Tesco takes on banks with cheap loans

TESCO has started an interest rate price war with AIB and Bank of Ireland by offering fixed rate loans of between €2,500 to €30,000 at lower rates than those offered by the main banks.

Tesco claimed yesterday that a recent survey shows that its typical fixed loan rate of 7.9% is competitive and can save customers more than €700 over the 48-month life of a typical €8,000 loan. Tesco has already piloted the scheme in 10 of its 86 stores in Ireland and is now targeting the estimated one million customers a week who used Tesco stores in a significant challenge to the main banks.

A spokesperson for the Irish Bankers Federation said the expansion by Tesco of its consumer credit services was further evidence of the growing level of competition and new entrants to the Irish financial services sector.

Tesco Personal Finance marketing manager Michelle Harris said that judging from the large amount of interest generated by the pilot, they know that customers are indeed shopping around for loans.

“And it pays to shop around, as many of our customers have found. We have a fixed rate of 7.9% while other institutions only offer between 9.8% and 12%. And, not only does our package compare very favourably to other fixed loans, but we also win when compared to many of the variable loan products offered by the main banks and this means that all applications are subject to standard lending criteria.

“We offer the same low fixed rate to all successful applicants depending only on the level of the loan amount borrowed,” she explained.

Tesco would not divulge what portion of the Irish consumer loans market it is targeting with this latest initiative.

Tesco customers can borrow €2,500 to €30,000 at fixed rates as low as 7.9% APR, with repayments spread over periods of up to 10 years.

Fixed rates range from 7.9% APR for loans over €8,000, 8.9% APR for loans from €5,000 to €7,999 and 11.8% APR for loans under €5,000.

Tesco Personal Finance was formed in July 1997 as a joint venture between Tesco plc and the Royal Bank of Scotland Group plc. The company launched the Tesco Credit Card in Ireland in June 2000.