Spotlight On: HSBC personal loans

The deal

HSBC is from Monday cutting its typical personal loan rate from 6.9 per cent to 6.4 per cent APR.

Good points

Loan rates are getting cheaper. The bank's loans also offer the choice of repaying over 12 to 84 months, plus there are options of making no payments for the first three months or not making a payment in January for the life of the loan.

Bad points

To get the new rate you'll need to borrow at least £7,000 and you'll need an HSBC current account. Also, the actual rate you're offered may be higher depending on your credit score.

Conclusion

There is a bit of a personal loan rate war going on right now with Nationwide already having cut typical loan rates to 6.4 per cent. But don't use the deals as a reason to borrow. For instance, borrowing £15,000 over five years at 6.4 per cent will cost you around £2,500 in interest payments. You should add that amount to the cost of whatever you're planning to buy with the loan. If you can save up the money beforehand it will work out much cheaper. if you do need to raise cash, to buy a car for instance, then the cost of borrowing is gradually creeping down.