CashPA

New figures have revealed that personal loan rates for larger amounts are at their cheapest for four years. They peaked back in 2010 and have been dropping dramatically ever since. Meanwhile, however, the rates on smaller loans are starting to creep back up. The difference in the rates available for these different amounts is staggering.

So what are the five secrets to getting a cheap loan?


1. Consider the total cost of your borrowing

The figures, from Moneysupermarket found that the average rate for a loan between £7,500 and £15,000 is 6.79%, the lowest since the credit crunch first hit. That's a 1.48% drop since the same time last year.

Meanwhile, however, the cost of borrowing £3,000 is up to its highest in six months and would currently set you back an average of 15.15%.

It is worth thinking very carefully, therefore about how much you want to borrow, and the monthly repayments. If you increased your borrowing by just £100 it could have a massive effect on the rate you are offered, so it's worth investigating whether being cunning in the levels of borrowing could save you money overall.

2. Consider the timing of your borrowing.

Tim Moss, head of loans and debt at MoneySupermarket.com, says: "As we move into the Christmas period, it is likely that we will see rates rise as lenders tighten their books." Lenders don't like desperate end-of-year borrowers who run out of cash because of a failure to plan ahead, so they will be very cautious about lending and rates will rise accordingly.

In the New Year, however, the rates will drop again. Moss adds: "We can expect to see some more inventive propositions entering the marketplace for 2012 as competition increases."

3. Shop around

The average loan costs can hide some massive variations. If you take a loan of £7,500 over five years, for example, you may be offered 6.2% from the likes of Nationwide and Sainsburys Finance, but you could expect to pay anything up to 8.8% for a loan from the Halifax.

4. Take your time

You cannot afford to be in too much of a hurry. The introduction of Consumer Credit Directive (CCD) rules earlier this year means that only 51% of consumers will get the advertised rate. It means you need to leave plenty of time to apply for a loan, consider the rate you are offered, and if you don't like the look of it, make an application elsewhere.

5. Keep your nose clean

As ever in this environment, the best rates will only be offered to those with the very best credit records. If you fail to keep up repayments, are constantly late with big bills or the mortgage, or are wayward with your credit card, there's a good chance you will either be denied credit, or you will be forced to pay through the nose for it.