At this time of year many people may end up looking for a loan, with some wanting a loan in order to fund Christmas purchases, others looking to consolidate their debts with a loan, and some simply looking to get a loan to make payment for a one off purchase either before the VAT increase kicks in or when the sales start.

One consumer campaign group, Which?, has stated that consumers should make sure that they shop around in order to get the best deal on a loan, adding that heading to their bank may not necessarily be the right option, as they could end up paying way over the odds by asking to borrow money from their bank.

In fact, the group suggested that it might be advisable for consumers to head to the local supermarket in order to get a competitive unsecured loan, as this could work out cheaper in terms of both repayments and overall interest. Many supermarkets now offer personal loans, and have appeared on a number of best buy tables when it comes to value for money on borrowing.

Figures show that the rates of interest being charged on personal loans from a range of High Street lenders are far higher than the rates being charged by some of the supermarket giants, including Tesco and Sainsbury’s. The consumer group also said that consumers could get cheaper rates with larger loans, and could benefit from recent drops in personal loan interest rates, which could save them more money.

One official from Which? said: ‘It seems perverse that consumers are offered a better rate the more debt they take on, but that unfortunately is the way the market works. If you’re planning to borrow smaller amounts, it’s worth considering the alternatives, including credit cards, in-store interest-free credit, credit unions or peer-to-peer lending sites such as Zopa.’