During the last five years, personal loan interest rates have reduced dramatically, making them cheaper than a lot of mortgages.
Sainsbury’s Bank has reduced its personal loan rates to 2.9%, with a 0.1% reduction for those customers with a Nectar card who wish to pay over three years or more. This rate applies to loan amounts between £7,500 and £19,999.
The average Standard Variable Rate for a mortgage is 4.62%, while one of the lowest Standard Variable Rates is still higher at 2.95% with Stafford Railway Building Society. Although unsecured personal loans may be cheaper than some mortgages, and offer some security to borrowers if they default on payments, it may prove extremely difficult for borrowers to be approved for a personal loan to fund a deposit or reduce a mortgage debt.
Sainsbury’s Bank stated that it would not approve a personal loan to someone who wanted to purchase a property, either in the UK or abroad, or to support a mortgage application. Reducing a mortgage debt or repaying negative equity will also be refused by the bank. Personal loans are usually offered to those who want to carry out home improvements or consolidate debt.
According to the founder of Moneycomms, a research service for personal loans, Andrew Hagger, the average rate for personal loans has dropped from 7.9% in December 2011 to 4% in 2016.
CeMAP qualified mortgage advisers are available to help borrowers to locate the most suitable and affordable mortgage deal for their circumstances.
