Hitachi Personal Finance, the consumer lending arm of the Japanese engineering group, is to offer the cheapest unsecured loans in Britain as it aims to seize a large chunk of the household credit market.
Hitachi is offering a representative APR of 6.5 per cent, but it said up to one in 10 customers would receive rates below that – as low as 4.9 per cent.
Competition in the unsecured personal loan market has increased in recent months as consumer credit returns to growth following three years of contraction.
The Bank of England has predicted that average interest rates of 11 per cent in February are set to fall, after the availability of credit grew more than 10 per cent in the first quarter of 2013 compared with the last three months of 2012.
The Derbyshire, part of Nationwide Building Society, currently offers the cheapest APR on unsecured personal loans at 5 per cent.
Hitachi wrote £1.4bn of consumer credit in the last financial year, mostly tied to purchases of household goods via retailers such as B&Q and DFS. Already a strong player in the market for the “point of sale” credit that is sold to customers in shops, it is now seeking to grow a direct lending business of a similar size.
About £2bn of personal loans are extended each month, with the biggest banks accounting for almost 60 per cent.
Gerald Grimes, managing director, said: “We’re not a bank and we felt it was time borrowers with a whiter-than-white credit history had the chance to get a better deal, and that’s what we’re giving them.”
He said the group had the infrastructure and risk analysis models to manage lending direct to customers after more than 30 years of dealing with them via retailers.
“We are targeting £1bn annually within five years. That would be 5 to 6 per cent of the market. The banks have such a large share they don’t offer good service, and decline 80 per cent of applicants. We’ll lend to many of those turned down.”
The company, whose consumer division is based in Leeds, has trialled loans for existing customers under the brand name Savvi. It has written £10m-£15m of credit a month for the last year.
This weekend, it will launch under the Hitachi name by advertising online and on the London Underground. It promises an instant online decision and, for successful applicants, the money within 24 hours, with loan durations lasting up to five years.
Its point-of-sale loans are subsidised by retailers offering interest-free credit on expensive items such as kitchens and sofas.
In the year to March 31 2012, Hitachi Personal Finance increased revenue from £89.7m to £103.9m and profits from £22.1m to £34m compared with the year before. However, retailers are beginning to reduce their generous subsidies and Hitachi’s point-of-sale volumes are set to decline.