You would think that even in the aftermath of the Northern Rock crisis and the ongoing credit crunch, customers looking for cheap loans would be willing to search elsewhere for financial products, but a poll conducted by YouGov shows otherwise. In fact there is still a ‘conservatism’ amongst banking customers which makes them reluctant to move their finances and a study by Morgan Stanley concur, saying that they found only 8% of consumers are planning to switch accounts due to the current banking crisis. Furthermore, nearly a third (31%) said they would be very unlikely to switch. Marketing Week commissioned a similar study which showed that nearly two-thirds (65%) of consumers polled said they wouldn’t consider a financial product, such as a bank account, personal loan, or credit card, from outside the traditional banking sector. Despite like for like quotes, high street banks are still more popular with consumers than non-banking brands such as supermarkets offering similar financial products despite the banking crisis, so are stores wasting their time with offering financial products?
Out of all the supermarkets, Tesco Personal Finance proved the most popular non banking brand, with 20% of those polled saying they’d consider taking out a Tesco account. Other non banking brands, such as Sainsbury’s, M&S Money and Asda proved less popular as a choice for people to take out loans and purchase credit cards. In an attempt to find out which supermarket or bank was the cheapest lender, we got quotes for a £10,000 personal loan over five years and saw who came out on top.
Alliance & Leicester had the best deal with a 6.7% APR and a total repayable cost of £11,740. Next up were Sainsbury’s with 6.8% APR and a total of £11,767, followed surprisingly by M&S who had a poor showing in the last few years for loans, with a 6.9% APR and total cost of £11,794. Tesco’s had a very poor showing with 7.4% APR and overall total cost of £11,926 and the last of the banks – Nat West had 9.9% APR and a total cost of £12,595.
There are other factors to consider when taking out a loan. Supermarkets do not offer the financial advice that banks do. All enquiries or complaints are handled over the telephone or by letter, you cannot speak to someone face to face as you would with a banking loan. However, a supermarket is unlikely to go bankrupt so your money may be safer if you are considering a savings plan or ISA. Our advice, always look at the total repayable and not just the APR as some interest on loans are calculated differently and this can affect the total cost.