Cheapest loan providers named

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The Telegraph has an interesting article which covers the best deals for personal loans at present:

Loan alert: personal loans charging 8pc or less

A personal loan from Nationwide is reported as the cheapest, with a loan rate of 7.9% offered to existing Nationwide customers (though not those with existing loans).

The AA also offers a decent rate of 8% with fewer restrictions than other lenders, and also can offer a payment holiday under some conditions.

Alliance and Leicester also offer a rate of 8%, but the Telegraph reports that this is only available through comparison websites. Does this mean this is due to cash back from commission rather than being a direct A&L product?

Sainsburys Finance also offers a good rate of 7.9%, but it’s very conditional - you have to have a minimum term holding a Nectar card to secure this rate, and also apply online. You also need to borrow a minimum of £5,000, which is higher than other lenders. Otherwise, their normal rate is 8.1%.

Overall, it’s actually pretty sad to see the loan rates so high, especially when the Bank of England interest rate stands at 0.5%, and with interbanking Libor rates at 1%. That means the spread on profits from loans stands at the highest in recent history.

On the one hand, perhaps banks will argue it allows them to recapitalise better, but on the other, with rising defaults, there may be a nasty trade-off on the profits.