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Compare £1,000 loans

Whether it’s to fix the fan belt on the car or see you through Christmas, many of us have had to take out a small, short-term loan at some point in our lives. Find out about some of the options for a £1,000 loan.

When can a £1,000 loan help?

When funds are limited, time is short and you’re faced with one of life’s unexpected emergencies such as a broken washing machine or car repairs, a low interest £1,000 loan can make all the difference.

A £1,000 loan is usually the minimum amount most lenders will offer. You might find there are cheaper alternatives, such as using a credit card to buy something - particularly if you can get one with an interest-free deal on purchases. If you’ve never borrowed before or you have a poor credit rating and want to borrow a small amount, credit building cards may help too.

But if you’re interested in taking out a loan, you have some options, so let’s go through them…

What types of loans are there?

There are several different types of loan available:

Personal unsecured loans

An unsecured loan doesn’t use any of your assets, such as your home or car, as collateral. This means your lender doesn't have the right to seize these in the event you miss repayments. This is good news for you, but it does mean you’re a greater risk to the lender, so will usually pay a higher interest rate than you would with a secured loan.

However, if you continue to miss repayments and are taken to court, debt collectors may use your assets to pay off the outstanding loan, along with any additional charges.

Homeowner secured loans

These are generally for larger amounts than £1,000. They typically offer low interest rates but rely on using your home as security that you’ll pay back the loan. If you can’t repay, you could lose your home.

Instalment loans

These are repaid over a long period of time, which means that they sometimes offer lower interest rates. But because you repay your loan over a long period, you could end up paying more overall.

Guarantor loans

If you have a poor credit rating, you can ask a friend or family member (one with more assets and better credit) to co-sign your loan, which ultimately makes them responsible for the debt. This means if you don’t pay, they’ll have to. Because the loan has a guarantor, lenders may be prepared to offer a lower interest rate than without the guarantee because they’re more likely to get their money back.

Peer-to-peer loans

This is where you borrow money from individuals rather than a bank or building society. Loan rates vary according to what lenders think your risk of not paying back is. Some peer-to-peer loans offer low rates, but of course, this may not apply to your loan.

Payday loans

These are very expensive and often have short repayment periods. The penalty fees can add up quickly and you could end up in a lot of debt. Think extremely carefully before applying for one. If you need advice on getting your finances back on track, see the MoneyHelper website.

Credit union loans

Credit unions also offer small loans, but you may need to meet their eligibility criteria – for instance you may have to live in the local area, belong to a particular trade union or work in a specific industry. They can also have rules around how long you need to have saved with them before you can borrow money, so you may not be able to access a loan quickly.

Before you compare £1,000 loans, it’s important to work out how much you can afford to pay back each month. Missing repayments and even paying late can damage your credit score, and if you can’t repay your loan you risk being taken to court.

Can I get a £1,000 loan with a bad credit rating?

Although your options may be limited, it’s possible to get a loan with bad credit.

Lenders usually charge a higher interest rate for borrowers with bad or limited credit. You may also find that lenders have more restrictions on the amount you can borrow and the length of the loan, compared with borrowers with a good credit history.

But as long as you can keep up with the repayments on the loan, you could improve your credit rating for future borrowing.

Alternatives to taking out a bad credit loan for £1,000 could be a credit building credit card or switching to a bank account that offers an interest free overdraft.

Do I need a guarantor to get a £1,000 loan?

Not usually, but it might be the only option for some borrowers with bad credit.

If this is the case, you’ll need someone to guarantee that they’ll pay back the loan - often a parent or a close family friend - if you default on the repayments. Typically, guarantor loans range from £1,000 up to £15,000, so it could be an option if you can’t borrow the money any other way. Just bear in mind that interest rates are higher than a standard loan – sometimes as high as 50% APR.

Do I need a credit check to get a £1,000 loan?

Yes, as with any kind of borrowing, lenders will want to perform a hard credit check when you apply for a £1,000 loan. This will show up on your credit file and other lenders will be able to see it. However, if you make repayments on time and in full, it could help improve your credit rating.

When you compare loans through Compare the Market, we’ll conduct a soft credit check. This won’t be visible to lenders, so you can shop around and see what loans are likely to be available to you without it affecting your credit rating.

What can I use my £1,000 loan for?

It’s highly unlikely that your lender will put restrictions on how you use your £1,000 loan. As long as you’re capable of paying it back, you can use your £1,000 loan for whatever you want. In many cases, people take out a small loan for emergency short-term costs, such as car repairs, vet bills or DIY projects.

How to find the right £1,000 loan

When it comes to choosing the right loan for you, you’ll want to consider the following:

  • The length of the loan - most loan terms for £1,000 will be between one and five years. A loan spread out over a longer period will mean smaller monthly repayments but could cost you more in the long run. If you can afford the monthly payments, a shorter term should save you money.
  • Interest rates - when comparing loans, you’ll want to look for the lowest representative APR. This is the advertised rate that lenders must offer to at least 51% of borrowers. Just be aware that the rate you’ll be offered could be higher, especially if you have a poor credit history.
  • Lender requirements - all lenders have a list of criteria that borrowers have to meet, so check what these are before applying for a loan in case you’re not eligible. A soft search quote option lets you check whether you have a good chance of being accepted before you actually apply.

How can I compare loans quickly and easily?

Comparing loans from lots of lenders can take a while. Luckily, we can help with our simple comparison service. You can quickly compare loans that you’re eligible for, and get information on the representative or guaranteed APR, total amount repayable and monthly repayments, to find the £1,000 loan that’s right for you.

Comparethemarket 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.

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Page last reviewed on 17 FEBRUARY 2023
by Alex Hasty