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Unsecured borrowing has never been so competitive

7th July 2014 Print

With many providers launching market leading deals on loans and credit cards in recent weeks, there has never been a better time to review your borrowing and make sure you are getting the most bang for your buck, according to analysis by MoneySuperMarket.
 
The comparison site compared the average and best buy rates on purchase and balance transfer credit cards and unsecured loans over the last year, and found that providers are offering some of their best ever deals.
 
Credit cards
 
The balance transfer card market has remained buoyant for some time, with Barclaycard continuing to dominate the field and up the stakes to ensure it always remains the market leader. Last month it launched its 33 month zero per cent balance transfer credit card, though Halifax was quick to respond by extending its 28 month card to 30 months just last week, whilst keeping the transfer fee at a very competitive 2.50 per cent consumers have never had it so good as the zero per cent interest periods on balance transfer cards have increased by a significant amount over the past year. In July 2013 the average length of term of the best five zero per cent cards was 26 months – this has now increased to a lengthy 32 months.
 
It’s a similar story with zero per cent purchase cards, with the average interest free introductory period also having increased from 15.8 months in July last year to 17.4 months today. The current best buy is Tesco Bank’s Clubcard Credit Card for purchases, which, as of last week, offers zero per cent for 19 months – three months longer than the best purchase card in June 2013.
 
Personal Loans
 
The personal loan market is also following suit with some of the lowest rates currently available, as well as average rates across products dropping substantially. HSBC is leading the charge after launching the lowest ever loan rate last week at 3.9 per cent for loans between £7,000 and £15,000, although this is only available for existing customers. Tesco Bank also recently reduced its APR on loans of £7,500 to 4.1 per cent, so it is apparent that providers will continue to battle it out in the loan wars.
 
In addition, average APRs on loans of both £7,500 and £5,000 have plummeted dramatically over the last year. Those looking to borrow £7,500 over five years were offered a rate of 10.16 per cent APR in January this year – this has almost halved in just six months, with the average rate standing at 5.53 per cent at present – a difference in interest of £925 over the term of the deal. Similarly, today’s average APR on loans of £5,000 over five years stands at 8.14 per cent - this has fallen by an incredible 45 per cent since January when the average was 14.86 per cent – a difference of £909.
 
Kevin Mountford, head of banking atMoneySuperMarket commented: “It’s good news all round for many borrowers at the moment. Providers are vying to be top dog in the credit card and loan markets, meaning that deals are being extended and rates are being reduced in order to attract customers. However, with Bank of England Governor Mark Carney recently signalling that Base Rate will rise sooner rather than later, the era of cheap borrowing may be coming to an end, therefore consumers should act now to make the most of the current deals before they disappear.
 
“Whilst the decision to borrow should never be taken lightly, for those who are looking to borrow for a large purchase, or consolidate existing debts, the rates and promotional deals on offer mean it may never be cheaper to borrow on a loan or credit card. However, consumers need to remain aware that many of the low rates on offer are only available to those with excellent credit histories. Those with a less than perfect credit score may be offered an alternative deal.
 
“When borrowing money via a credit card you should also make sure you are able to pay it back within the zero per cent period so as to avoid being stung by interest which can really make your debt add up.  For example, those who can afford to pay off their balance within a shorter time frame may find they are better off opting for a balance transfer card which offers a shorter interest free period, but has a much lower fee. As always, shopping around is crucial to ensure you are on the best deal to suit your circumstances.”