Grab a 5.6% loan rate while you can!

Personal loan rates are the lowest they've been for almost six years - but you'll need to act fast if you want to take advantage of some of the top deals.

Derbyshire Building Society has lowered its personal loan rate (on borrowing of between £7,500 and £14,999) down to a market-leading annual percentage rate (APR) of 5.6%. This makes it the cheapest deal since November 2006, according to our figures at MoneySupermarket.

Moments after Derbyshire announced its new cut-price offer, Sainsbury's Finance followed suit, also slashing its rate for loans from £7,500 to £15,000 from 5.7% to 5.6%.

Tim Moss, head of loans and debt at MoneySupermarket, said: "These moves could be great news for anyone who is looking to borrow a larger amount via a personal loan. As we have seen over recent months, when one lender moves, others tend to follow, so we could see the personal loan market hotting up - good news, especially when rates are falling to below credit crunch levels."

Here, we take a closer look at the terms of both new loans to see if one of them could be the right choice for you...

What's the deal?

Derbyshire Building Society is offering a rate of 5.6% to borrowers looking for a loan between £7,500 and £14,999 over one to five years.

To qualify, you must be aged 18 or over, and have a minimum household income of £700 a month. This deal is only available until October 31 however, so you'll need to act fast if you want to apply.

Sainsbury's, meanwhile, is offering the same APR of just 5.6% on loans of £7,500 up to £15,000 but this is only on loans that are repaid between one and three years.

If you want to pay off the loan over a longer period, between four and five years, the bank is offering a marginally higher rate of 5.7%. A lower rate is offered to those who can clear their debt more quickly because they are considered lower risk than those who need more time.

You must be a Nectar card holder to apply for these rates, but you can pick up a card free of charge in your nearest Sainsbury's store.

You must also be aged 18 or over, and not have been declined for credit in the last month, or have a history of bad credit like arrears, County Court Judgements, default or bankruptcy to apply.

Any catches?

The biggest catch with the Derbyshire deal is that it is only around until October 31. For those considering the Sainsbury's loan, the fact that you can only borrow up to three years if you want to qualify for the 5.6% rate could be problematic for those who might struggle to pay off what they owe in such a short time-frame.

However, it would mean paying less overall interest so the shorter you can reasonably afford to pay off a loan, the better.

You will need an impeccable credit history to qualify for either the Sainsbury's or Derbyshire loans, as the best deals are only ever offered to those who are considered very low risk by lenders.

Mr Moss said; "Those with less than perfect records may be offered a different rate and lenders only have to offer the advertised loan rate to 51% of successful applicants, so although a rate may initially appear attractive, it may not be the one you receive in the end.

"Before applying for a loan, or for any credit product, it's a good idea to check your credit history so you have a clearer idea of the products you are more likely to be accepted for based on your credit score."

You can use MoneySupermarket's loans smart search to get an estimate of how likely you are to be accepted for a loan.

You can also limit the chances of being rejected by checking your credit profile for any errors. You can get hold of a copy of your credit file online from credit agencies like Equifax or Experian for a small fee. You can see what type of access to your report is available by visiting our credit monitoring channel.

What's the verdict?

If you do need to take out a loan, then now is a great time to take advantage of the low rates on offer and the deals offered by Sainsbury's and Derbyshire currently can't be bettered.

The Derbyshire deal just has the edge over Sainsbury's loan, due to the fact you can choose a longer repayment term if you need to, but don't hang around if you are interested as this offer disappears in just a few weeks' time.

Top tip

Due to the fact that different interest rates apply to different amounts borrowed, it may work out to be more cost effective to borrow more rather than less.

For example, for loans between £5,000 up to £7,500 Derbyshire charges a representative APR of 7.2% if you can repay in one to three years, so if you wanted to borrow £7,000, you'd be better off borrowing £7,500 instead to benefit from the lower loan rate of 5.6%.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.