by other providers.
‘If you’re looking for a loan with a fixed monthly repayment and a fixed term, a Best Rate personal loan could offer much better value and greater certainty than the average credit card. For lower amounts and shorter repayment periods though, a 0%-on-purchases credit card could be a good alternative, particularly if it also offers reward points.’