The Financial Blog

Sainsburys personal loans interest rate cut!

Sainsbury’s personal loans interest rates have been cut from 8.9 per cent typical APR to 8.2 per cent APR from today. Sainsbury’s Bank also say they will be offering the 8.2 per cent loan rate to customers applying by phone; previously the offer was only available for internet loan applications only.

This great offer means that Sainsbury’s Bank is now offering one of the lowest loan rates in the UK for loans between £7,000 and £15,000.

Benefits of the Sainsbury’s Bank loan include;

A personally tailored repayment period, from one to seven years 
Fixed repayments for the whole period of the loan
An instant personal loan decision
The money in 24 hours
No set up fees

Steven Baillie, Head of Loans, Sainsbury’s Finance said: “We are committed to providing our customers with great products and are delighted to be able to offer this rate cut at a time when our customers are planning for 2009.”

I think an affordable monthly loan payment is a good way for people to manage any debts they may have on credit or store cards but the key thing is making sure no additional borrowing beyond affordable monthly payments is done.

Something like 60 per cent of people who take out a loan to pay off debts will go on to borrow even more money, usually they take out yet another personal loan. Unfortunately this is how the cycle of borrowing and debt continues until loan repayments are missed.

Make sure you don’t fall into the debt trap - never borrow beyond your means and make sure you meet you’re monthly repayments. Never, ever take out a loan to pay off another loan, unless you seriously consider extending the term of the loan to reduce monthly repayments. And, if you are unsure about what to do then seek professional financial advice…

Borrowers beware … loan rates at an all-time high

The Gap between the average loan rate and base rate almost doubled in just two months moneysupermarket.com’s SmartSearch tool can help find the right loan for you…

Analysis by moneysupermarket.com has revealed that the average cost of a personal loan has crept up to almost double that of base rate since September this year.

Borrowers looking for a loan can now expect to pay 8.46 per cent. With a base rate of just three per cent, consumers are paying more than a five per cent premium for their personal loan. This is compared to just two months ago, when the gap between the average loan and base rate was a more manageable 2.92 per cent.

Tim Moss, head of loans at moneysupermarket.com, said: “Loan costs are often overlooked in the frenzy of a base rate cut, when the focus is on the impact of any rate movement on mortgage payments and savings rates. What our calculations clearly show is that the cost of a personal loan is as apparently uncorrelated to base rate as mortgage rates are. The key difference though, is that mortgages are priced according to LIBOR rather than base rate - loan rates are not.

“Whilst personal loans are often seen as the ‘poor man’ of everyday financial products, there is always a spike of activity post-Christmas and into the New Year when consumers take their finances in hand, and turn over that new leaf. Invariably this involves consolidation of store cards, credit cards and overdrafts. However, loans are not the cheap form of borrowing they once were. In the last two weeks, we’ve seen three of the top loan providers - Tesco, Asda and Yourpersonalloan (the Co-Op’s loans vehicle) increased their rates by as much as 0.3 per cent, despite base rate dropping by 1.5 per cent.

“The Competition Commission’s recommendations on the sale of PPI last week will undoubtedly result in loan rates soaring next year, perhaps up to around ten per cent, which means they won’t be that much more competitive than credit cards. However, it’s likely we could see one or two downward rate movements after Christmas as providers seek to attract those with New Year’s resolutions of the financial kind, but borrowers need to keep a close eye out for the best deals and ensure they only apply for products they’re likely to be accepted for. This is where our SmartSearch tool will help - enter a few basic details and we’ll point you towards loans you are likely to be eligible for with your credit history. With lending criteria becoming more and more stringent, it’s important to keep your credit record as clean as possible and not taint it with failed applications for loans.”

MoneyExpert.com comment on Competition Commission recommendation that PPI should not be sold to a customer within 14 days of being sold a loan.In the current economic climate the right PPI could still be vital for customers; Sean Gardner, director of MoneyExpert.com, said:”Stopping lenders from filling their boots with missold and overpriced PPI income is obviously a welcome move. But if you remove PPI from loan sales altogether there is a real risk that many consumers will simply do without, and while PPI still has a part to play consumers should be able to purchase it with appropriate financial products. After all, with a recession looming large and unemployment levels spiralling it could be that this once maligned product will be very much needed in 2009.”

Commenting on the Competition Commission’s findings into PPI, Clare Francis, site editor of price comparison site, moneysupermarket.com, said: ”PPI has been a cash cow for lenders for too long now and this crackdown is welcome.  That said, the decoupling of the PPI sale from the loan sale is likely to have one immediate effect which is bad news for consumers - loan rates will rise as lenders look to recoup some of their margin. ”In general standalone PPI is cheaper than that sold by lenders alongside a loan, so consumers will be able to use their “personal PPI quote” as a benchmark price and shop around during the two week cooling off period.  We anticipate that this move will give standalone providers and comparison sites such as moneysupermarket.com a great opportunity to steer consumers toward better value PPI products without any sales pressure. ”Whilst there is no doubt that PPI has, in the past, been over priced and over sold we do believe that there is a place for the product.  The biggest reason for people seeking help with their debts is a change in personal circumstances such as an accident, sickness or unemployment and this is exactly when an appropriate PPI policy can prove a wise purchase. And with the country now in the grip of recession and unemployment on the up it could prove invaluable to an increasing number of people.” 

27 per cent of people are now walking and cycling more often in an effort to cut costs in the midst of the credit crunch.

New research from Happen also claims that 32 per cent of people now eat, drink (alcohol), and smoke less - which of course is good news from a health point of view!

So although we’re all poorer we can all live longer and enjoy our meagre living - Stay away from the chocolate!

Uswitch say the Government has failed to stop fuel poverty, Ann Robinson, Director of Consumer Policy said;  “2008 is set to be remembered as the year Britain was crippled by inflation, soaring fuel bills and the rampant growth of fuel poverty.

“Government failure to stamp out fuel poverty has not only allowed it to tighten its grip on our pensioner population, but spread its roots into other parts of society too.

“Now single income households, including families, face a real threat to their standard of living as fuel poverty becomes part of everyday British life.”

The average UK household energy bill is now £1,292, a massive increase of around £380 and thats only since the beggining of 2008. Fuel poverty is when more than 10 per cent of monthly income is spent on energy bills.

Unfortunately Uswitch.com are predicting further price increases early next year.

First Plus announced that it will not accept any new business from 9th August, head of loans at Moneysupermarket.com, Tim Moss, said;

“First Plus’s announcement that it will not accept any new business from 9 August is a huge blow to the debt consolidation market.”

“For people with multiple unsecured debts, often at high rates of interest, the option of using a secured loan at a lower monthly payment to reduce their outgoings has been extremely attractive. For many though this option will disappear because, while there are other secured loan providers in the market, their capacity to lend is likely to be limited.”

“The recent, and further predicted, falls in house prices make the environment for secured loans difficult for consumers and lenders alike. The Competition’s Commission’s proposed changes to the Payment Protection Insurance market are also likely to have been a body blow to First Plus.”

>>Click here to find the lowest rates on debt consolidation loans
 

Sainsburys finance say that 4.9 million plan to buy a second hand car at some point between March and August 2008, spending an average of £4,636 each, which equates to £22.76 billion and a lot of loans to go with it!

Although this is an incredible amount of money it’s actually down by 8 per cent on the £24.87 billion intended spend on second hand cars, for the previous 6 months!

Head of Sainsbury’s Loans, Steven Baillie, said: “Sellers need to make sure they know the market value of a vehicle to ensure they get a good deal when they come to sell their existing car, or indeed come to buy a new one. Our findings show the amount people anticipate spending on second-hand cars is significantly less compared with six months ago, which may be a knock-on effect of people’s growing financial uncertainty.

“It’s important that people remember to haggle when negotiating any car purchase, as haggling can save the buyer an average of £1,468. Despite this our findings show that over half of people who are intending to buy a second-hand car in the next six months say they do not plan to haggle or they may only haggle slightly.”

Rather suprisingly I thought, only 17 per cent of second hand car purchases in the next 6 months will be financed by a loan. Sainsburys Bank are urging people to shop around for a competitive loan rate.

Probably one of the best things you can do is visit a financial comparison website to get an understanding of the interest rates on offer for the loan amount your require. These comparison web sites make it easy to compare loans and loan APRs.

Customers who choose to take out a Sainsburys Loan can choose to make no repayments for the first 3 months and get and instant decision and get a cheque delivered within 24 hours.

Don’t forget your car insurance! >>Click here to compare car insurance quotes

And >>Click here to compare loans and apply online today!

Moneyexpert.com say that loan rates are still increasing even though the Bank of England has cut interest rates 3 times in the last 6 months. Personal loans or unsecured loan interest rates have increased by up to 1 per cent and Moneyexpert.com say that it is cheaper to borrow more if you’re loan application is accpeted.

The average rate for a £5,000 loan is now 10.16 per cent compared to 9.44 per cent in November 2007. The average interest rate for a £7,500 loan has increased by 0.91 per cent to 8.88 per cent, compared to 7.97 per cent in November 2007.

Moneyexpert say that approximately 1.38 million people have had loan application rejected in the last 6 months as lenders issue stricter criteria when it comes to approving loans.

Founder of MoneyExpert.com, Sean Gardner, said: “The Bank of England has a battle on its hands to restore confidence in the credit markets when lenders react to three rate cuts totalling 0.75 per cent by actually increasing rates.

“The unsecured loans market is almost mirroring the mortgage market where the issue is not so much rates but availability - whether or not lenders will let you have the cash.

“However it remains the case that creditworthy customers can still access competitive deals and borrowers should research the market carefully before making an application.

“And you will pay lower rates on average if you borrow more. Lenders take the view that those borrowing more are generally a better risk than those borrowing less and offer better deals as a consequence.”

>>Click here to visit Moneyexpert.com and check out their loan tables

Click here to compare loans now!

New research from Moneysupermarket.com reveals that more and more people are taking out short term payday loans to tide them over when their monthly finances are stretched to the limit. Since September last year Moneysupermarket.com say that there has been a 55 per cent increase in the number of paydays loans taken out.

Payday loans are short term but expensive loans. For example if you needed an extra £80 one month becuase your car had broken down, you could look into getting a payday loan to tide you over. Typical APR’s on a payday payday loan are around 25 per cent so you’d have to pay back £100 if you borrowed £80. The term of a payday loan is only 30 days so you need to ensure you can afford to pay the money back quickly.

Given the high APR involved with this kind of loan, a 55 per cent increase over such a short period of time is staggering. It shows the increase in living costs is stretching families on a tight budget.

Head of loans at Moneysupermarket.com Tim Moss, said: “The rise in payday loans is astronomical and symbolises just how difficult people are finding it to cope day to day. As disposable income is being squeezed through increases in the cost of food, fuel, utilities and general living necessities, these loans are increasingly used to help those on a tight budget.

“Payday loans can be useful as a short-term credit vehicle. They are a bit like taxis -convenient for short journeys, but if you are going a long way, there are much cheaper ways to travel.

“They should only be taken out when it’s absolutely necessary and you are sure you can pay it back quickly. Anyone looking for longer term credit or unable to pay off the debt immediately, should steer clear of them. It would be wiser to borrow the cash from family or friends or arrange an authorised overdraft with your bank.”

Probably the best thing to do is review your finances and see how your money is spent every month, there may be ways to cut unneccessary spending and save money for those unexpected financial emergencies.

If you’re looking for a bigger loan then >>Click here to compare loans and find the best deals!