Lenders in the UK are trying to capture a larger and larger chunk of the profitable personal loan market at the moment, attempting to draw customers in with lower and lower rates of interest. The result is that two providers are now offering rates of just 5.4% on some of the loans they offer, which is certainly appealing to anybody looking to get their hands on some cash for a holiday, car, redecorating or anything else.
However, the banks and building societies are still unable to compete with the emergence of social, or peer-to-peer, lending, which is drawing in ever more of the market. Although the vast majority of lending is still done through traditional means, there is a lot of scope for this more personal finance offering to grow.
The recent reduction of rates might be triggered in some way by the Funding for Lending scheme that the government and Bank of England has made available. Although it is supposed to be used for mortgages, the fact that it offers banks capital to provide mortgages means that they have some of their own freed up, which they can now use to compete in the personal loans market more.
It’s a sector that hasn’t gotten much attention in recent years, with most people focussing on mortgages instead, but Nationwide’s head of personal loans, Paul Wootton, says that “the personal loan market is as competitive as ever, and the society is constantly monitoring the products we offer to our customers.”
These low rates can just be headline figures though, and the head of loans and debt at MoneySupermarket, Tim Moss, said: “Before applying for a loan, or for any credit product, it’s a good idea to check your credit history so you have a clearer idea of the products you are more likely to be accepted for based on your credit score.”