Tesco is the supermarket credit winner

Customers looking for cheap credit along with their groceries should make Tesco their first stop, and avoid Marks & Spencer altogether.

In a bid to find out which supermarket was the cheapest lender, EveryInvestor pitted the four main franchises’ personal loan and credit card deals against one another.

Tesco came out top overall, followed by ASDA and Sainsbury’s, with M& S last by some margin.

Those in the market for a £10,000 personal loan repaid over four years will find Tesco is their best bet, with a 6.8% APR and a total cost of £11,408.

ASDA is a close second with a 6.9% rate and a total cost of £11,425 followed by Sainsbury’s at £11,472. M& S offers a terrible deal, with an 8.9% APR and a £12,013 final bill – over £600 more than Tesco’s.

So how does this compare to the market leading products? An identical loan at Your Personal Loan will cost £11,383 at a rate of 6.7%, which is marginally better than the Tesco deal.

If payment protection insurance (PPI) is added to the loan, then ASDA actually works out the cheapest supermarket, but still costs over £100 more than the market leading provider. Sainsbury’s PPI is particularly pricey – costing nearly £1400 more than ASDA’s – making it more expensive even than M& S.

Says Chris Gilchrist of EveryInvestor “Taking out a lender’s PPI is always a terrible idea, as the same cover can be bought far more cheaply from an independent provider.”

For example, had you taken out a PPI policy with British Insurance for the Tesco loan, the total cost would have been £11,925, a saving of £2,125.

Smaller loans equal bigger rates
With personal loans, there are two distinct categories; those below £7,500 and those above.

On loans below this threshold, lenders significantly hike the rate of interest. Some lenders - like ASDA – have stopped offering personal loans below £7,500 altogether as they see them as a waste of time.

Sainsbury’s actually offers the lowest rate on a £5,000 loan, followed by Tesco and M& S. Remarkably, Sainsbury’s actually works out cheaper than Your Personal Loan as well, which charges £7 more (despite having an APR that is 1.2% lower).

But tack on its uncompetitive PPI and Sainsbury’s once again becomes the most expensive, with Your Personal Loan cheapest.

Tesco and Sainsbury come out best in comparing the supermarkets’ credit card offers though neither are as good as the best offers available elsewhere.

Tesco gets top rating

Having collected the information, EveryInvestor ranked each of the provider’s products from best to worst. We looked at the total cost of both smaller and larger loans, plus the typical APR, balance transfer, and new purchase deals on the various credit cards.

Overall Tesco is comfortably the best provider, offering competitive rates on both loans and credit cards. ASDA and Sainsbury’s were fairly closely matched, while M& S was clearly the worst .

“It’s encouraging that the supermarkets are in general better than average in terms of their personal loan and card offerings,” says Gilchrist. “But a lot of shoppers probably believe their supermarket offers them a better deal than it in fact does, and every single supermarket credit offer can be beaten by shopping around.”