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Derin Clark

Derin Clark

Online Reporter
Published: 15/06/2021

The cost of taking out a personal loan has fallen year-on-year as lenders have cut the interest rates on loans, meanwhile consumers looking to borrow through a 0% purchase credit card will find that the average number of interest-free days offered is now longer compared to a year ago.
Figures due to be released in the latest Moneyfacts UK Unsecured Lending Trends Treasury Report show that the average cost of a £3,000 personal loan over three years has fallen from 14.8% in June 2020 to 14.4% in June 2021. This means that the total cost of an average three-year loan at this term is now £18.48 less compared to a year ago.

The average £5,000 personal loan over a repayment term of three years has fallen from 7.4% in June 2020 to 7.1% in June 2021, making the overall cost of a £5,000 loan on this term £23.16 less now than a year ago.

Those looking to borrow £10,000 over five years will find that although average rates have also fallen, the decrease is not as significant year-on-year as lower loan amounts, falling from 4.5% in June 2020 to 4.4% in June 2021. Overall, the cost of this loan on a five-year term is now £26.16 less compared to the previous year.

While average personal loan rates have fallen on all amounts year-on-year, during the last three months the average £5,000 personal loan rate on a three-year term has increased slightly, from 7.0% in March to 7.1% this month, while the average rates on a £3,000 loan on a three-year term and a £10,000 loan on a five year term have fallen over the last three months, down from 14.8% to 14.4% and 4.6% to 4.4% respectively.

“Consumers looking to consolidate debts or perhaps make home improvements via a personal loan will be pleased to see rates have dropped across a few lending tiers over the last three months,” explained Rachel Springall, finance expert at “Those borrowing £5,000 will note a slight rise, however the average rate is still down year-on-year. There has also been a couple of lenders leaving the market entirely, namely John Lewis and Starling Bank. If borrowers are considering a small loan, such as £3,000 they may be better off considering an interest-free credit card instead.”

How much will your loan repayments cost?

Use our loan repayment calculator to find out the total cost of the personal loan with the interest rate added, along with what your monthly repayments will be.

Longer interest-free period on credit cards

Consumers looking to borrow via an 0% purchase credit card will also be pleased to see that the average number of interest-free days available on these cards has increased slightly year-on-year, up from 282 days in June 2020 to 285 days in June 2021. The last three months have also seen a rise in interest-free days on 0% purchase credit cards, increasing from 284 in March. Meanwhile, the number of 0% purchase credit card deals available to consumers has risen year-on-year.

Along with average interest-free days increasing, some well-known high street credit card lenders have also been offering better deals, as Springall revealed: “For those borrowers looking to use a 0% introductory purchase credit card, there have been a few improvements recently including increases to interest-free offers by Lloyds Bank, Barclaycard and M&S Bank.”

Find the best 0% purchase credit cards

Find out more and compare the best 0% purchase credit cards.

How to check your credit score

“Whatever type of borrowing method consumers choose it is always a wise move to review their credit report before they apply and be mindful that they may not get the offer or rate advertised, as the representative APR is only given to at least 51% of successful applicants,” explained Springall.

Consumers looking to check their credit score can do so for free online here. For those who want to improve their credit score our guide on how to improve your credit score provides some handy tips.


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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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