Compare personal loans

The loans comparison service we provide focuses on unsecured personal loans. These are not linked to an asset or possession, which is the case with secured loans.

With a secured loan, the amount you borrow is backed by an asset – this is usually your home but could also be your car or another valuable possession. If you can’t repay your loan, the lender has the right to use your asset to recoup its money. In a worst-case scenario this could result in your home being sold to raise the funds.

An unsecured loan – also known as a personal loan – is simply a loan that is not tied to an asset you own. Unsecured loans tend to be more common, but interest rates are typically higher than for secured loans because the lender is running the risk that it might not get its money back if you default.

If you apply for an unsecured personal loan, you can typically borrow between £1,000 and £25,000, though this will depend on the lender. Interest rates are usually the most competitive if you borrow £7,500 or more.

Borrowing limits for secured loans are typically much higher – you can usually borrow upwards of £25,000. This is why lenders looked for the security of a linked asset to protect their interests.

When you apply for a loan, the lender will ask what you plan to use the money for. Typical requests include home improvements, a holiday, a wedding, a new car, or debt consolidation.

You won’t usually be able to use a personal loan for the following:

• Starting your own business
• A deposit on your first home
• Investing in stocks or shares
• Gambling

If it becomes clear that you have used for a purpose other than the one stated, the lender may take action to recoup the money from you immediately.

Personal loan terms tend to last between one and five years, although it is possible to borrow for seven years or more with some lenders.

When choosing the duration of your loan, you have to strike a balance. The longer the repayment period, the lower your monthly payments. But because you are being charged interest for a longer period, your total repayments may be higher by the time you’ve repaid all you owe.

So it’s sensible to keep the term of your borrowing as short as possible while choosing a monthly payment amount that you can comfortably afford throughout the period.

The easiest way to make your loan repayments is to set up a monthly direct debit for the fixed amount set by the lender. This will ensure all your payments are made on time and in full each month.

Once you’ve received your loan funds into your bank account, your first repayment will usually be due the following month.

APR stands for annual percentage rate and is the official rate used to show the overall cost of your borrowing for a year. It’s used to compare both loans and credit cards, and it factors in the rate of interest, as well as any additional fees and charges.

Keep in mind that if the APR is ‘representative’, which means that, under the regulations, it only has to be offered to 51% of successful applicants. The remaining 49% may be offered a different, higher rate.

If you apply for a personal loan online, many lenders will give you an instant decision, while others will take around five to 10 days.

Once approval has been granted, some lenders will transfer the funds into your account the same day. In other cases, you may have to wait between two to five working days.

Joint loans are available from many lenders, but remember that, with these loans, both applicants will be responsible for the whole loan – not just for their half or share. This means if one person can’t or won’t make their repayments, the other person will have to pay off the entire loan.

Applying for a joint loan also means your credit files will be linked. Should you apply for credit in your own name in the future, lenders will be able to see the other person’s credit history and will take that into account as well as your own. If their credit rating is poor, this can affect your chances of getting accepted.

Most lenders will allow you to pay back your loan early, but you may have to pay an early repayment charge. This is often the equivalent of one to two months’ interest and should be set out in your loan information and agreement when you first apply.

If you miss a payment, you will usually be charged a fee of around £25 and your lender will send a letter requesting that you make up the missed payment the following month.

Providing you do this and miss no future repayments, it’s unlikely your lender will take any further action. However, if you cannot make up the missed payment, or you miss multiple loan repayments, you may face more serious consequences.

Missing payments or failing to repay the full amount required each month for three to six months is known as defaulting and, if this happens, you’ll be sent a ‘default notice’. This will outline the details of your loan, the terms you’ve broken and the steps you should take.

Both the missed payments and default notice will be recorded on your credit report. This could negatively affect your credit score and is likely to make it harder for you to access financial products in the future.

Your lender may also choose to pass your debt on to a collection agency which will then take steps to recoup the money, plus a profit, from you. In addition, the lender or debt collector could file a County Court Judgment (CCJ) against you.

If you’re concerned about repaying your loan, it’s vital that you talk to your lender as soon as possible to see if you can come up with an alternative repayment plan.

A repayment holiday is simply a break from making a payment. Some lenders will allow you to take a repayment holiday for up to one month twice a year. However, interest will still be charged, which means you’ll pay more interest overall and your loan term will be extended.

To get accepted for the most favourable loan rates, your credit score will need to be in good shape. If your credit score is poor, you’re more likely to be turned away or you may have to pay a higher rate of interest.

If your loan application is declined, ask the lender if it can provide more information as to why. Even if the lender can’t give you a specific reason why your application was rejected, it may be able to give you an indication – for example, if you failed a credit check.

It’s also worth using a fee-free online service to check your credit report to ensure there are no errors. If there are, contact the relevant credit reference agency to get the mistake(s) corrected.

Try to wait around three to six months before making another loan application. Each time you apply for a loan (or any form of credit), a mark is left on your credit file. If a lender spots several applications in a short space of time, this can suggest you’re struggling to get credit and lenders may be less willing to let you borrow.

When you use our eligibility checker, you’ll be given an indication of whether you’ll be accepted for a range of loans – and we can give you this information without affecting your credit file or score in any way. That means you’ll be able to identify deals where you have a strong change of being accepted before you apply.

Yes – you’ll have a 14-day cooling off period from either the date the loan agreement was signed or when you received a copy of the agreement – whichever is later. If you’ve already received the loan funds in your account, you will need to repay this sum within 30 days.