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 different types of loans, 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
✓ Get loans for buying a car, home improvements or consolidating debt
✓ Find out whether an unsecured or secured loan is right for you
✓ Learn how to improve your chances of getting approved for a loan
✓ Find loans you’re likely to qualify for with Compare the Market’s free eligibility checker
What types of loan are available?
There are several types of loan, but they all fall into two categories - unsecured loans (not secured against an asset) and secured loans (secured against an asset)
Also known as an unsecured loan, the amount you can borrow is based on your personal circumstances, including how much you earn and your monthly outgoings. How good you’ve been at repaying debt in the past will also be considered. Most financial providers offer unsecured loans up to £25,000, and repayments are usually spread over a fixed period of up to 10 years. Personal loans can be used for almost anything, from paying for a wedding to covering large unexpected bills such as emergency repairs for a broken boiler. Find out more about personal loans.
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. Peer-to-peer loans are typically unsecured and often fall under the same category as a personal loan.
This is a type of secured loan, secured against your property, so you must be a homeowner (either own outright or have a mortgage) to be eligible. These loans can be for up to 25 years, and you can borrow up to £500,000. If you don’t keep up your repayments, the lender may be able to force you to sell your home, to repay the debt. Find out more about homeowner loans.
This type of loan is designed for people with poor credit scores or no credit history. The loan is unsecured, but someone else – a relative or close friend – guarantees to cover the repayments should you fail to make them. Unfortunately, you can’t compare guarantor loans with Compare the Market. Find out more about guarantor loans.
Debt consolidation loan
This form of loan enables you to clear multiple existing debts, effectively transferring them into a single repayment. A debt consolidation loan can be useful for getting back on top of your finances, and offers the convenience of one central debt rather than keeping track of many. However, it’s important that you consider this type of loan carefully. When you compare loans, you should check and compare the interest rates and term lengths for both your existing and potential loans, as well as any other debts, to ensure which option offers the best rates overall. It’s also important to note that extending your loan term through consolidating existing debts could result in you paying more overall. Find out more about debt consolidation loans.
There are several different types of loan available to buy a car, all of which fall under the term 'car finance'. For example, this could be a personal loan, which is unsecured, or a hire purchase loan, which is secured against the vehicle you are buying. This means you must meet your monthly repayments, otherwise the finance provider could take back the vehicle. Find out more about car loans.
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, the 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. Find out more about bad credit loans.
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 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 rate.
We understand that the outbreak of coronavirus (COVID-19) has caused financial difficulty for some of you.
If you have a loan and you’re worried about making repayments due to coronavirus, we’re here to help you understand the options available and the assistance some banks are providing.
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. 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 2 minutes**
See loans from a wide range of lenders
Loans available up to £50,000 (£500,000 for homeowner loans)
**On average it can take less than 2 minutes to complete a loans comparison through Compare the Market based on data in November 2020.Start comparing loans
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
What can I use my loan for?
You can use your loan to fund a variety of things, from buying a car to making home improvements, to paying for your wedding. You could also use it to consolidate other existing loans or debts, making them easier to manage.
Want to know more? Read about:
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. 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 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 able to borrow much more, potentially as much as £500,000, 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, such as 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 low 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 lower interest 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 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.
If you’re struggling financially due to the impact of coronavirus, you can ask your lender for a payment holiday. Read our guide to Loans and coronavirus for more information.
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 best place to get a loan. 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.
Money product expert
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."