M&S cuts loan rate to 5.5%

The personal loan war continues as M&S announces a market-leading 5.5% rate on its personal loan.

Interest rates are on personal loans are now at a five-year low.

If you want to borrow between £7500 and £15,000, M&S Bank may be willing to lend to you at 5.5%. That’s a cracking rate, especially when you remember that back in January, the cheapest loan on the market was 6% a year.

Here’s how the M&S Personal Loan compares with other leading loans on the market:

Best personal loans - £10,000 over five years

Loan

Representative APR

Total amount repayable

Monthly repayment

M&S Personal Loan

5.5%

£11,423.91

£190.40

Derbyshire BS Personal Loan

5.6%

£11,449.80

£190.83

Tesco Bank Personal Loan

5.7%

£11,476.20

£191.27

Sainsbury’s Bank Standard Nectar Cardholder Loan

5.7%

£11,476.20

£191.27

Clydesdale Bank Online Personal Loan

5.8%

£11,502.60

£191.71

Yorkshire Bank Online Personal Loan

5.8%

£11,502.60

£191.71

AA Existing Member Personal Loan

5.9%

£11,529.00

£192.15

Barclays Bank Existing Customer Barclayloan

5.9%

£11,529.00

£192.15

So the M&S Loan is the clear market leader, but don’t assume that everyone will be offered a loan at 5.5%. M&S Bank is only obliged to offer loans at 5.5% to 51% of successful applicants – plenty of folk could be turned down or offered a loan at a higher interest rate.

That said, if you have a good credit rating, there’s a good chance you will be offered a 5.5% loan. That’s as long as you’re looking to borrow between £7,500 and £15,000 for a period between one and five years.

And even better, a recent law change means you’ll probably be able to repay your loan early if you wish, and not have to pay any penalty fee.

A new bank

This week’s rate cut comes after M&S launched its first ever current account last month. It’s a premium account where you have to pay a monthly fee, but I suspect that M&S Bank will still win a fair number of customers thanks to its much-loved, trustworthy brand.

What’s more M&S isn’t just making a push in personal loans and current accounts. The M&S Credit Card is also a very attractive product as it comes with a 15-month 0% period for new purchases.

Let’s imagine that you got a new M&S card and then used it to buy some new furniture for £2000. You wouldn’t have to pay any interest on the resulting debt for 15 months!

You can also earn M&S reward points as you spend on the card. You’ll get one point for every pound you spend at M&S and a point for every £2 you spend elsewhere. Every 100 points gives you a £1 M&S voucher.

You do need to be careful though. The 0% deal will probably end if you don’t make the minimum monthly payment on every card bill. It’s also worth noting that the 15-month period begins when you take out the card not when you buy the furniture.

Still, the M&S Card is a great bit of plastic and it’s effectively an even cheaper way to borrow than the M&S Loan.

Should you borrow?

Before you rush out to get a new credit card or loan, do ask yourself if you really need to borrow. Debt can become a massive millstone if your circumstances change, and, of course, you’ll have to pay interest if you take out a personal loan.

Even though the rate on the M&S Loan is low, you’ll still be giving money to M&S which you could be spending on yourself.

So if you’re able to hold back from borrowing, you may do yourself a favour in the long-term.

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