Marks & Spencer has launched a cashback deal for new personal loan customers, reimbursing them for 25% of the total interest they pay on the loan.
While this results in a significant saving – nearly £1,000 on a £15,000, five year loan – the fact M&S loans charges a hefty 8.9% APR means it still isn’t the cheapest lender around.
Both Your Personal Bank and Money Back Bank offer better deals than M&S on all loan amounts, even once you factor in the cashback discount.
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Cashback means you lose interest
Furthermore, M&S only repays you at the end of the loan. This is significant, as it means they get to hold on to your money for the duration of the loan without paying you a penny’s interest, meaning you miss out on potential earnings.
As an illustration, the monthly payments at M&S for a £15,000, five year loan would be £312.55, but at Your Personal Loan they would be £294.84.
So let’s assume you opt for the latter, and invest the £17.71 difference in a high-interest regular saving account each month - Skipton Building Society’s Special Saver is ideal, paying a 7.05% rate with a minimum monthly payment of just £10.
By the time your loan is paid off you will have earned yourself £156 in interest. So not only does M&S charge you a higher overall price, but you lose out on earnings as well.
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| | £7,500 Over Three Years | £7,500 Over Five Years | £15,000 Over Three Years | £15,000 over Five Years |
| Your Personal Loan | £8,295 | £8,845 | £16,597 | £17,690 |
| MoneyBack Bank | £8,303 | £8,853 | £16,606 | £17,706 |
| M&S (incl. discount) | £8,364 | £8,907 | £16,728 | £17,815 |
Red tape confuses things further
The M&S offer is also very restrictive. For starters, it’s only available on loans between £7,500 and £20,000, and must be repaid over a minimum of three years.
So customer looking to lend small amounts or repay the loan quickly won’t qualify for the discount. Finally, the offer is only available to customers taking out a loan between 1st April and 3rd June 2008, so you have to act quickly.
In summary, the cashback offer makes M&S’ loans significantly more attractive than they were before, but they’re not as cheap as it first appears and you’ll still find better deals elsewhere.
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