How to find the cheapest rate

Some lenders, including Lloyds TSB and Royal Bank of Scotland, offer better rates to internet customers than they do to people who apply in person at a branch or over the phone.

In the case of Lloyds TSB, someone obtaining a ?1,000 loan from their local branch would pay a rate of 19.9 APR. But if they borrowed the money from the bank's online arm, Loan Direct, the rate charged would be 15.8 APR.

However, there are cheaper rates available.

Some loans are more flexible than others. Egg and the Woolwich are among the lenders that allow people to take payment holidays, while Sainsbury's Bank gives borrowers the option of deferring their first payment for up to three months.