Plummeting interest rates mean that people taking out loans today could save hundreds of pounds compared with the deals on offer not long ago.
According to data supplied by Moneyfacts.co.uk, a £7,500 five-year loan taken out at one of the biggest banks today is on average nearly £400 cheaper than it would have been had it been taken out in 2013.
Meanwhile, loans taken out from other lenders – including the likes of Sainsbury’s, Tesco and the Cop-op – come in on average about £225 cheaper over the five-year term.
“Many consumers still rely on credit to manage their outgoings each month, but they could be making the mistake of turning to some of the most expensive sources, such as overdrafts, high-interest credit cards or even payday loans,” says Rachel Springall, of Moneyfacts.
“However, by taking time to review their finances, consumers could consolidate their debts to a manageable monthly payment with an unsecured personal loan.”
Borrowers need to be aware that they won’t automatically qualify for the lowest advertised rate. But most people should find that borrowing is more competitive today than it was a few years ago.
“The loan price war has made this option for managing debt even more competitive, and will no doubt grab the attention of prospective borrowers,” says Ms Springall.
“Although only 51% of successful loan applicants are required to get the advertised annual percentage rate (APR), the changed cost of loan pricing today compared with that of just two years ago means that borrowers can still save money by switching their loans – subject to early payment charges – even if they don’t get the lowest rate on the market.”