Are you planning on getting a new car, a new kitchen a new bathroom or anything else in the New Year? If you can’t afford to pay for it outright you may be able to take advantage of some of the lowest loan rates since the credit crunch began.
Research from a price comparison site last month found that the average loan rates on borrowings of £7,500 or more were at a four-year low, with similar rates last enjoyed as far back as November 2007.
On the top ten loans between £7,500 and £15,000, the average loan rate was 6.79 per cent in November, compared to 8.27 per cent for the same period in 2011, according to MoneySupermarket.com data.
MoneySupermarket.com loans expert Tim Moss predicts that the most attractive loan rates will disappear in the run up to Christmas, before going back up in the New Year – which could make it a good time to borrow if you are planning on refurbishing your home or buying a new vehicle.
The same research found that loan rates on lower borrowings had actually gone up over the course of four years. Back in November 2007, the average loan rate on a £3,000 loan was 10.6 per cent, but this year the average rate was 15.15 per cent.
It may make more sense to use a credit card with an introductory low or 0 per cent interest period if you’re planning to borrow a relatively small amount of money, but credit cards certainly aren’t suitable for everyone and you should think carefully about your ability to pay back what you borrow before applying.
Of course if rates do go back up, the best rates will still only be available to those with the best credit scores. Your credit score is a measure of how well you can be trusted to pay back your borrowings, based on your previous borrowing and repayment history.
Getting rejected for credit several times within a short space of time can have a negative effect on your credit score, so it is best to allow a ‘cooling off’ period if you are rejected for credit, whether that be a loan or a credit card.
Alternatively you can use MoneySupermarket’s loans Smart Search tool which allows you to see how likely you are to be accepted for some of the loans currently on the market without it leaving a ‘footprint’ on your credit history. This limits the chance of credit rejection as you get a score out of 10 telling you the likelihood you’ll be accepted.