Derbyshire BS cuts personal loan rate to 5.9%

Derbyshire BS has jumped to the top of the personal loan best buy tables by cutting its rate to less than 6%.

If you need to borrow money but are worried about the cost, the fact that Derbyshire Building Society) has slashed its personal loan rate will be welcome news.

Now customers wanting to borrow anything between £7,500 and £14,999 over 12 to 60 months (that’s one to five years) can apply for a market-leading rate of 5.9%.

This is the lowest the Nationwide Group (which owns the Derbyshire) has ever gone for personal loans. So how does this deal stack up with the rest of the market?

Borrowing £7,500 over five years

Here is a roundup of the most competitive loans available for borrowing £7,500 over five years, ranked by lowest typical APR.

5.9% could be the new 6.0%

Earlier this year lenders were locked in a rates war, competing in a race to the bottom.

In January M&S cut its rate from 6.4% to 6.0% and Tesco followed suit by reducing its loan price from 6.4% to 6.1%. Then in May, Tesco relented and dropped all the way to 6.0% to match M&S.

Take a look at how the battle raged in Best loans getting cheaper, as M&S cuts rate to 6% and Tesco cuts loan rate to 6%.

It is clear from the table that the unsecured personal loans market has become a bit stagnant since then. Four out of 11 deals listed in this category are priced exactly the same at 6.0%.

[SPOTLIGHT]Sainsbury’s is the only other lender I can find that also offers a rate of 5.9% on a loan of £7,500 up to £14,999 but this is for a shorter period of between one and three years, which may not be ideal for some borrowers who need to spread the cost over a greater number of years to reduce the size of their monthly repayments. In fact, if you borrow £7,500 over less than three years, the rate drops to a paltry 5.8%.

But you never know, 5.9% could be the new 6.0% if the news that Barclays has reduced the rate on its loans of between £10,000 and £25,000 from 6.2% to 5.9% is anything to go by.

The Barclays loan is available over two to five years and comes with a price match guarantee giving customers a £50 one-off payment if they can find the loan cheaper elsewhere within 30 days. But the catch is these loans are only available to existing customers and you have to borrow more than Derbyshire to activate the best rate.

Derbyshire has set a new precedent in the five-year unsecured loans market, so fingers crossed other lenders follow suit.

What are the chances?

When taking out a loan you should remember that the attractive advertised rate is not necessarily the rate you will be given if you're accepted.

Lenders like Derbyshire are only obliged to give the headline price to 51% of applicants while the rest can expect to receive a higher rate.

Read What REALLY damages your credit rating and make sure you check your credit profile to avoid being part of the 49%.

The alternatives

If you need to borrow money you don’t always have to turn to a loan.

One alternative is to take out a 0% credit card. This could be more appropriate for your needs and help you cover costs without incurring any extra debt for a set period.

Of course this is under the proviso that you pay the amount back during the interest-free period!

Take a look at: The best ways to borrow £5,000 for more ideas.

More stories on loans:

Sainsbury's Finance: top personal loan rates fall to 5.9%

Three ways to get an interest-free loan

Amigo Loans and the dangers of being a guarantor

Sainsbury's launches price guarantee for loans