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If after a bout of frantic Holiday shopping and several over-enthusiastic trips to the Summer sales you find your debts are running away with you, now might be the time to seize the reins and consider a personal loan.

The Credit Card Research Group has estimated that cardholders spent a record £12.3 billion on Christmas this year, making it likely that more people than ever before will be relying on temporary loans to see them through the post-festive gloom.

After the announcements made by most of the banks and building societies concerning cuts to their mortgage rates in response to the quarter-point base rate cut last week, borrowers would be justified in expecting similar reductions in the cost of a personal loan.

These cuts have not materialised. Among the main lenders only the Nationwide has cut its secured personal loan rate by 1.1 per cent. Unsecured loans have remained unchanged.

"It is outrageous," a spokeswoman from MoneyFacts, the monthly financial data publication, said. "The cost of borrowing money on the wholesale market has gone down but the banks and building societies are not passing on their savings to the customers."

Steve Porter, head of the Halifax's personal loan product development team, said: "The dynamics of a personal loan are very different from those of a mortgage. Risk levels are higher on a personal loan than on a mortgage and the length of the term is shorter, factors which both affect the pricing."

Instead of permanent cuts in rates borrowers are having to make do with temporary sweeteners offered by some of the lenders in what they refer to as their January sales.

Unsecured personal loan

If you want to borrow £1,000 and pay it off in six months the cheapest method is still a credit card. But for borrowers who need a larger loan or who wish to make repayments over a longer period, an unsecured personal loan should offer the best deal.

Unsecured personal loans have a fixed rate for the whole of their term, so new rates do not apply to existing borrowers.

Several banks and building societies are offering cut-priced winter deals. Halifax has a discount of 1 per cent available to new customers until February 13; Norwich & Peterborough is offering the same discount until January 31. The Royal Bank of Scotland has a 3 per cent cashback on its personal loans until the end of March. Yorkshire Bank has cut its rates by up to 3.2 per cent, while Marks & Spencer is offering customers signing before March 31 the chance to win a £5,000 holiday.

Best deals

However, for the best year-round deals on a £1,000 unsecured loan, repaid over 12 months, try Northern Rock or Sainsbury's Bank. For an unsecured loan of £5,000, with repayments spread over three years, the best deal is available from Clydesdale Bank with an APR of 12.8 per cent and monthly repayments with insurance of £181.88. Several lenders such as Marks & Spencer, Woolwich, Halifax, and the Bank of Scotland offer cut-price rates on personal loans for existing mortgage or account customers.

If you decide to take out an unsecured personal loan be sure to check all the details. Some lenders have penalties if you want to pay off the loan early. Other loans may not be available to the self-employed or people on short-term contracts.

Insurance

There is also the issue of insurance to consider. Several lenders have eye-catching APRs but when compulsory insurance is added to the repayments, the figures begin to lose their shine. Sometimes the price of insurance for the whole loan may be added at the outset and charged interest at the same rate.

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