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Sainsbury’s Bank offer low-rate unsecured loans up to £35,000

A 6.9% APR personal loan offering £10,000 more than anything else on the market has been launched

Sainsbury’s Bank is the first lender to offer a personal unsecured loan of £35,000 to both their new and existing customers.

It offers an APR of 6.8% for those borrowing between one and three years, and 6.9% for those borrowing over a five year term.

David Mann, Head of Money at uSwitch, said: “This new loan is a sign the personal loan market is coming back to life.

“We’ve seen lots of competition around low rates and hopefully this will mean further competition to support the needs of all people looking for a larger personal loan that can’t or don’t want to hassle with the secured loan process.”

Price matching

The supermarket bank have offered to match the price of any unsecured loan you find for a more competitive rate, possibly in anticipation of competitors attempting to undercut them as they catch up and offer similar loans.

The interest with a representative 6.9% APR (based on borrowing £30,000 and repaying over 60 months with 60 monthly repayments) would be monthly repayments of £589.67 with total amount repayable of £35,380.20.

You have the right to repay all or part of the loan at any time although early repayment charges may apply.

What’s the catch?

There is no major catch beyond the normal rules for unsecured lending.

You must be at least 18 and a UK resident with a home telephone number to apply. The 6.8/6.9% rate is only available online with different rates available if you arrange the loan over the phone.

And whilst the 6.9 rate is their headline representative rate, the rate you will actually be offered depends on your personal credit assessment.

Also, Sainsbury’s Bank reserve the right to vary rates without notice, but the competitiveness of the sector, financial regulations and potential negative publicity means they are unlikely to raise them to anything severe.

The loan also comes with the usual caveats and defaults for unsecured borrowing, namely: charges of between £10 and £50 that will be added to your debt if you miss payments, and the chance of County Court Judgement or even bankruptcy if you can’t repay the loan.

Whilst this is far from being ‘dodgy’ loan, you should still approach with the same caution as you should have for any form of unsecured lending.

A lending price war, a win for consumers?

This cheap borrowing is a trend across the lending industry – HSBC announced mortgages with rates below 1% yesterday – as lenders have seen a perfect storm of cheaper costs and a fall in customer demand over the summer and early autumn.

This means lenders can both afford to offer better rates and have to, as they fight with competitors over a smaller a number of customers.

So, while Sainsburys may have been the first to offer an unsecured loan of up to £35,000, others could follow soon and the rates could well become more competitive as 2014 draws to a close.

It is still worth comparing with other lenders as you could get a better rate for a smaller amount.

  • Personal loans are unsecured loans typically ranging between £1000 and £25,000 (the Sainsburys offer of £35,000 is new) that are offered against your personal credit score, they have fixed monthly payments that will need to be met or penalties will apply. Credit cards may be more suitable for sustained smaller debts.