The best personal loan rates - and how to find the right one

Personal loan rates are at record lows spelling good news for borrowers who want to access funds for a car, home improvements or to clear debts and pay the money off steadily over time.

But loans can be notoriously difficult to navigate and a bit of a minefield if you are not equipped with the right information or are not the kind of borrower who will get the best advertised rate.

We highlight the best personal loans around below, complete with an explanation why, and explain how to go about getting the best deal for you.

First things first...

Are you trying to cut existing credit card debt?

RULES TO REMEMBER

If you plan to take on a loan, make sure you're up to scratch on the laws.

EU rules mean early part-repayments are allowed

Since 1 February 2011, partial overpayments are allowed on loans taken after this date.

Banks may charge you, but this is limited to a maximum of 1 per cent of the amount repaid (if the loan is for more than a year) or 0.5 per cent (if under a year).

Loan providers must allow you to pay off your loan in an early repayment. This is subject to a penalty which is usually one or two months interest.

If so, a loan probably won't be the absolute cheapest option for you - as long as you do not have a large amount of debt and can try to clear it relatively quickly.

The whole point of balance transfer deals on credit cards are to shift card debts to them at a special cheap rate.

These rates will almost certainly be cheaper than loans for less than £1,000.

And for larger amounts they can still prove more cost effective. 

Providing you can transfer to a credit card, and will definitely pay it off before the 0 per cent deal ends, a balance transfer can prove the cheapest option.

If you can't, you would need to make sure you transfer your balance to another 0 per cent deal, or you will face high interest charges.

If you don't have the financial firepower or discipline to clear the debt within a 0 per cent balance transfer period then a loan may be the best move. It sets monthly payments and as long as you keep up with them over the course of the loan, you will end up with that debt cleared.

Best buy loan rates at different levels

Remember: Terms and conditions apply on all these loans, particularly on how long you borrow for, and rates you are offered will vary depending on your credit history

Loans up to £5,000  

Peer-to-peer provider Ratesetter offers the cheapest deal at 4.4 per cent. 

Zopa charges a slightly higher 5.3 per cent on the same amount.

Lending Works charges 6 per cent.

 Loans for £5,000 to £7,499 

TSB offer the best-buy rate of 3.3 per cent for someone borrowing £5,000 to £7,499.   

Hitachi Personal Finance charges slightly more at 3.4 per cent.  

M&S Bank and peer-to-peer lender, Zopa, both charge a rate of 3.6 per cent. M&S offers up to seven years to repay at the rate, and Zopa gives you up to five years. 

Sainsbury's Bank offers a rate of 3.7 per cent over three years to anyone with a Nectar loyalty card.

If you need longer to repay or don't hold a loyalty card you will be offered a rate of 3.8 per cent.  

Loans for £7,500 to £15,000

Lenders typically offer the best rates to those borrowing between £7,500 and £15,000 as this is the bracket most banks typically advertise.  

M&S Bank charges the cheapest rate on up to £15,000 at 2.8 per cent, plus it gives a repayment window of up to seven years.

TSB charges 2.9 per cent interest on loans of between £7,500 and £20,000 lasting up to five years. 

Sainsbury's Bank charges just 2.9 per cent but only to Nectar card holders borrowing over one to three years on up to £20,000. The rate jumps on terms between four and five years or for anyone without a supermarket loyalty card to 3 per cent. 

Zopa charges 3 per cent on mid-sized amounts repaying over up a a five-year term. Hitachi Personal Finance offers a slightly higher rate at 3.1 per cent.