TSB raise personal loans APR from 2.8% to 3.2%

30 November 2017   By Samantha Smith

CUSTOMERS taking out a personal loan with TSB will have to pay anything from £79.99 to £266.63 extra in interest over five years, after the bank increased their APR from 2.8% to 3.2%.

tsb bank branch sign
Credit: Barry Barnes/Shutterstock.com

The 0.4% rise in APR is higher than this month's 0.25% base rate increase, suggesting that TSB are responding as much to the continued and risky growth of unsecured borrowing as to the Bank of England's rise.

Yet while TSB's 0.4% increase will make borrowing with them more expensive, the bank point out that their personal loan APR still remains competitive.

And given that Barclays, Lloyds Bank, RBS, and HSBC charge respective APRs of 4.9%, 3.9%, 3.4%, and 3.3%, their claim isn't without foundation.


TSB's increase applies to all loans with a term between one and five years, and with a principal loan amount between £7,500 and £25,000.

While APRs are merely representative and can vary with the borrower's circumstances, the table below shows how the new rate of 3.2% will alter their costs.

LoanTotal interest payable over five yearsTotal amount repayable over five yearsDifference in costs (compared to 2.8% APR)

The difference isn't that great over five years when the smallest possible amount is borrowed, but as the loan nears its maximum the gap in expense becomes more noticeable.

The retreat of credit

Not only will this gap make things slightly harder for customers, but it's also a further indication that lenders such as TSB are making credit less available to the public.

Since the end of last year, the Bank of England have been warning about the risks to financial stability posed by the growth in household debt.

This growth ultimately led them to increase the base rate by 0.25%, while banks shortened 0% interest periods on credit cards and made lending criteria stricter.

Yet as we wrote yesterday, at a time when wages aren't keeping up with inflation, rises and restrictions such as TSB's may not be enough to significantly curb growth in borrowing.

Still offers value

Despite the rise, TSB are emphasising the value their loans still provide customers.

Their Head of Loans, Nick Smith, explains, "Our personal loans help customers to borrow well, whether they're consolidating other loans, planning home improvements or looking to finance a car".

Unlike some providers, we don't punish people for shopping around for a loan, as we offer personalised quotes on a TSB loan without affecting your credit ratings. We also make sure you get the loan quickly and we offer the flexibility of overpayments
Nick Smith, TSB

Smith also notes that, unlike some other lenders, TSB provides personalised quotes for loans that don't affect a customer's credit rating.

Added to this, they allow for overpayments and the early repaying of loans, although this involves paying a settlement balance that includes up to 58 days interest.


Another benefit for customers is that, even though TSB have increased their APR, it's still lower than the APR on personal loans (between £7,500 and £25,000) from the Big Four UK banks.

BankAPRExtra cost on a £7,500 loan over 5 years
Lloyds Bank3.9%£141.17
NatWest/Royal Bank of Scotland3.4%£40.18

That said, it isn't the cheapest on the market, with the following smaller banks offering slightly lower APR.

BankAPRExtra cost on a £7,500 loan over 5 years
Clydesdale Bank/Yorkshire Bank2.9%-£60.04
M&S Bank3%-£40.06

Repayment holidays

Still, even if TSB's personal loan now isn't quite the cheapest available, the current economic and financial climate could see the lenders above also raising their APRs in the coming months.

And even if they don't, TSB affirm that their loan comes with the advantages of early repayment and the possibility of taking two one-month repayment holidays every year.

Although M&S Bank let customers defer repayments for three months at the beginning of the loan, this latter option isn't something currently being offered by the four banks above.

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