Personal loans fight rage on
SANTANDER fired the latest salvo in the personal loans battle by undercutting Nationwide’s best-buy product just two days after it was launched.
The Spanish banking giant is offering an interest rate of 7.2% on unsecured loans of between £7,500 and £14,950 which are taken out through price comparison websites.
The move undercuts the previous market-leading deal of 7.3% which was available for all consumers from Nationwide, and equals the rate of 7.2% which was reserved for people who hold their main current account with the building society.
The new Santander deal, which comes just a week after the group last slashed its loan rate to 7.3% in order to be the market leader, is a further sign of the currently intense competition among providers offering loans.
More than half a dozen major loan providers have slashed the rates they offer in the past two weeks, and there are now around 10 different products available for less than 8%.
January is traditionally a busy period for the personal loan market, as people take stock of their finances and often decide to take out a loan to consolidate credit card debt in an attempt to reduce their monthly outgoings, but this alone does not explain the current battle among lenders to have a best-buy rate.
The personal loan market was hit hard by the credit crunch as providers struggled to raise funds for lending, while unsecured borrowing was considered riskier than secured debt.
But the number of personal loans providers has increased markedly over the past year as banks have reassessed their capital position and found they can now afford to offer unsecured borrowing again, boosting competition.
Tim Moss, head of loans at Flintshire-based moneysupermarket.com, said: “The banks’ priority for products has changed.
“Six months to a year ago their priority was mortgages and savings, and, as always, current accounts. But with the current restrictions in the mortgage market, banks are looking for other lending products to make money out of and they can make a short-term profit on loans.”
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