We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies. You can understand more and change your cookies preferences here.


When you click on a retailer link on our site, we may earn affiliate commission to help fund our not-for-profit mission.Find out more.

10 Jan 2019

M&S relaunches cheapest loan rate - but it comes with a catch

You'll only be able to spread repayments up to 36 months
Marks and Spencer

M&S Bank has relaunched its 2.8% APR offer on personal loans between £7,500 and £20,000, but to qualify you willneed to be able to spread your repayments over one to three years.

Borrowing with a personal loan over a short period means you'll have to make meatier set monthly repayments, but the upside is you will pay less interest overall.

Which? takes a look at the new offer, crunches the numbers on short-term borrowing using a personal loan and looks at whether a 0% credit card is a better option to keep your monthly and overall borrowing costs down.

Be more money savvy

Get a firmer grip on your finances with the expert tips in our Money newsletter – it's free weekly.

Email address (required)

This newsletter delivers free money-related content, along with other information about Which? Group products and services. Unsubscribe whenever you want. Your data will be processed in accordance with our Privacy policy

The M&S Bank loan

You can now get a rate of 2.8% APR on loans from £7,500 up to £20,000 with M&S Bank.

However, the record-low rate is only available if you choose to borrow over a term of 12 to 36 months. Extending the term over three years up to 84 months attracts a slightly higher rate of 2.9% APR.

To apply you will need to be over 18 and have an annual income of at least £10,000.

The headline rates are reserved for those with a good credit history and M&S Bank says that applicants that do not meet its criteria will be offered a different APR.

Lenders only have to offer their advertised rate to 51% of applicants, so if your credit history isn't as strong as others that go for the deal you could end up with a more expensive rate.

Luckily, M&S Bank offers a 'soft search', which lets you see if you will be eligible for a loan without leaving a mark on your credit report.

Can you afford a short-term loan?

When borrowing with a personal loan the longer you choose to borrow for the cheaper the monthly repayments. However, spreading the cost of your loan over a longer period will cost you more in interest in the long run.

For example, a loan of £7,500 taken out for three years at 2.8% APR would set you back £217.32 a month and cost you £7,823.52 overall.

In contrast, a loan of £7,500 taken out over five years at 2.8% would mean more manageable repayments of £133.97 a month, but the total cost of the loan would be £8,038.20 - £214.68 more.

If you're thinking about getting a short-term loan you should make sure you can afford the bigger monthly repayments.

The tables below set out how the monthly repayments and total cost of borrowing vary on different loan amounts across the one-, two-, three- and five-year term options on offer with the M&S Bank deal.

How M&S Bank compares

M&S isn't the only lender offering this record-low rate and other providers are allowing borrowers to stretch repayments over a longer period.

Cahoot is offering a rate of 2.8% APR on loans ranging from £7,500 up to £20,000 with the option to take it out over one to five years.

While Sainsbury's Bank is offering a rate of 2.8% APR to Nectar cardholders on loans between £7,500 and £15,000, spread over 12 to 60 months.

Personal loans vs. 0% credit cards

The rates on personal loans are at all-time lows but you may be able to borrow even more cheaply with a 0% credit card.

Right now you can get 30 months' 0% on purchases with the Santander All in One Credit Card (representative 21.7 APR). The card comes with a £3 monthly fee but you can also get 0.5% cashback on your spending which could help cover this.

With a credit card, you just need to be able to meet the minimum monthly repayment (typically 1% of the balance or £5), which might be better suited to your budget.

You can also repay what you borrow on a credit card whenever you want without being hit with early repayment charges that are sometimes applied to borrowing with a personal loan.

One downside to credit cards is you won't know what limit you will be able to get until you apply and sometimes this may fall short of what you can get with a loan, or what you need.

Please note that the information above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the personal loan or credit card provider before committing to any financial products.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.