Competition has forced loan rates down to their lowest level in four years as M&S Money cut APR to 6% for a loan of £10,000 made across a five year period.
A recent analysis of the market by Moneyfacts shows that seven high street providers have slashed their rates already in 2012, with the deal by M&S money hitting the four year record, and forecasts suggest that they may fall further still as the year wears on.
Providers who have cut their rates already this year include M&S Money, Tesco Bank, The Co-operative Bank and Sainsbury's Finance.
According to the quarterly lending report from the Bank of England the final quarter of 2011 saw the demand for unsecured lending drop, with lenders citing "economic problems in the euro" damaging consumer confidence and subsequently demand for unsecured credit.
The historically low Bank of England base rate may have helped prompt the personal loan price war with lowered demand potentially playing a part in increased levels of competition too.
There has also been a fall in the overall default rate on unsecured lending, which is expected to remain broadly similar during the first quarter of this year. According to the Bank of England summary:
"Lenders reported that default rates for secured and unsecured loans to households had fallen in the past three months, although default rates for unsecured loans were expected to stabilise in the coming quarter"
In spite of the good news of lowered interest rates, potential borrowers would still do well to beware of being lured into unecessary debt which can quickly spiral out of control. There are a number of charities offering free advice to those who find themselves in difficulty as a result of unmanagable debt.