Personal Loan Rates Drop

The trend for consumers to borrow smaller amounts to fund things like DIY projects or car purchases has been picked up on by the loan companies. This week has seen two loan companies, Abbey and Northern Rock, drop their rates to below 6% for unsecured personal loans over £5,000. The rate drop will see availability for low-rate personal loans at much lower amounts, prior to these new rates the lowest available was on loans over £7,000. Abbey’s rate drop, they now offer an APR of 5.7% for Internet applications, is their second rate drop in a few weeks. Northern Rock’s new personal loan rate is extremely good value at 5.6%.

With these low rates the loan companies are hoping customers will flock, certainly to those considering an unsecured personal loan they represent extremely good value. However as always that’s not the whole story; despite the advertised rate many customers will actually receive a higher rate due to their circumstances and credit history, useful to bear in mind before getting carried away at the idea of getting a good deal.

One thing that does bode well for consumers is the lowering of the minimum amount to get the best rate available. It can be very tempting to borrow more than you need to get a better deal, but often that can end up more expensive in the long run and leave consumers with higher debts.

Having these low rates set at a lower minimum opens the market up to consumers who don’t wish to borrow larger amounts. Nowadays personal loans are popular among homeowners for home improvements such as a new kitchen or bathroom.

These types of projects can yield rewards for homeowners by increasing the value of their property. Debt consolidation and car purchase are other popular reasons for personal loans. The new deals may be better for at least some consumers who fall in this bracket.

The other obvious benefit to consumers is that these low rates indicate the level of competition between loan providers is still high, which is good news for those looking for a good deal and prepared to shop around. With such low rates being offered by two big loan providers it’s likely that other companies will try and compete with better offers for consumers.

Great personal loan deals are already widely available, especially as Abbey’s new low rate indicates, on the Internet. Abbey’s non-internet rate continues to be 6.4%, while this is still good value, customers who haven’t checked out what’s available online could be missing out on a better deal.

As always when choosing an unsecured personal loan, careful consideration should be given to whether it’s the best form of finance for you and whether you can afford it. Good deals are only good if they are appropriate for your personal circumstances and as mentioned the advertised APR isn’t always available for every customer so obtaining a quote which details the charges applied to you is essential.