Personal loan rates tumble as competition levels continue to boom in banking sector

Rates on personal loans have continued to tumble as competition continues to heat up across the banking sector.
HSBC have slashed the rates on their mid-range personal loans to just 4.3% on borrowing between £7,000 and £15,000 whilst Sainsburyís, Tesco, Yorkshire and Clydesdale bankís have all launched new products with rates under 4.5%. 
HSBCís new deal is exclusively available to existing current account holders, though they have extended the headline rate to ìPremierî account customers as well on loans up to £25,000. 
Borrowers can choose to take the loan out for a term between two and five years, though the advertised rate is subject to the applicants credit history and current financial status, which could pose difficulties for those who wish to capitalise on cheap borrowing costs at present. 
The last two years have seen the rates attached to personal loans tumble dramatically, with HSBC the latest lender in the country to slash the rates on their products.
The Treasuryís Funding for Lending Scheme and subsequent rising levels of competition within the banking industry have been cited by market analysts as the driving factors behind falling rates, though many have urged aspiring borrowers to proceed with caution as most will likely be unable to obtain the headline rate on offer without having an exemplary financial record and a stable cash flow situation. 
 Funding for Lending
Personal loan rates initially begun to take a downward trajectory back in July 2012, when the Treasury launched their Funding for Lending scheme aimed at raising lending levels by banks and building societies to consumers.
Under the scheme, the UKís major lenders were given cheap access to credit by the Treasury at rates as small as 0.25% on the condition that they passed on this low cost finance to aspiring borrowers across the UK.
The impact of the initiative has been gradual and personal loan rates tumbled from their industry average of 7% back in 2012 to just 5% at the start of this year, 
However, despite the scheme being refocused away from personal lending and toward lending to businesses, personal loan rates have continued to fall this year, with industry analysts arguing that soaring levels of demand for personal loans has resulted in the banking sector becoming more competitive as lenders clamour to try and capitalise on renewed consumer interest with personal loans. 
Factors such as the increased desire to purchase cars and embark on property extensions have been forwarded as some of the primary reasons behind why so many consumers have begun to seek the acquisition of a personal loans, with the low borrowing costs meaning that many feel comfortable enough to take on larger levels of debt and repay them in a affordable and spaced out manner. 
Larger loans, lower rates
Despite the tumbling rates on personal loans, industry experts have advised that aspiring borrowers seek larger personal loans for their future endeavours due to the actuality that lenders usually charge far higher rates on smaller products.
Lenders often view borrowers of small loans as higher risk because of the trend that a larger level of bad debt and loan defaults are often incurred from customers such as these.
So whilst HSBC offer a headline rate of 4.3% on their larger personal loan product, their rate for personal loans of £2,500 for two years and over is a significantly higher 21.9% APR, reflecting the desire of major lenders to try and detract customers from taking out smaller sized loans.
Industry experts have advised people searching for smaller personal loans to consider the offerings of less mainstream lenders such as Hitachi Personal Loans or Peer-Peer giant Zopa, both of whom have loans as small as £2,500 on offer at a substantially lower rate of 8%.
Personal loans to consider 
The rising levels of competition within the personal loan market have resulted in a plethora of attractive new offerings being launched by lenders in the past few weeks. However, the following products are a few that have caught the eye and can provide aspiring borrowers with an affordable and manageable loan deal without over burdening them with significantly large monthly repayments: 
Sainsburyís Bank- Currently offer personal loans between £7,500 and £15,000 at a rate of 4.4% and with optional loan terms between 1 and 5 years. The low rate means that borrowing £15,000 for 3 years would necessitate monthly repayments of £444,96, providing the borrower attains the headline rate on offer. 
HSBC- Currently provides personal loans between £7,500 and £15,000 at a rate of 4.3% and an optional loan term between 1 and 5 years. This means that borrowing £15,000 for 3 years would necessitate monthly repayments of £444.31 , subject to attaining the headline rate. 
Hitachi Personal Finance- Offers personal loans between £7,500 and £10,000 at a rate of 4.3% and an optional loan term between 1 and 5 years. 
Tesco Bank- Currently has personal loans between £7,500 and £15,000 on offer at a rate of 4.5% and an optional loan term between 1 and 10 years. 

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