News Column

Saturday Money: HSBC offers historic 3.9% personal loan

July 5, 2014

Patrick Collinson

HSBC has launched a personal loan at 3.9% - the lowest rate ever charged - sparking a price war among providers.

The 3.9% rate will apply to loans between pounds 7,000 and pounds 15,000, with repayments spread over one to five years. The rate is even lower than the 4.29% HSBC charges first-time buyers for its standard two-year fixed-rate mortgage.

Sylvia Waycot, editor at data provider Moneyfacts, confirmed that the deal "is the lowest rate ever recorded on Moneyfacts". It smashes the previous lowest-rate personal loans, which have charged around 5% interest.

HSBC's move has sparked a price war among loan providers. Tesco almost immediately cut its cheapest loans from 4.5% to 4.1% - although that still leaves it pricier than HSBC.

For a five-year HSBC loan of pounds 7,000, monthly repayments will be pounds 128.40. For pounds 15,000, repayments will be pounds 275.14.

So what's the catch? HSBC said the deal is for existing customers only - but added that it had a total of 16.1 million customers in the UK, about one in four of the population.

Many applicants for "best-buy" loans are rebuffed because they don't meet the bank's credit-scoring criteria. But under credit rules, an advertised interest rate must be given to at least 51% of applicants accepted for loans.

According to Moneyfacts, applicants for loans whose credit score is rated as "fair" rather than "good" are offered deals at far worse rates. It says Everyday Loans offers finance to those on a "fair" credit score at 37.1% interest.

The HSBC loans will appeal most to car buyers, but homeowners may prefer an HSBC personal loan to a mortgage extension to finance improvements.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Guardian (UK)

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