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Loans At Under 6%?

With interest rates continuing to creep ever upward, the search for cheap personal loans intensifies as they become more scarce. In 2006 it was possible to find many loans at less than 6%, but the rise in interest rates has meant that lenders have pulled these off the market as they would struggle to make any money from such deals. Borrowers are finding it difficult to pay back their loans, too, and the number of defaulters has also been on the increase.

Nevertheless, despite the doom and gloom, it is still possible to find loans at less than 6%. In addition, there are other ways in which borrowers might borrow money.

Masterloan is still offering loans at less than 6% - 5.9% to be precise – for amounts up to £15,000. The rate is only available by phone (0800 056 6223), and has a maximum repayment period of five years. The next closest is Moneyback Bank – owned by Alliance & Leicester – who are offering a rate of 6.1% on loans of more than £5,000. Northern Rock are offering a loan rate of 6.3%.

These three rates depend of the credit rating of the applicant, and it must be pristine to acquire such a rate. It would be worth checking your credit rating before applying – but use a service that doesn’t leave a record of your check.

For loans of less than £5,000, there are even less options, but good rates can be found. Masterloan – owned by Barclaycard – are offering 6.3% above £4,000, and Virgin are offering 7.3% for loans above £3,000.

There is an online service at (zopa = Zone Of Possible Agreement) which aims to put lenders and borrowers directly in touch. The website acts as facilitator and ensures that debts are repaid, and can often find loans at better rates than those found on the High Street.

The site divides borrowers into A+, A, B or C categories dependent upon their credit rating and, of course, those in the best categories can get the best rates. The service reduces the risk of defaulters by only allowing people with credit ratings of good and better to join. As an example, for a £5,000 loan the average APR for a three-year loan is 7.2% at the moment. However, rates do vary with the amount borrowed and the required repayment period. One example is a 6.3% rate to borrow £1,000 with repayment within one year.

Short-term loans can be financed with a credit card offering 0% interest on new purchases. The longest introductory period on offer is currently one year from HSBC, and Sainsbury’s Bank has an offer of ten months on its credit card. Sky Mastercard has a limit date instead, with 0% interest until March 2008.

If, after the period of 0% interest, you still have an outstanding balance, you could consider switching to a card offering 0% on balance transfers, but there is often a fee accompanying this.

Another way is to use an existing credit card to make a purchase, then transfer the balance to a card offering a transfer deal for life, such as Marks & Spencer’s &More card, which is currently offering 4.9%. Others are Citibank at 4.9% 0 - but with a higher transfer fee – and Sainsbury’s Bank at 5.9%. These are all less than standard loan rates as we have seen. Of course, if you pursue the transfer route, watch out for making new purchases as these will be subject to higher interest rates than your transfers.

The Barclaycard Simplicity card is a good flexible option for anyone with a good credit history. Charging 6.8% on transfers and purchases, the card has no set repayment period, and repayments can be as low as £5 per month. But - a word of warning – the rate is not fixed, so could rise in the future.

Apply today for a loan with UK Loan Store, our rates begin at 7%

Tom Smith
26th May 2007


More Information:

  • The Benefits of Credit Cards
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  • Secured v. Unsecured Loans
    What are the differences between secured and unsecured loans? Essentially, whether or not the loan is secured by property in the event the borrower defaults on the loan.
  • Online Loans - How Popular and Safe Are They?
    With the development in technology allowing for safer online transactions coupled with high-speed Internet connections, many people are conducting loan research from the comfort of home. The use of online loan applications is becoming more and more popular.
  • Finding the Cheapest Loan
    How do you find the cheapest loan? Through a combination of factors that include understanding your credit score, determining the best type of loan for your purposes, and shopping around
  • Shopping around for loans - why not?
    Chances are if you were shopping for a home theatre system, you would shop around to find the best deal. So why not shop around for a loan?
  • Deciding on a Loan
    What is the one thing that all financial advisors tell their clients before committing to any financial agreement? It is the most basic rule of all commerce; do you homework and shop around.



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