Managing your money while juggling everything else life throws at you can sometimes be tricky, and it can be made harder by an unexpected bill or a change in situation. If you find yourself needing a quick cash boost to help you manage a surprise expense, or you’re trying to fund a project like renovating your home, there are loan products out there that can help you get things moving.
We can help you find the right loan to get things sorted. We’ve got lots of information on all the best loan types for you, along with our loans eligibility checker which can give you an idea of which loans are available to you. Once you know which type of loan you need, our loan comparison service can help you find the right one for you, breaking down the cost so you can check it’s affordable.
At a glance
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What can I use a loan for?
You can use your loan to fund a variety of things, from buying a car to making home improvements, or paying for your wedding. You could also use it to consolidate existing loans or debts, making them easier to manage. Here are a few things you could use a loan for:
Unsecured personal loans can be used to cover big, unexpected bills – for example, emergency repairs to essentials like your boiler or your car.
Buying a car
Car loans include personal loans, which are unsecured, or hire purchase loans, which are secured against the vehicle you’re buying.
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.
The best day of your life come with a big price tag. Although you’ll want to pay for most of it yourself, a wedding loan could help you cover a shortfall in your budget.
Managing your money
A debt consolidation loan can bring all your debts into a single loan, making admin easier. However, you’ll need to look very carefully at costs as you could end up paying more overall.
Spreading the cost of a holiday
Ideally, you’d want to pay for your holiday from your savings. But if you’re planning a trip of a lifetime, you might want to top up your savings with an unsecured holiday loan.
What is the best type of loan for me?
There are three main types of loan. The best type of loan for you will depend on your individual circumstances.
1. Unsecured loan
Also sometimes called ‘personal loans’, unsecured loans can typically allow you to borrow up to £25,000 without putting up something valuable as security. However, you’ll still have to be sure that you can afford the repayments.
2. Secured loan
A secured loan requires you to put up something you own as collateral – in the case of a homeowner loan, your property. You can borrow larger sums of money with this type of loan, but if you can’t pay it back you could lose your home.
3. Guarantor loans
With a guarantor loan, someone agrees to make the repayments if you’re unable to. This could work for you if you have bad credit or no credit history, but if you don’t pay it back it could damage your relationship with your guarantor. You can’t compare guarantor loans with Compare the Market.
4. Peer-to-peer loan
With a peer-to-peer loan, you borrow the money from someone or a group of people instead of borrowing from a financial institution, like a bank. Peer-to-peer websites connect you with people willing to lend to you, then act as intermediaries. The interest rate you’re offered will depend on your credit score, with the best loan rates usually reserved for people with a good credit score. Peer-to-peer loans are typically unsecured and often fall under the same category as a personal loan.
5. Bad credit loan
Bad credit loans can cover all of the above, but this type of loan is specifically aimed at borrowers who have a poor credit history. While bad credit loans offer a way to rebuild your credit score, they don’t tend to offer the best loan rates. A bad credit loan interest rate will usually be much higher than average. And sometimes you’ll need a guarantor before a lender will approve you for a loan.
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.
Why it’s important to consider how much money you need
Knowing how much you need to borrow will help you decide where best to find that extra cash injection.
- If you only need to borrow a small amount of money for a very short time, consider using your interest-free overdraft, if you have one. If not, it could be worth looking at different current accounts that offer this facility.
- Credit cards with 0% interest on purchases could be worth a look, particularly if you need to buy something specific. As long as you pay back what you owe within the interest-free period (and make at least the minimum monthly payments on time), you can be smug in the knowledge that the credit hasn’t cost you a single penny extra.
If you need a larger sum of money, a personal loan could be the best answer. You can usually opt to borrow a minimum of £1,000, with upper limits depending on the lender. Most will lend you up to £25,000, although some may go as high as £50,000.
The best APRs (annual percentage rate – this is the amount of interest, plus any fees, you pay on top of your loan) are reserved for customers with the best credit ratings. That’s why when you apply for a loan, you need to know that the APR you see might not be the one you get, unless it’s labelled as a guaranteed APR.
Will I be accepted for a loan?
Everyone wants the best loan rates, but before you start applying, there’s a few things you can look at to maximise your chances of being accepted.
- Check your credit score: a lender will carry out a credit check before approving you for a loan. If your credit rating is good, you’ll likely be accepted, with better credit scores attracting the best loan rates.
- The amount you’re borrowing: this will affect the likelihood of you being accepted, with the loan amount you’re eligible to borrow typically being based on your income and existing debts. Therefore, if you’re on a lower salary or have other debts, consider applying for a smaller loan to increase your chances of being approved.
- Use our eligibility checker: when you compare loans with us, you can find out which loans you’re eligible for by answering a few questions. This is only a “soft check” and won’t impact your credit score.
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 your credit score is too low, you may find it difficult getting approved for a loan or the best loan rates. A lender will carry out a credit check of your finances to see how well you’ve managed debt in the past. So it helps to have your credit file in the best shape possible. You can take steps to improve your credit score before you start applying. Find out more about building your credit score.
- Look carefully at lenders: do a soft search with different lenders or use our eligibility checker to get an idea of whether your application would succeed. Only apply to lenders most likely to accept you. If you have a poor credit record, you may need to look for a specialist lender.
- Don’t look to borrow too much: lenders will consider the affordability of your loan, so if you’re looking to borrow more than you can pay back, you might find yourself being turned down.
Why choose Compare the Market
See loans for your chosen amount in under 3 minutes**
See loans from a wide range of lenders
Loans available up to £50,000 (£500,000 for homeowner loans)
**Correct as of March 2022.
What do I need to get a loan?
To apply for a loan, you’ll need to undergo a credit check and meet certain requirements. These can vary from lender to lender but, generally, you’ll need to:
- Be 18 or above – for some lenders it may be 21, and other lenders also have upper age limits
- Have a regular income
- Be on the electoral register
- Have a functioning bank account
- Be able to afford the repayments
Frequently asked questions
How can I check if I am eligible for a loan?
To find out if you’re eligible for a loan, you can use Compare the Market’s loan eligibility tool when you compare loans with us. Simply answer a few questions, and we’ll be able to run a soft search on your credit file, to find out which loans you qualify for.
What is the difference between a secured and unsecured loan?
The main difference between a secured and unsecured loan is that a secured loan is exactly that – it’s secured against something, which is known as collateral. This could be your home or a vehicle. Because of this, secured loans can offer some of the best loan rates. However, with a secured loan, the loan provider can repossess your collateral if you’re unable to meet your repayments.
An unsecured loan doesn’t need collateral, meaning you won’t be at risk of losing your home or car, for example. However, because you’re not offering anything to secure the loan, you may be charged higher rates of interest and be unable to borrow larger amounts.
Do I need a good credit rating to get a loan?
While having a good credit score is important in being accepted for a loan, having a bad credit score doesn’t mean that you’ll always be refused. A good credit score is a way of proving to lenders that you’re responsible with money, and have a history of borrowing and successfully paying off loans or other debts. This is why people with the best credit scores get the best loan rates. This is also why a poor credit score may make lenders wary of approving you for a loan.
However, there are several loan options for those with bad credit. You may not have access to the rates and amounts to borrow as others, but we have information on the sorts of loans that may be available to you, as well as ways to improve your credit score.
How much can I borrow?
It depends on the type of loan you’re looking for. Do you just need to borrow £1,000? £2,000? Or maybe even £5,000? A personal loan would typically be used for borrowing these amounts, up to as much as £50,000. However, things like your credit score, income, as well as existing loans, debts and other outgoings will be taken into consideration.
If you opt for a secured loan, you’ll normally find you’re potentially able to borrow as much as £500,000, or even more, if you secure the loan against your home. It’s important to know that if you can’t meet the repayments on a secured loan, your lender could repossess the item you offered as collateral, like your car or home.
While you might be able to borrow up to £50,000, or even £500,000, it doesn’t mean that you should. Borrowing the right amount for your needs, while ensuring that you’re able to pay it back comfortably, is arguably the most important thing to consider when taking out a loan.
What is a representative example?
When a loan is advertised, you’ll see what’s called a ‘representative example’. This will show the loan amount, the interest rate, the length of the loan, the representative APR, the repayment instalment amount and the total amount payable. It will tell you what borrowing that amount of money over that time period could cost with that representative APR. Here’s what a representative example might look like.
|Loan amount||Interest rate||Loan term||Representative APR||Monthly loan repayment||Total loan repayment|
|£5,000||3.6% (fixed)||24 months||3.6%||£216.11||£5,186.64|
APR is the total cost of borrowing money over the course of a year. It includes fees that automatically come with the loan, as well as the interest rate. Bear in mind that the representative APR must be offered to at least 51% of successful applicants, but it isn’t necessarily what you’ll get. That will depend on your credit record and personal circumstances.
How long can I borrow for?
How long you can borrow for may depend on the type of loan, and the amount you’re borrowing. Normally, personal loans can last up to 10 years, with anything over one year being considered a long-term loan.
While extending your lending period will likely bring your monthly repayments down, it’s important to know that you’ll pay more in interest over the full length of the term. Therefore, if you’re able to afford the repayments, it’s best to pay off your loan as soon as possible.
If you need the initial security of a lower monthly repayment, consider taking out a loan that allows you to repay the debt early. This type of loan allows you to make additional payments as and when you’re able to, to help pay off your loan earlier and save money on your overall term.
What’s the cheapest way to borrow money?
It depends how much you want to borrow and how long for. Borrowing options include:
- 0% purchases credit cards: 0% purchase cards can be one of the cheapest ways to borrow money, provided you keep up with at least the minimum monthly repayments and ideally repay the amount in full before the interest-free period ends.
- Personal or unsecured loans: if you can get the best loan rates, this can be one of the cheapest ways to borrow.
- Secured loans: these can offer some of the best loan rates, but if you’ve secured a loan against your home you risk losing it if you can’t make the repayments.
How do I work out the cost of my loan?
The best loan rates vary according to the size and duration of the loan. If you’re looking for low interest loans, you might look to borrow over the longer term, as these loans may attract lower interest rates.
But remember, you need to look at the overall cost as you’ll be paying back the loan for longer.
Borrowers with poor credit records will be charged higher rates.
What is a homeowner loan?
A homeowner loan is a type of secured loan that uses your home as collateral. Because you’re securing the loan against something as valuable as your home, it provides you with access to larger amounts to borrow, as well as potentially the best loan rates and longer loan terms.
This type of loan is potentially a better option for those with a bad credit history, as offering your home as collateral provides security to your lender. When you apply, the lender will check whether you hold enough equity in your home to borrow against.
It’s important to be aware that if you can’t meet the repayments on your homeowner loan, the provider can repossess your home. On the other hand, if you’re able to pay off your loan early, it’s likely that you’ll be charged an early repayment fee. It’s important to be aware that if you can’t meet the repayments on your homeowner loan, the provider can repossess your home. On the other hand, if you’re able to pay off your loan early, it’s likely that you’ll be charged an early repayment fee.
What is a soft search?
A soft search is a type of search on your credit file that doesn’t impact your credit score. While it will be recorded on your credit file, it won’t be visible to lenders and so can’t affect their decision to approve your loan application or not. We’ll carry out a soft search when you compare loans with us.
Can I get a loan to buy a car?
You can get a personal loan to spread the cost of buying a car, or a secured loan specifically designed for this purpose, known as car finance. If you take out car finance, you may lose the vehicle if you can’t make the repayments. You can use our car finance calculator here. Compare the Market can help with:
- Hire purchase – these loans typically require a 10% deposit. The remainder is split into monthly repayments and spread over one to five years. Hire purchase usually offers fixed interest rates, but are only an option when buying through a car dealer. You won’t be able to use a hire purchase finance plan with a private seller.
Other options, which are not available through Compare the Market, include:
- Personal contract purchase – this type of car financing agreement gives you the option of handing back the car or buying it when the term ends.
- Personal contract hire (PCH) - pay a monthly rental fee and give the car back at the end of the agreed period.
- Logbook loans – this is a type of secured loan, when the car acts as the collateral that the loan is secured against.
See more on car financing options
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 be charged higher interest rates in 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.
What is APR?
APR is short for annual percentage rate. It represents the cost of borrowing over 12 months and includes the interest rate as well as any other standard charges. The benefit of APR is that it allows you to compare the cost of borrowing from different lenders - the higher the APR, the more it will cost you to borrow.
When a loan is advertised, ‘representative’ APR is shown. This is the APR available to at least 51% of applicants, but it’s not necessarily what you’ll be offered. That will depend on your personal circumstances, including your credit history.
Will searching for a loan affect my credit rating?
Searching for a loan won’t affect your credit rating. However, it’s worth noting that each time you apply for credit, a note is placed on your report saying that a business has reviewed it.
If you make several inquiries in a short period of time because your previous applications have been unsuccessful, it may be seen 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 break from paying back your loan for a certain amount of time agreed with your lender - typically three months. You may need one if you’ve lost your job, gone on maternity leave, or had unexpected bills to pay.
Remember, 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 for unemployed people. But the drawback is that they usually come with very high interest rates. This could cause greater debt problems further down the line if you have difficulty meeting your repayments. Having little or no income poses a big risk to lenders so, if they do offer you a loan, they may ask you to use your home or car as collateral, or find a guarantor willing to repay the loan if you can’t.
Is it better to borrow from my bank?
There’s no one place to get the best loans. 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.
If you’re buying a new vehicle, for example, car finance may be a better option. Or a peer-to-peer loan might be suitable if you only want to borrow a small amount for a short period. With most bank loans, you have to borrow at least £1,000 for 12 months or more, so you might end up borrowing more than you need – or can afford.
Look for a provider that lets you borrow the money you need for the cheapest monthly instalments by doing a loan comparison.
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 look at what the loan will cost over the whole term – the total amount repayable. Here’s an example of what that could look like. It’s for illustrative purposes only and assumes that there are no extra fees.
|Loan amount||Length of loan||Monthly repayment|
|APR||Interest payments||Total amount repayable|
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.
Best loan tips
If you decide that borrowing money is right for you, there are ways to do it wisely. Here are a few things to consider, when looking for the best loans:
Decide how much you want to borrow
Before you start exploring loans, it makes sense to work out how much you need and how much you can afford to pay back each month. Once you know this, it’s wise to stick to your budget and not be tempted to borrow more, even if you’re eligible to do so.
Check your credit rating
A credit report that’s in good shape can give you a wider choice of loans among potentially the best loan rates. You can check your credit report for free with the three main credit reference agencies, Experian, Equifax and TransUnion, and correct any errors before you start shopping around for loans. You can check your Experian credit score for free in the Meerkat app.
Look at the total amount repayable
Understand how much you’ll pay overall for your loan, not just how much you’ll pay each month. A loan over a longer term can have lower monthly repayments, but you may pay more in interest overall. You can adjust terms, amounts and interest rates using our loan calculator to get an idea of how much you might pay.
Don’t apply for too many loans
Each time you apply for a loan, it leaves a mark on your credit report. If lenders see several applications within a short time it can signal to them that you’re in financial difficulties, which can make them reluctant to lend to you.
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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 great-value loan, and the crucial thing is to never borrow more than you can afford to pay back."
- Rob Silvey, Finances expert