Competition in the personal loans market in the UK has intensified over the new year, with one deal to borrow £10,000 (€12,000) offering the lowest rate in four years, Moneyfacts has found.

Leaders have been slashing borrowing deals

Seven lenders have dropped their loan rates since the start of 2012, the comparison website said, including a five-year deal from Marks and Spencer Money which Moneyfacts said could help consumers trying to consolidate their debts.

Lenders have been slashing borrowing deals as the Bank of England has kept the base rate at a historic 0.5 per cent low, but fears have been raised about the fallout from the eurozone crisis pushing up costs and causing credit criteria to tighten.

Moneyfacts.co.uk spokeswoman Rachel Springall said: “Research by Moneyfacts has shown that 6.0 per cent APR on a £10,000 borrowing amount over a five-year term is the lowest loan rate on offer in four years.

“Previously the lowest rates for this borrowing amount and term were 8.4 per cent one year ago, 7.8 per cent two years ago, 6.8 per cent three years ago and 5.8 per cent four years ago.

“Marks and Spencer Money has reduced its personal loan rate by 0.4 per cent to six per cent APR for medium borrowing amounts of £10,000 over five years. Those looking for a personal loan to consolidate their debts will benefit from this low rate.”

She added: “Seven lenders have dropped their loan rates since the start of 2012.

“It will be interesting to see whether other lenders follow suit over the coming weeks. Customers must shop around for the best deal as loan rates are continuing to fall in this competitive market.”