What Are The Lowest Loan And Credit Card Rates? | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 06/08/2020

Today it was announced that the Bank of England has held base rate at 0.1%. While this may seem like good news for consumers looking to borrow money, our research has found that over the last few months, interest rates on loans and credit cards have increased.

Although personal loan and credit card rates have been rising, for consumers with a good credit score, there are still some highly competitive deals on offer. Here we’ve looked at what has been happening to personal loan and credit card rates since the beginning of 2020 and highlight some of the lowest rates available.

Your credit score can have a significant impact on the interest rate you are offered on loans and credit cards – you can find out your credit score on our credit check page.

What has happened to loan rates during 2020?

For those looking to take a loan of £5,000, the average loan rate at the beginning of the year stood at 7.1%. In April, just a few weeks after the Bank of England cut base rate to its historic low, the average £5,000 loan rate fell slightly to 7.0%, but over the last few months the average rate has been rising and now stands at 7.6%.

A similar picture can be seen with a slightly higher loan of £7,500. Back in January, the average rate on a £7,500 loan was 4.6%, which then fell to 4.3% in April, but has since risen to stand at 4.7% this month.

Again, the average rate on a £10,000 has seen a similar pattern. In January, the average rate on a £10,000 personal loan was 4.5%. this then fell to 4.2% in April and has now increased to stand at 4.6% this month.

Average personal loan rates
  Average £5,000 personal loan rate Average £7,500 personal loan rate Average £10,000 personal loan rate
1 January 2020 7.1% 4.6% 4.5%
1 April 2020 7.0% 4.3% 4.2%
1 August 2020 7.6% 4.7% 4.6%

 

The good news for consumers is that although personal loan rates are rising, they have only seen marginal increases since the beginning of the year. Saying this, the number of personal loan products available to consumers has fallen. In January, the overall number of personal loans available on the market was 46, which had then increased to 48 in March just before the Coronavirus pandemic began to significantly impact the UK. After this, it fell to 45 in April and currently stands at 43.

As well as this, consumers may find it harder to be accepted for a personal loan in the current economic climate, especially those who have a poor credit rating. For tips on how to improve a credit rate, read out guide 8 ways to improve your credit score.

What are the current lowest loan rates available?

For someone looking to take out a £5,000 loan to be repaid over three years, the lowest rate available in our charts is 3.4% from Tesco Bank, which offers this rate on both its Telephone Personal Loan and Online Personal Loan. With this loan, borrowers will be making monthly repayments of £146.17 and the total cost of the loan would be £262.12, meaning that after the three years they will have repaid £5,262.12.

Someone looking to take out a £7,500 loan to repaid over five years has the choice of both cahoot and TSB, which offer the lowest rate of 2.8%. cahoot offers this rate on its Online Personal Loan and TSB offers it on its Personal Loan. Both these loans would result in borrowers making monthly repayments of £133.98. The total cost of these loans would be £538.80, so by the end of the five years, borrowers will have repaid a total of £8,038.80.

cahoot’s Online Personal Loan and TSB’s Personal Loan also offer the lowest rate of 2.8% on a £10,000 loan to be repaid over five years. A £10,000 loan at this rate would result in monthly repayments of £178.64. The total cost of the loan would be £718.40, which would result in borrowers repaying a total of £10,718.40 over the five-year period.

To view all the personal loans currently available, visit our personal loan chart.

Consumers looking to take out a personal loan should always keep in mind that the actual interest rate they are offered will depend on their credit score and, as such, should not assume that they will be offered the advertised rate. Those with a bad credit score and who do not have the time needed to improve their credit rating should visit our bad credit loans chart.

What has happened to credit card rates during 2020?

Across all credit cards, the APR has increased by 0.4% since the beginning of the year. In January, the APR across all credit cards stood at 24.9%, which then increased to 25.2% in April and has risen further to stand at 25.3% this month.

Along with an increase in the APR, the total number of credit cards available on the market has fallen by 24. In January, there were a total of 151 credit cards available. This then fell to 147 in April and has since dropped again, and there are now 127 credit cards available.

Those looking for a 0% purchase credit card will have seen the number of deals available fall by 19 since the start of the year. In January, there were 70 0% purchase credit card deals available, which were cut to 64 deals in April and have since fallen further over the last few months, with 51 deals now available.

Borrowers looking for a 0% balance transfer credit card will have also seen their choice in deals fall since the start of the year. In January, there were 76 0% balance transfer credit cards on the market, which then fell to 70 in April and now stands at just 54 deals.

 

Credit card APR and number of deals
  APR on all credit cards Total number of credit card deals Number of 0% purchase deals Number of 0% balance transfer deals
1 January 2020 24.9% 151 70 76
1 April 2020 25.2% 147 64 70
1 August 2020 25.3% 127 51 54

 

As well as the number of deals falling and the APR rising, many credit card lenders have been reducing the terms on their 0% deals. In addition to this, borrowers with poor credit scores are likely to find it harder to be accepted for a credit card in the current economic climate, or will be offered a higher-than-advertised APR. Those in this situation can consider getting a credit repair card, which will charge a higher APR than most standard credit cards, but will help to rebuild their credit scores.

What are the best credit card deals available?

Consumers looking for a 0% purchase credit card will find the longest interest-free term is currently being offered by Santander. Its All in One Credit Card Mastercard offers a 0% interest term on purchases for 26 months, although borrowers should be aware that this card charges a £3 monthly fee. After the interest-free term comes to an end, it charges 21.7% APR. The second-longest interest-free term on a 0% purchase credit card comes from Tesco Bank’s Clubcard Plus Mastercard, which has an interest-free period of 24 months. This card is only available to Clubcard plus members, and charges a £7.99 fee per month. After the interest-free period has ended, it charges 37.7% APR.

For those looking for a 0% balance transfer credit card, five cards currently offer the longest term of 28 months, but three of these – from NatWest, Royal Bank of Scotland and Ulster Bank – are for existing customers only. M&S Bank offers an interest-free period of 28 months to both new and existing customers on its Transfer Plus Mastercard. This card charges a transfer fee of 2.85%. After the interest-free period has ended, it charges 19.9% APR. TSB also offers 0% interest for 28 months to new and existing customers with its Platinum Balance Transfer Card Mastercard. This card charges a 2.95% transfer fee. Once the interest-free period has ended, it charges 19.9% APR.

A full list of all the current deals available can be found on our 0% purchase credit card and 0% balance transfer credit card charts.

Struggling to repay debt?

Those who are struggling to repay the money they already owe on personal loans and credit cards should contact their lender to discuss possible repayment options. Alternatively, borrowers struggling with debt should contact Citizen Advice or a free debt charity for information and help on how to deal with their debt.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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