By Amy Andrew and Marc Shoffman
PUBLISHED: 07:05 EST, 9 April 2013 | UPDATED: 03:41 EST, 24 July 2013
Loans are notoriously difficult to navigate and can be a minefield if you are not equipped with the right information.
Here we explain how to go about getting the best deal for you, complete with an explanation detailing why we're happy to pick each account.
We don't just copy the best rates from the comparison tables – we scour the market for all-around winners. This is a taster of the top deals. For the best rates, visit our loan rates tables, which are comprehensive and independently compiled.
New car? Many people take out a loan to cover the initial cost
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 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.
Providing you can transfer to a credit card, and will definitely pay it off before the 0 per cent deal ends, that's the best option. If you can't, make sure you transfer your balance to another 0 per cent deal.
Use our guide to find the best 0 per cent transfer credit card for you.
• Are you trying to cut the cost of a loan you already have?
If you are trying to switch to a loan with a cheaper rate, it's worth bearing in mind that this may not save you money. Some loans, especially older ones, will slap down hefty lock-in charges - so on balance you probably won't save much, if anything.
However, it is always worth checking up on your options. So check your small print to see if you can move and see what rates are around.
Best for loyalty card holders
Sainsbury's Standard Loan offers a market-topping headline rate of 4.9 per cent based on borrowing between £7,500 and £15,000 and repaying over three years.
Exclusive deal: cut your interest rate by taking out a free Nectar Card
As an added bonus, Sainsbury's Bank has included a price promise for Nectar Card holders, which states if you can get a better deal elsewhere, it will beat it by 0.1 per cent.
To qualify, successful applicants for the Sainsbury's Standard Loan must provide a written offer from the other lender in the same name as the loan offered by Sainsbury's within 28 days of the Sainsbury's Standard Loan being approved.
You must not have accepted the standard loan offer by signing and returning the Sainsbury's Loan agreement.
The loans must be compared on a like-for-like basis, based on features such as, but not limited to, length of loan, fixed loan amount and repayment structure (including interest and set up fees - if any).
The offer does not apply to any Sainsbury's Shopper Reward Loans.
If you are not a Nectar card holder, you cannot apply for the deal. However this is easily remedied by signing up for a free Nectar Card. As long as you swipe it in store or use it online within six months of applying for the loan, you can apply for the deal.
Although the process may seem a little long-winded for a reduction of 0.1 per cent, savings will add up over time.
However, bear in mind that multiple credit searches impact your credit footprint - if you do sign up to this deal you will have effective applied for two loans.
The offer may be higher depending on your personal circumstances, credit assessment procedures and other related factors.
Nationwide customers who hold a FlexAccount, FlexPlus Account or a FlexDirect Account account also have the option of taking out a loan from Nationwide with the same chart-topping rate as Sainsbury's at 4.9 per cent.
The Flex Direct account features on our list of the best overdraft offerings, and will pay you 5 per cent incredit interest and the FlexAccount is one of the top current accounts for overall perks - so it might be worth switching.
Read This is Money's guide to the benefits of switching for more information.
Best for no-frills
The Derbyshire Building Society offers a rate of 5 per cent - only just off Sainsbury's best-buy loan.
It is available for loans of £7,500 to £15,000 for up to 5 years for those aged 18 to 79 and has no setup fee.
Applications for the loan are only accepted online, but you can ask any questions by phone. Lines are open Monday to Friday 8am-6pm.
The application process takes minutes and you will receive an instant online decision.
You have to be aged 18 or over to apply for the loan and have a minimum combined income of £700 per month, from earnings and/or a pension.
If you are self-employed you must be a homeowner and be able to supply one year's audited accounts
Based on an assumed loan amount of £11,000 over 51 months at an interest rate of 5.0 per cent a year, you would pay £239.31 a month. The total amount payable would be £12,204.81.
Best for M&S customers
M&S Bank has a loan with a rate of 5 per cent on loans between £7,500 and £15,000. That is as long as you are already an M&S current account, credit card or loan customer.
The loan can be repaid over 12 to 60 months with an option to defer repayments for three months.
There are no arrangement or set-up fees and you can apply online or by phone.
CHEAPEST LOANS BY PRICE
Cheapest loans under £5,000
£1,000 - £1,999: Sainsbury's 14.8 per cent if repaid in one to five years. (Nectar cardholders only)
£2,000 - £2,999: Sainsbury's 14.8 per cent if repaid in one to five years. (Nectar cardholders only)
£3,000 - £4,999: Tesco Bank 12.8 per cent
Cheapest loans over £5,000
£5,000 - £7,499: Sainsbury's 6.9 per cent
£7,500 - £14,999: Derbyshire/Sainsbury's 5 per cent
Cheapest loans over £15,000:
Derbyshire 7.3 per cent
M&S 7.2 per cent (current account, credit card or loan holders only)
If you don't already have a bank account or credit card with M&S Bank, they still offer slightly higher rates for non-cardholders so could be worth checking out - especially if you are unhappy with your provider and are thinking about opening up a new account anyway.
Although M&S Bank does not feature on either This is Money's five of the best credit or debit card guides, if you shop regularly at M&S, banking with it too could be a good option because there are lots of perks and deals for card holders.
On all M&S loans, monthly repayments are fixed. You have the option of taking a 'repayment holiday' by deferring repayments for the first three months, although you will still store up interest. This will end up lengthening your loan term.
There are no arrangement or set-up fees and you can apply online or by phone. To apply for an M&S Personal Loan you have to be a UK resident aged 30 or over or a homeowner.
Free perks: M&S Bank is offering rewards for those that take out a loan
Best for loans of more than £15,000
If you need to take out a loan for more than £15,000, Tesco Bank is currently offering a rate of 7.2 per cent APR to borrow between 15,001 and £25,000. The term can range from 12 to 120 months.
It has no set up fees but if you want it quick, there is a 'Fast Delivery' fee of £50.
Eligible customers have the option to apply for a two-month payment break before starting their monthly payments. This is only available at start of loan.
However, Interest will be charged during the payment break, and your overall loan period will be extended by two months which means that you will pay an extra two months interest
You can also take up to three months payment-free until your first repayment is taken.
Derbyshire is offering a rate of 7.3 per cent APR representative for loans between £15,001 and £20,000 for up to five years.
The deal is fairly straightforward - there are no hidden costs so you won't be charged application, arrangement or default fees.
One of the best aspects of this loan is that if you find yourself with some spare cash, you can overpay on installments as often as you like - and there is no charge. Derbyshire will then recalculate and shorten your loan term, so you will end up paying less in interest.
If you want to pay off your loan in full you will be charged two months' interest on the remaining loan. If you have chosen to pay your loan off within 12 months, this is reduced to 28 days.
Payments are made monthly and the rate is fixed for the entire term of your loan. Unlike the M&S option, you cannot postpone repayments for a few months at the start of your term.
To qualify for Derbyshire's loan you must be over the age of 18, have a good credit history, be a UK resident for the length of the loan and have a minimum combined income of £700 per month (from earnings and/or a pension).
If you are self-employed you must be a homeowner and be able to supply one year's audited accounts.
If you already have an M&S current account, credit card or loans, it may be worth considering its rate of 7.2 per cent.
Best for cutting out the middleman
Loan-to-save firm Ratesetter provides an exchange for lending between those with money to invest and others who want cheap loans, in return for a commission from both sides.
Lend-to-save sites offer extremely good deals for loans - but you have to pass their stringent tests to be eligible.
The tough stance on who they do and don't accept is in place to avoid defaults.
This kind of lending is growing in popularity - the obvious downside is that if the company goes bust, lenders may lose their cash. However, if you stick with well-established firms such as Zopa or RateSetter, you are much better protected.
Currently, the best personal loan rate is offered by RateSetter at 4.7 per cent for a 24 month £7,000 unsecured loan.
There are no early repayment penalties but there are a number of additional costs including a £90 arrangement fee.
In addition to the loan and the interest, you will also be charged an administration fee and credit rate fee. The fees payable will be dependent on how much you would like to borrow, the repayment term and your personal credit profile.
There is nothing to pay up front, all the fees are spread out over the monthly repayments and are included in the total amount repayable.
The bonus for borrowers on these kinds of loans is the flexibility - if you don't like the rate on offer, ask for a better one and wait for it to be matched.
- Ratesetter's rival Zopa offers a 4.8 per cent headline rate on a three-year £10,000 loan
ARE YOU ELIGIBLE FOR AN INTEREST-FREE SOCIAL SECURITY LOAN?
If you don't have any personal savings, before going for commercial debt it's worth seeing if there are any loans available from the government's social fund available to you.
The first are crisis loans, which are for emergencies or disasters - basically anything that endangers your house or family.
The next type are budgeting loans, which are interest-free loans for those receiving benefits. The minimum you can borrow is £100 and it can be used to spend on things like school uniforms or furnishings.
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