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^ Correct as of June 2024.

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Managing your money while juggling everything else life throws at you can sometimes be tricky.

If you find yourself needing a quick cash boost to help you manage a surprise expense, or you want to fund home renovations, there are bank loans and loan products out there that can help.

We have lots of information on what could be the best loan types for you. And our loans eligibility checker can give you an idea of which bank loans and other options you’re likely to be accepted for before you apply, without affecting your credit score.

Once you know which type of loan you need, shop around and compare our best loans to help you find the right one for you.

With interest rates so high, how can I get the best loan deal?

The Bank of England base rate currently stands at 5.25%, the highest level since February 2008. With rates so high, the cheapest loans can be more difficult to find.

To improve your chances of getting the best loan deal for you, start by building your credit score. A good credit rating shows lenders that you can manage your finances responsibly and are a reliable borrower. This could give you access to better interest rates.

Shopping around can help you compare rates to see which are the most competitive. By using a comparison site like ours, you can check which loans you’re likely to be eligible for, without affecting your credit score, before you formally apply.

What’s the best type of loan for me?

The best type of loan for you will depend on your individual circumstances.

1. Unsecured loan

Also called personal loans, an unsecured loan typically allows you to borrow up to £25,000 without putting up a valuable asset as security.

2. Secured loan

A secured loan requires you to put up something you own as collateral – in the case of a homeowner loan, that would be your house. In the case of a secured car finance loan, that would be your car. You may be able to borrow larger sums of money with this type of loan, but if you can’t pay it back you could lose your home or your car.

3. Guarantor loans

A guarantor loan could be an option if you have bad credit or no credit history at all. It’s an unsecured loan but is guaranteed by someone agreeing to make the loan repayments if you’re unable to.

You can’t compare guarantor loans with Compare the Market.

4. Peer-to-peer loan

With a peer-to-peer loan, you borrow money from an individual or a group of people instead of borrowing from a financial institution. Peer-to-peer websites connect you with people willing to lend to you, then act as intermediaries. Peer-to-peer loans are typically unsecured.

You can’t compare peer-to-peer loans with Compare the Market.

5. Bad credit loan

A bad credit loan is specifically aimed at borrowers who have a poor credit score or no credit history. This type of loan usually has a higher interest rate and tends to come with restrictions, such as a borrowing limit. Sometimes you’ll need a guarantor before a lender will approve your loan application.

 

See if you’re eligible for a secured, unsecured or bad credit loan by using our eligibility checker before you apply. It won’t impact your credit score.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

What will my loan cost?

Understanding how much you’ll pay for your loan isn’t just a matter of knowing what the monthly repayments will be. You should also compare interest rates and look at what the loan will cost over the whole term – the total amount repayable.

Here’s an example for illustrative purposes only. It assumes there are no extra fees.

Loan amount Length of loan Monthly repayment
£5,000 2 years £229.73
APR Interest payments Total amount repayable
10% £513.55 £5,513.55

A shorter loan term will mean you pay less interest overall, but the monthly repayments will be higher.

A longer loan term will have lower monthly repayments, but you’ll pay more in interest overall. To get an idea of how much a loan could cost you, use our loan calculator.

What can I get a loan for?

You can get a loan to fund a variety of expenses and to consolidate existing loans or debts:

Unexpected expenses

Unsecured personal loans can be used to cover large, unexpected bills. For example, emergency repairs to your boiler or car.

Buying a car

Car loans include personal loans, which are unsecured, or hire purchase and personal contract purchase loans, which are secured against the vehicle you’re buying.

Home improvements

Looking to get a new kitchen or bathroom, or build an extension? A home improvement loan could help you fund your project. These loans can be secured or unsecured.

Weddings

The best day of your life comes with a big price tag. Although you’ll want to pay for most of it yourself, a wedding loan could help you spread the cost.

Managing your money

A debt consolidation loan can bring all your debts together into a single loan with one payment plan. This type of loan tends to have a lower interest rate than other forms of credit.

Bridging the gap when selling your home

A short-term bridging loan could be used to ‘bridge the gap’ while you wait for the sale on your current home to complete.

Spreading the cost of a holiday

Ideally, you’d use your savings to pay for a holiday. But if you’re planning the trip of a lifetime, you might want to top up your savings with an unsecured holiday loan.

Will I be accepted when I apply for a loan?

It’s not guaranteed. Whether you’ll be accepted depends on a number of factors, including:

  • Your credit score
  • Your income and existing debts
  • How much you want to borrow.

When you compare loans with us, you can find out which loans you’re eligible for by answering a few questions. This is a soft credit check and won’t impact your credit score.

Check eligibility

How can I get approved for a loan?

If you’ve previously struggled to get a loan or are worried about being accepted for the first time, here are some tips to help you get accepted:

  • Build your credit score: if you have a low credit score, you may find it difficult getting approved for a loan or the best loan rates. You can take steps to improve your credit score before you start applying.
  • Check eligibility: use our eligibility checker to see which loans you’re likely to be approved for. Only apply to lenders most likely to accept you.
  • Don’t look to borrow too much: lenders will consider the affordability of your loan, taking your income and any existing debts into account. So if you’re looking to borrow more than you can pay back, you might be turned down.

Why choose Compare the Market?

See what loans you could be eligible for in under 4 minutes[2]

See loans from a wide range of lenders

Loans available up to £50,000 (£500,000 for homeowner loans)

Compare loans

 

[2] Correct as of June 2024.

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What do I need to get a loan?

To be eligible for a loan, you’ll need to undergo a credit check and meet the potential lender’s requirements. Generally you’ll need to:

  • Be at least 18 and meet any other age requirements – for some lenders this may be 21 or older and there may be upper age limits too
  • Have a regular income
  • Be on the electoral register
  • Have a bank account
  • Be able to afford the repayments.
Author image Sajni Shah

What our expert says...

"Borrowing is a normal part of life for millions in the UK – many of us need to borrow at some point to fund a major purchase, whether it be a new car or a new kitchen. Some of us will also choose to use a new loan to pay off several existing ones, bringing the debt into one place and making it easier to manage. It makes sense to shop around to find a loan, and the crucial thing is to never borrow more than you can afford to pay back."

- Sajni Shah, Consumer expert on money and utilities

Step-by-step guide to finding the best loan for you

1. Check your credit report

A credit report that’s in good shape can help you access the best loan rates. You can check your credit report for free with the three main credit reference agencies – Experian, Equifax and TransUnion.

2. Decide how much you want to borrow

Before you start exploring bank loans and other available options, work out how much you need. Don’t be tempted to borrow more, even if you’re eligible to do so.

3. Check you can afford the repayments

Use our loan calculator to get an idea of how much your repayments might be. You can adjust the amount or the time to pay back to weigh up affordability.

4. Check which loans you might be eligible for

Use our loan eligibility checker to see which loans you’re likely to be accepted for, without impacting your credit score.

5. Compare loans and apply

Check and compare interest rates and terms on loans you’re likely to be eligible for. Make your decision and apply for the loan of your choice.

Beware of scams

According to the UK Government, fraud is by far the most common crime, accounting for over 40% of all offences in England and Wales. Even the most financially savvy borrowers could be duped by loan fraudsters, so it always pays to be cautious.

If you think you’ve found the best loan possible at an unbelievable rate, remember the golden rule: if it sounds too good to be true, it probably is.

Here are a few things to watch out for:

  • Cold calls, texts or emails offering you a loan and asking you to reply or call back
  • You’re asked to pay an upfront fee
  • You’re asked to give out personal details
  • You’re asked to pay quickly or unusually
  • Loan companies that are not authorised by the Financial Conduct Authority (FCA).

If you need to report a scam or suspected fraud, contact Action Fraud online or by phoning 0300 123 2040 (Mon-Fri 8am-8pm).

Read our guide for more tips on how to avoid loan fraud.

Frequently asked questions

Do I need a good credit rating to get a loan?

Having a good credit score is important if you’re to be accepted for a loan, but having a bad score doesn’t mean you’ll always be refused. There are several loan options for those with bad credit, although they typically have higher interest rates and come with borrowing restrictions.

A good credit score shows lenders you’re responsible with money and have a history of borrowing and paying off debts. This is why people with the best credit scores get the best loan rates.

How much can I borrow?

This will depend on the type of loan and your financial situation. Your credit score, income, as well as existing bank loans, debts and other outgoings will be taken into consideration.

If you opt for a secured loan, you may be able to borrow a larger amount. But if you can’t meet the repayments, your lender could repossess the item – such as your home or car – you offered as collateral.

What is a representative example?

When a loan is advertised, you’ll see a representative example. This will show the:

  • Loan amount
  • Interest rate
  • Length of the loan
  • Representative APR
  • Repayment instalment amount
  • Total amount payable.

It will tell you what borrowing that amount of money over that time period could cost.

APR is the total cost of borrowing money over the course of a year. It includes any fees that come with the loan and the interest payable.

The representative APR must be offered to at least 51% of successful credit applicants. However, the rate you’ll get depends on your credit record and personal circumstances.

How long can I borrow for?

How long you can borrow for depends on the amount you’re borrowing and the type of loan. You generally have longer to pay back larger loans.

Typically, you can pay back a personal loan over 1 to 10 years – but you may find longer or shorter terms from some lenders.

What’s the cheapest way to borrow money?

It depends how much you want to borrow, for how long, and your personal circumstances. Borrowing options include:

  • 0% purchase credit cards: ideally, you’ll need to repay the full amount before your 0% period ends and keep up with the minimum monthly repayments.
  • Personal loans or unsecured loans: if you can get the best rates, these can be some of the cheapest loans available.
  • Secured loans: you may be able to borrow more, but you’ll need to use a valuable asset, like your home, as collateral. This could be repossessed by the lender if you fail to make the repayments.
  • Car finance: includes Hire Purchase and Personal Contract Purchase loans, which are secured against your car.
  • 0% overdrafts: a few bank accounts come with a buffer – where you can go overdrawn by a small amount without paying any fees or interest. Some student and graduate accounts offer this option too. Overdrafts are designed for short-term borrowing, so may not be suitable if you need to borrow longer term.

What is a homeowner loan?

A homeowner loan is a type of secured loan that uses your home as collateral. It offers you access to larger amounts, as well as potentially the best loan rates and longer loan terms.

This type of loan is potentially an option if you have a bad credit history. When you apply, the lender will check whether you have enough equity in your home to borrow against.

If you can’t meet the repayments on your homeowner loan, the provider can repossess your home.

What is a soft search?

A soft search checks your credit score and history. But it won’t show up on your credit history or affect your credit score. We carry out a soft search when you use our eligibility checker.

Can I overpay or pay my loan off early?

It depends on your loan agreement. Although providers must allow you to pay back personal loans in full, there may be fees for early repayments or overpayments. Read more on repaying loans early.

What happens if I miss a loan repayment?

Missing a loan repayment will likely mean you’re charged a penalty fee. It could also negatively impact your credit score, meaning you could find it harder to borrow in the future.

What if I’m struggling to repay my loan?

If you’re struggling to repay your loan, get in touch with the loan provider. They may give you more time to make the payment. Simply missing repayments will affect your credit score and you’ll be charged a fee for each one you miss.

If you need help with debt, organisations like Citizens Advice and StepChange Debt Charity can offer free non-judgmental advice.

What is APR?

APR is short for annual percentage rate. It represents the cost of borrowing over 12 months and includes the interest rate and any other standard charges.

Does APR rise with interest rate increases?

If you have a loan with a variable APR and the Bank of England base rate increases, so could your APR. This means your loan repayments will be higher.

If you have a fixed rate loan, the APR will remain the same, even if interest rates go up.

Will searching for a loan affect my credit rating?

Searching for a loan with Compare the Market won’t affect your credit rating. However, each formal application for credit will be marked on your credit file.

If you make several applications in a short period of time, lenders could see this as a sign that you’re in desperate need of a loan or that you’re taking on more debt than you can afford.

What is a payment holiday?

A payment holiday is when you take a short break from paying back your loan. The payment holiday needs to be agreed with your lender. You may need a payment holiday if you’ve lost your job, taken maternity leave or received unexpected bills to pay.

You’ll continue to be charged interest if you take a payment holiday and you’ll still have to pay back the loan at a later date.

Can I take out a loan while on benefits or unemployed?

It’s possible to get loans if you’re unemployed, but they usually come with higher interest rates and specific conditions.

Having little or no income poses a bigger risk to lenders. If they do offer you a loan, they may ask you to put up your home or car as collateral, or find a guarantor willing to repay the loan if you can’t.

If you’re on certain benefits, you may be eligible for a Budgeting Loan from the government.

Is it better to borrow from my bank?

Your bank will usually be willing to lend you money if you have a good credit history and hold a current account with them. But that doesn’t automatically mean a bank loan is right for you.

For example, if you’re buying a car, then car finance may be a better option.