Borrow £2,000 at 0% and get paid £100
Brits looking for credit could receive £2,000 interest free for a year and be paid £100, according to analysis of unsecured lending in the UK.
Research by Defaqto finds while the best personal loan rates are standing at around eight per cent, overdrafts and credit cards offer the prospect of interest free borrowing.
A number of banks and building societies are offering zero per cent overdraft deals.
Leading the pack is Alliance & Leicester's Premier current account, which offers a zero per cent authorised overdraft for 12 months and £100 cashback for switching accounts.
David Black, principal consultant of banking at Defaqto, said: "This means that you could get paid £100 to borrow £2,000 interest free."
However, £500 a month must be deposited into the account or a £5 fee is charged and the overdraft is not automatically provided and is agreed on during the application.
The offer on the deal runs out on May 28th.
As with credit card deals, failing to clear the debt over the fixed period also can wipe away the benefits of the introductory zero per cent rate.
A number of credit cards are also offer zero per cent deals.
Defaqto finds 69 per cent of credit cards available to new customers have a 0% introductory balance transfer offer - on average for 9.7 months.
However, there are transfer fees on average of 2.85 per cent of the balance.
Leading the charge is the Virgin Credit card offering a 16 months introductory balance at 0% with a 2.98 per cent fee.
HSBC offers 15 months 0% on transfers for current account customers with 2.90 per cent fee.
Some 60 per cent of credit cards available to new customers have a 0% introductory purchase offers lasting on average for 4.4 months.
Tesco has entered the market with a 12-month zero per cent introductory period on purchases.
Louise Bond, personal finance expert at uSwitch.com, said: "This is a very encouraging move and a market leading offer from one of Britain's biggest retailers.
"The number of credit cards offering competitive introductory offers has gradually contracted, especially over the last year."
She added: "Tesco has sent a clear message out to its competitors by reinvigorating the introductory purchase offer market. We hope that this move heralds a new wave of competitive 0% deals being launched as other providers follow its lead."
Tesco Personal Finance also leads the way on personal loans - offering a £5,000 loan repaid over three years at 7.9 per cent for existing loan customers.
Fellow supermarket Sainsbury's offers the same terms for Nectar Card customers - which can be picked up for free.
However, Mr Black warns the best rates are limited to those with the best credit ratings.
"Personal pricing or 'risk based pricing' is taking a real hold in the unsecured market so, as an individual's credit worthiness deteriorates it becomes increasingly difficult and, when available, more expensive to borrow," he said.
He added lenders consider many aspects when deciding if to lend or not and at what rate including a consumer's credit report, employment and property status, affordability, indebtedness, and financial behaviour.
"Many providers concentrate the majority of their lending on existing customers and a 'cautious approach to lending' is becoming an increasingly commonly heard phrase," Mr Black said.
"Existing customers are not immune from this process as lenders will also monitor their creditworthiness."
He concluded: "Typically two-thirds should be offered the advertised loan rate. The remaining one-third may get offered a loan facility at a higher rate. Another factor to consider is that the borrower may not be able to borrow as much as they want."
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