Compare £1,000 loans
Whether it’s to fix the fan belt on the car or a new washing machine, 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, but you can find some high-street lenders and credit unions who will lend smaller amounts.
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. Let’s go through them…
What types of loans are there?
There are several different types of loan available:
Personal unsecured loans
A personal unsecured loan doesn’t require an asset, such as your home or car, to be used as collateral. This means your lender doesn’t have the right to seize your home or car if you miss repayments.
This is good news for you, but it does mean you’re a greater risk to the lender, so you will usually pay a higher interest rate than you would with a secured loan.
If you do fall behind on payments, however, you could end up being taken to court by your lender. This could result in debt collectors seizing your assets to pay off the outstanding loan and any additional costs.
Homeowner secured loans
Typically, secured loans are generally for larger amounts than £1,000. They usually offer lower interest rates than personal loans. Your home will be used as security that you’ll pay back the loan. If you can’t repay, you could lose your home.
Instalment loans
These are personal loans that are typically repaid over a long period of time. The long repayment period means your monthly outgoings will be lower, but the overall cost will be higher as you’ll be paying back the loan for longer.
Guarantor loans
A guarantor loan may be an option if you have bad credit or no credit history. It’s an unsecured loan but is guaranteed by someone, usually a friend or family member, who agrees to pay back the loan if you’re unable to.
You can’t compare guarantor loans with Compare the Market.
Peer-to-peer loans
With a peer-to-peer loan, you borrow money from an individual or group of people, rather than a bank or building society.
Peer-to-peer websites connect you with people willing to lend to you, then act as intermediaries.
You can’t compare peer-to-peer loans with Compare the Market.
Payday loans
Payday loans are designed to tide you over until you get paid. Also known as cash advances, they’re a type of short-term loan.
The cost of short-term loans is now capped by Financial Conduct Authority (FCA) rules. This means you’ll pay a maximum of 0.8% in interest per day.
For example, if you borrow £100 for 30 days and repay on time, you’ll pay a maximum of £24 in interest. If you’re late repaying, the most you could be charged is £15.
And you can’t be charged more in fees than 100% of what you borrowed. For a £1,000 loan, that means you could have to pay back a maximum of £2,000.
Think extremely carefully before applying for a payday loan. If you need advice on getting your finances back on track, see the independent MoneyHelper website.
You can’t compare payday loans with Compare the Market.
Credit union loans
Credit unions also offer small loans, but you may need to meet their eligibility criteria to join. For example, you might have to live in the local area, belong to a particular trade union or work in a specific industry to become a member.
Credit unions may have rules around how long you need to have saved with them before you can borrow money, so you might not be able to access a loan quickly.
You can’t compare credit union loans with Compare the Market.
What to think about before getting a loan
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 paying late can damage your credit score. 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 place 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.
Use our loan eligibility checker to find out which loans you might be eligible for without any impact on your credit score.
What alternatives are there to £1,000 loans?
If you want to use your £1,000 loan to buy something, you could consider a 0% interest on purchases credit card. But be sure you can pay back what you spend in the interest-free period, otherwise you’ll be charged a higher rate of interest.
You could also consider a credit-building credit card if you have poor credit 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.
Do I need a credit check to get a £1,000 loan?
Yes, as with any kind of borrowing, lenders will want to run 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 the loan repayments on time and in full, it could help improve your credit rating.
When you compare loans with Compare the Market, we’ll conduct a soft credit check. This won’t be visible to lenders, so you can shop around to 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?
Lenders do put some restrictions on loans. For example, you typically can’t use a loan for:
- Gambling
- Investments, such as stocks and shares
- Purchasing property or as a bridging loan
- Business purposes
- Tax-avoidance schemes
- Illegal purposes.
Some lenders rule out using loans to cover household bills and late payments too. So check the loan terms and conditions.
In many cases, people take out a small loan for emergency or short-term costs, such as car repairs, a new sofa or a DIY project.
How much will a £1,000 loan cost?
How much a £1,000 loan costs depends on the interest rate, how long you borrow the money for and your credit history.
Smaller loans often have higher rates of interest because lenders have similar fixed costs whether they lend you £1,000 or £50,000.
Interest is calculated at the start of the loan for the whole of the loan. It’s added to the loan amount and divided into equal payments for the term of the loan to arrive at your monthly payments.
| Interest rate | Loan term | Monthly payment | Interest paid | Total paid |
|---|---|---|---|---|
| 7% | 1 year | £86.43 | £37.13 | £1,037.13 |
| 7% | 2 years | £44.68 | £72.20 | £1,072.20 |
| 7% | 5 years | £19.70 | £181.99 | £1,181.99 |
| 20% | 1 year | £91.86 | £102.28 | £1,102.28 |
| 20% | 2 years | £50.10 | £202.49 | £1,202.49 |
| 20% | 5 years | £25.60 | £535.75 | £1,535.75 |
| 35% | 1 year | £97.68 | £172.14 | £1,172.14 |
| 35% | 2 years | £56.11 | £346.72 | £1,346.72 |
| 35% | 5 years | £32.59 | £955.56 | £1,955.56 |
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 could save you money.
- Interest rates – when comparing loans, 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.
Use our loan eligibility checker to find out which loans you’re likely to be accepted for before you apply. It’s a soft credit check so won’t impact your credit score.
What our expert says...
“Personal loans generally have fixed interest rates, so your repayments are unlikely to go up. This can help you budget for your loan. But make sure you can afford your payments for the entire length of the loan.”
- The Editorial Team, Experts in personal finance, insurance and utilities
How can I compare loans quickly and easily?
Comparing £1,000 loans online from lots of lenders can take a while. Instead, use Compare the Market and we’ll show you which loans you could be eligible for, from a wide range of lenders.
Compare the Market 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.
