Supermarkets Bring Back Competition to Personal Loan Market

Fri, 12 Mar 2010

Consumers are enjoying a return of competition to the personal loan market as supermarkets compete for market share. Personal loans have become expensive since the credit crunch, though rates are beginning to return to more affordable levels. Supermarkets have contributed to the fall in personal loan rates, with Sainsbury’s Finance offering competitive interest rates, and this week cutting rates by 0.1 per cent to 8.8 per cent on loans between £5,000 and £7,000.

Significantly, Sainsbury’s have opened up their loan deals to borrowers who do not already hold Nectar cards. Instead, consumers applying for a loan may sign up for the card at the same time. Some banks have remained competitive, and Alliance &Leicester are only slightly behind Sainsbury’s in the table topping offers, with an 8.9 per cent offer. A recent Defaqto study revealed just how competitive these rates are, considering that the average APR on a £5,000 stood at 13.9 per cent over the last two years.

Tesco, meanwhile, have helped to drive down the cost of borrowing larger loans. The supermarket charges an interest rate of 8.2 per cent on loans between £7,500 and £14,999.
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