Customers looking for cheap credit along with their groceries should make Tesco their first stop, and avoid Marks & Spencer altogether.
In a bid to find out which supermarket was the cheapest lender, EveryInvestor pitted the four main franchises’ personal loan and credit card deals against one another.
Tesco came out top overall, followed by ASDA and Sainsbury’s, with M&S last by some margin.
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Personal loan deals compared
If you are in the market for a £10,000 personal loan repaid over four years, Tesco is your best bet, with a 6.8% APR and a total cost of £11,408.
ASDA is a close second with a 6.9% rate and a total cost of £11,425 followed by Sainsbury’s at £11,472. M&S offers a terrible deal, with an 8.9% APR and a £12,013 final bill – that’s over £600 more than Tesco’s.
So how does this compare to the market leading products? An identical loan at Your Personal Loan will cost you £11,383 at a rate of 6.7%, which is marginally better than the Tesco deal.
The table below highlights an important marketing gimmick employed by lenders. Although Sainsbury’s offers a lower APR than ASDA, the former actually costs £139 more. This is because some lenders manipulate the way interest is calculated, so when you’re shopping around for loans make sure you always base your decision on the total cost rather than the APR.
Click here for our personal loan best buy table
| Provider | Loan Rate | Total Cost Excl. PPI | Total Cost Incl. PPI |
| Tesco | 6.8% | £11,408 | £14,051 |
| ASDA | 6.9% | £11,425 | £13,465 |
| Sainsbury’s | 6.5% | £11,472 | £14,909 |
| Marks & Spencer | 8.9% | £12,013 | £14,238 |
| Your Personal Loan | 6.7% | £11,383 | £13,346 |
Add PPI and the order changes
If you were to tack payment protection insurance (PPI) onto the loan, then ASDA actually works out the cheapest supermarket, but still costs over £100 more than the market leading provider. Sainsbury’s PPI is particularly pricey – costing nearly £1400 more than ASDA’s – making it more expensive even than M&S.
Do note that taking out your lender’s PPI is always a terrible idea, as you can get the same cover far cheaper from an independent provider.
For example, had you taken out a PPI policy with British Insurance for the Tesco loan, the total cost would have been £11,925, a saving of £2,125. Combine it with Your Personal Loan and the cost will be cheaper still - £11,900.
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Smaller loans equal bigger rates
When we talk about personal loans, it’s important to be aware of two distinct categories; those below £7,500 and those above.
When you take out a loan below this threshold, lenders will significantly hike the rate of interest you must pay on it to make the deal more attractive to them. Some lenders - like ASDA – have stopped offering personal loans below £7,500 altogether as they see them as a waste of time.
As the table below shows, Sainsbury’s actually offers the lowest rate on a £5,000 loan, followed by Tesco and M&S. Remarkably, Sainsbury’s actually works out cheaper than Your Personal Loan as well, which charges £7 more (despite having an APR that is 1.2% lower).
But tack on its uncompetitive PPI and Sainsbury’s once again becomes the most expensive, with Your Personal Loan cheapest.
| Provider | Loan Rate | Total Cost Excl. PPI | Total Cost Incl. PPI |
| Sainsbury’s | 7.9% | £5,685 | £6,979 |
| Tesco | 9.9% | £5,765 | £6,861 |
| Marks & Spencer | 10.9% | £5,942 | £6,926 |
| Your Personal Loan | 6.7% | £5,692 | £6,673 |
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A different way to get an interest free loan
Smaller loans generally offer poor value, and you will be far better off dumping the entire amount on a credit card with a lengthy 0% introductory offer on new purchases, then switching the debt to a balance transfer card before it starts earning interest.
The best way to do this is to start with the Halifax’s Purchase card, which offers a similar 15 month interest free period on new buys. Unfortunately, Halifax no longer offers this deal online, so you have to go in store to get it. If you simply can’t be bothered to take on the queues, then opt instead for the Halifax 12-month card, which offers 12 months interest free.
Then for balance transfers, the best deal at present is Virgin’s Mastercard, which offers 15 months interest free, although it does come with a fairly hefty 3% transfer fee.
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Credit card deals compared
Looking at the supermarkets’ deals on plastic and it’s a fairly close run thing between all the providers, but Tesco and Sainsbury’s are probably the best of the lot.
Tesco offers the best 0% on balance transfers offers (12 months), while Sainsbury has the lowest APR (15.9%). Both have a 12 month interest free offer on purchases made in store.
In general all the new purchase deals are poor on these credit cards, but the M&S &More card is the best of the lot, offering seven months interest free. Unfortunately it reverts to a hefty 18.9% rate thereafter, meaning it will start racking up interest far faster than the other deals.
The card that works best for you depends very much on how you plan to use it. Tesco’s card it best for transferring debt to, while those looking to use the same card for life would find the Sainsbury’s card most beneficial, as it has the lowest rate of interest after all the introductory offers expire.
Sadly though, none of these products offer anywhere near as good a deal as the leading products, as the table shows.
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| Provider | Balance Transfers | Transfer Fee | New Purchases | APR |
| Tesco | 0% for 12 months | 2.5% | 0% for three months | 16.9% |
| Sainsbury's | 0% for ten months | 3% | 0% for three months | 15.9% |
| ASDA | 0% for nine months | 2.5% | 0% for three months | 16.8% |
| Marks & Spencer | 7.9% for two years | NA | 0% until July 2008 | 18.9% |
| Halifax Purchase | 0% for six months | 3% | 0% for 15 months | 14.9% |
| Virgin Mastercard | 0% for 15 months | 3% | 0% for three months | 15.9% |
Every little helps…
Having collected the information, we ranked each of the provider’s products from best to worst. We looked at the total cost of both smaller and larger loans, plus the typical APR, balance transfer, and new purchase deals on the various credit cards.
Overall Tesco’s is comfortably the best provider, offering competitive rates on both loans and credit cards. ASDA and Sainsbury’s were fairly closely matched, while M&S was comfortably the worst (regular EveryInvestor readers will not find this surprising, as we wrote about the soaring cost of M&S credit a while back).
Of course this article is designed purely to see where the best deals lie among the supermarkets. If you are looking for either a loan or credit card, it’s important you shop around, as you are almost certain to find a better deal at one of the specialist players.
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