Despite the downward trend in base rates, the banks and direct lenders seem reluctant to make personal loans any cheaper. Quoted interest rates have remained largely unchanged over the past two months.

But it would be a mistake to presume this apparent lack of activity means nothing is happening behind the scenes.

There are an increasing number of 'payment holidays' – borrow now, pay nothing for three months – on offer and more lenders are being flexible about reducing rates for regular customers.

For instance, both Egg (the internet arm of Prudential) and Barclays quote a rate which is the maximum charged, subject to status of course. A Barclays loan on £5,000 over three years could drop to 12.9% for a low risk, existing customer.

Another new development has been the high profile launch of RAC Financial Services, a new joint venture with Halifax.

Interest rates are competitive for high loans, falling to 7.9% on £12,500 and above. But, as always, the headline rate disguises more conventional loan rates at the more popular end of the market, such as 12.9% on £4,000 over three years.

Many dealers should be able to offer attractive alternatives to direct loans provided customers can be persuaded to take their eyes off the headline and look at the detail.

HIGH STREET LENDERS (36-MONTH LOANS)
Loan Amount Lender APR Monthly Repayment
with PPP		 Monthly Repayment
Without PPP
£2,000 A&L 17.0% £79.07 £70.10
Egg 16.5% £79.47 £69.73
M&S Finance 15.9% £79.10 £69.18
RAC 16.9% £86.36 £71.88
Tesco 15.5% £78.61 £69.32
£5,000 A&L 10.4% £180.06 £161.27
Egg 10.7% £184.53 £161.91
M&S Finance 12.2% £187.62 £165.03
RAC 10.9 £195.61 £165.08
Tesco 9.8 £179.55 £159.80
£10,000 A&L 9.8% £356.92 £319.97
Egg 9.9% £365.15 £320.39
M&S Finance 11.5% £371.43 £327.07
RAC 9.9% £384.60 £325.32
Tesco 9.8% £360.55 £320.77
£15,000 A&L 8.9% £528.19 £474.16
Egg 9.9% £547.73 £480.59
M&S Finance 10.5% £549.00 £484.19
RAC 7.9% £557.18 £473.47
Tesco 8.6% £522.74 £471.79
Source: Automotive Management

* RAC: first three months' payments deferred