Compare personal loans

What to consider before taking out a loan

There are a few key things (beyond just the price tag) to look for when you run your loan comparison:

• The loan amount - don't borrow more more than you need to
• The rate of interest - advertised rates of interest only have to be offered to 51% of applicants, and it tends to be those with good credit scores that nab them
• The repayment term - long-term loans may offer lower rates of interest, but you’ll be paying back more overall
• Additional fees and charges - you could be charged administration costs, penalty fines and early termination fees. Find out what these are before you apply

What type of loan is best for you

Choosing the right loan to suit your needs could be the difference between great financial planning or a gateway to debt.

Personal loans

Also known as unsecured loans, personal loans are one of the most common types of loans. They’re so called because they’re based on personal information such as your income and credit score, rather than being secured against an asset.

Typically, you can borrow between £1,000 and £25,000 for between 1 and 7 years. You’ll find interest rates for personal loans vary considerably across lenders, so be sure to compare personal loans through our tool to get a good rate.

Secured loans

By contrast, secured loans are ones which are secured against a high-value asset, usually a house or car. You can borrow considerable sums of £25,000+ for, in some cases, as long as 35 years.

Because secured loans involve vast amounts of money, you need to put up an asset as collateral in the event you can’t pay – so they’re not something to be taken out lightly! However, because they’re of a much lower risk to the lender, you’ll generally enjoy much lower interest rates.

Guarantor loans

If you can’t get approved for a loan, then you can elect a close friend or relative – one with a strong credit score – to act as a guarantor on the loan. That means that, in the event you miss a repayment, your guarantor will be obliged to foot the bill. However, if you meet all your repayments then your credit score will improve and, in the future, you may be able to borrow without a guarantor.

Generally, you’ll be able to borrow between £1,000 and £10,000, with loan terms between 1 and 5 years. And again, because of the associated risk, interest rates tend to be pretty steep.

Bad credit loans

As most loans are contingent on credit scores, you may find you’re not approved if yours is less than favourable. The same goes if you don’t have a credit score.

Bad credit loans, also known as subprime loans, are specifically for those with bad credit histories. You won’t necessarily get great rates of interest, as you’ll be considered high-risk, but you could get approved where you’ve otherwise been refused.

Debt Consolidation loan

If you have multiple debts you’re struggling to keep on top of, then consider a debt consolidation loan. The risk of having several debts is that you’ll incur penalty fees on each missed payment, as well as paying varying rates of interest across the board.

Amalgamating all your debts into one monthly payment can help you know exactly what you owe and keep things in check. Depending on what deal you get, you could even find you get a more competitive rate of interest too, though do watch out for the loan term to see whether it’ll save you money overall.

Payday loans

Payday loans. have a bad reputation, and for good reason. They’re short-term: one month or less, to be exact, marketed to tide you over until your next payday. And because of this, they come with exorbitant rates of interest so that the lender can make as much money as possible – in fact, some loan companies have been taken to court over this.

You could end up owing several times what you borrowed, even more if you miss a payment. As such, you should avoid payday loans as best you can and look to other ways of borrowing instead, such as a credit card.

What information will you need to provide to compare personal loans?

As part of the search for a personalised loan product, you’ll typically need to provide the following information:

• How much money you want to borrow
• The purpose of the loan
• The term you want (the number of years the loan will last)
• Your name
• Your gender
• Your date of birth
• Your marital status and number of dependents
• Your contact details, including mobile phone and email
• Your address and the type of residence (home owned with a mortgage, rental property, etc.)
• Your employment details, including how long you’ve worked there and how frequently you’re paid
• Your net monthly income, and your rent or mortgage payments, loan payments, and other expenses
• Your banking details, including your account number and sort code—some loans can be dispersed the same day you apply

Be assured that your information will be kept safe and secure, transmitted and stored with encryption.

What can I use a personal loan for?

You could technically use a loan for anything you like. It pays to be responsible with money you borrow though - you should consider whether it is really necessary to take out a loan for whatever it is your are considering paying for, and whether it is an investment you are fine to pay interest on or pay off over the long term.

There are quite a few things that it is common to take a loan out for, including:

Weddings

Weddings can be expensive, so it is quite common for people to take out a wedding loan to help pay for the costs of it over time.

Holidays

You might be looking to go on that trip of a lifetime, or just take your whole family somewhere nice for a couple of weeks. A holiday loan might be able to help you afford your trip away, but like with all loan applications, we recommend you seriously consider whether taking out credit for a holiday is worthwhile, and affordable, over the long term.

Home improvements

Making major changes to your home, such as a new kitchen, boiler, or conservatory, can be expensive. Home improvement loans are a viable way of helping fund such improvements, that can help add value to your property.

Who can take out a loan?

Anyone over the age of 18 can apply for a loan, although this doesn’t mean you will be accepted.

Whether you are a young person looking for a loan, or a pensioner looking for credit, the rules are the same. To be accepted for a loan you will need to fulfil certain eligibility criteria, which usually include:

• Passing a credit check
• Having a complete and up to date credit file
• Being at least 18 years or older
• Being employed and meeting minimum income threshold.