The personal loans market is one industry that has been particularly hard hit in the current economic slowdown. Banks, already overloaded with large amounts of toxic assets, have become increasingly wary of lending to anyone without a spotless credit rating.

Unlike in years gone by, when a personal loan could be had by nearly all Brits, the new restrictions being enforced by the banks have made getting hold of a good value loan a difficult job. Many find they are charged astronomical interest, but there are signs of hope with lenders finally beginning to reduce their interest rates.

Interest rates on the move

According to research that was compiled last year, 2008 saw a dramatic 1.7% average interest rate hike on personal loans. This rise meant that many borrowers ended up paying hundreds of pounds more over the life of their loan than they would have previously.

These interest rate rises came in both incremental rises and large jumps and combined with stricter conditions, made the market a worrying place for consumers.

Now though, news from two of the country's leading lenders may be signalling the start of a decline in these rates. Both Nationwide and Sainsbury's Loans have signalled their willingness to cut rates for people take advantage of their other deals.

Nationwide announced last week that for existing FlexAccount and mortgage customers they would be reducing their rate to 8.2% on loans between £7,500 and £14,999, which makes them the cheapest of all the high-street banks operating in the loans market. A spokesman for the company said that the loans would be repayable between one and seven years.

The drop to 8.2% means that Nationwide is now on a par with both Tesco and Asda and 0.7% lower than the other high-street lenders NatWest and RBS.

Lowest rate for card holders

The rate offered by Nationwide and the two supermarkets is currently only beaten by another company most famous for its selection of groceries. Sainsbury's said recently that customers who take out a Nectar Card will be eligible for a rate of 7.9%.

Applicants can only apply online for the deal and the loans will have fixed repayment rate. Sainsbury's say that even new Nectar customers are eligible and that if the borrower meets the criteria the money will be deposited within 24 hours of acceptance.

“We’re constantly looking for ways to reward our customers and with this offer, we’re giving the Sainsbury’s shopper a preferential rate, enabling even more people to enjoy the benefit of banking, as well as shopping with us,” said Stephen Baillie from Sainsbury's.

“All of our loans customers enjoy one of the most competitive rates available in the market, but those shopping at Sainsbury’s can now take advantage of an even better deal.”

The deal applies to loans between £5,000 and £15,000 and allows borrowers to set their own repayment schedule up over a maximum period of seven years. Sainsbury's previously offered a rate of 8.1% on its personal loans, so this should come as a bit of good news for those looking to fund a new purchase.