UK High Street Loan Interest Rates More than 2% Higher Compared to Challengers

By: MoneyFacts

The quarterly Moneyfacts UK Credit Card Trends Treasury Report, which studies the UK personal finance market (Unsecured Personal Loans, Credit Cards and Overdrafts), shows that the gap between unsecured personal loan rates from high street brands and the rest of the market has widened, with high street rates now 2.3% higher on average compared to other providers*.

Given a loan of £5,000 over three years, a borrower would be charged £179 more in interest over the course of the loan based on the average rate of a high street loan versus the average across all other providers.

Specifically, the average rate at the £5,000 tier for high street brands is 8.5%, compared to 6.2% from other providers. The average loan rate across all lenders on the market, meanwhile, stands at 7.2%, down from 7.8% a year ago.

Rachel Springall, Finance Expert at Moneyfacts, said:

“Whilst unsecured personal loans remain competitive overall, there is still a chance that borrowers are paying over the odds by choosing a loan from a high street brand instead of a Best Buy alternative.

“Some consumers may prefer picking a high street brand for a loan because they have an existing relationship, but it is highly likely that a cheaper alternative can be found elsewhere. Loyalty doesn’t always pay, and the only real value that can be had from having a high street loan is the same as with any other loan, namely if it were to offer the most competitive rate.

“There is one exception in the Best Buys, with TSB charging the lowest rate at the £5,000 tier of 3.5%, as well as the lowest rate of 2.8% for higher tiers. All other high street providers charge over 4% for the same loan. It is also worth keeping in mind that not everyone will get the best rates, as they are not guaranteed for each customer.

“It remains the case that lower tier loans are charged more than the representative APR tiers from £7,500 upwards, so borrowers need to remember to compare loans on the exact amount they want to borrow. In addition, for small sums such as £3,000 or less loans can be more expensive, so they may well find it cheaper to use a low-interest credit card instead.”

*Based on the loan tier of £5,000 over three years.

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