Compare £4,000 loans

It’s common for many of us to take out a loan at some point in our lives, whether it’s for a wedding, sorting out debts or home renovations. With careful thought and planning, the right loan can turn out to be a useful financial decision. 

It’s common for many of us to take out a loan at some point in our lives, whether it’s for a wedding, sorting out debts or home renovations. With careful thought and planning, the right loan can turn out to be a useful financial decision. 

Anelda Knoesen
From the Money team
5
minute read
Do you know someone who could benefit from this article?
Posted 28 MAY 2021

Should I take out a £4,000 loan?

Everyone has their reasons for borrowing. Perhaps you’re planning a kitchen makeover, helping out with the costs of a wedding or putting a deposit down on a new car. Taking out a loan for £4,000 could be what you need.

But you shouldn’t rush into making a decision. Taking out a loan needs careful consideration and financial planning. You need to be sure you can afford the repayments each month.

You’ll also want to be sure you can get the right loan for your needs. It’s always worth shopping around and comparing loans to see what’s out there.

What types of loans are there?

To make sure you get the right loan for your needs, consider these options:

  • Personal unsecured loans
    This type of loan allows you to borrow a fixed amount of money for a fixed length of time. Unsecured loans are suitable for smaller amounts, like £4,000, as you don’t need to put up a high-value asset as security against the loan.
  • Homeowner secured loans
    Secured loans are usually for larger amounts of money, although they are available for £4,000 loans too. They typically offer low interest rates but rely on using your home as a guarantee. If you have problems paying back the loan, you risk losing your home. So think carefully and act responsibly.
  • Guarantor loans
    You can ask a friend or family member (one with more assets and better credit) to co-sign your loan, which ultimately means that they would have to pay back the loan if you don't keep up your payments. This can be a way to get lower interest rates if you have a poor credit rating. 
  • Payday loans
    You’d typically use a payday loan to bridge the gap between the time you run out of money and the time you get paid again. Payday loans are unsecured, so you don't need to pledge your home or car to get one, but the downside is the high rates of interest. We don’t offer this type of loan on our site. 
  • Instalment loans
    Although most loans are paid in instalments, this phrase is often used to specifically describe short-term, high-interest loans paid back monthly. 

Whatever type of loan you choose, take some time to work out how much you can afford to repay each month. Missing payments can damage your credit history, and if you’re unable to pay back a loan you could be taken to court.

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

Did you know?

If you need to borrow at the top end of £4,000 – so closer to £4,999 – it could be worth checking to see if a loan of £5,000 would be cheaper overall, as these can have lower interest rates. But work out the costs carefully as you should never borrow more than you can afford to pay back.

Should I speak to my lender first?

Yes. If you want to make a partial overpayment, then a 28-day notice period applies. You’ll be charged interest on the full amount you owe for 28 days after you notify your lender of an extra payment.

If you want to pay your loan off in full, you’ll need to ask your lender for an ‘early settlement amount’, which is a recalculation of what you owe based on:

  • what you’ve already paid and the amount you still owe
  • what interest charges apply
  • whether there are any early payment fees.

Your lender’s obliged to give you this figure if you ask for it and to give you at least 28 days to think it over. If you decide to go ahead, you’ll need to pay the outstanding early settlement amount by the settlement date the lender has given you – otherwise it will need to be recalculated.

If you don’t ask the lender for the figure, you may end up paying the wrong amount.

You don’t have to pay off the loan if you decide you’d be better off continuing with your monthly instalments.

What to consider when choosing a loan 

When looking for a loan, you want to make sure you get the best deal for your needs and circumstances. 

Here’s a few things to consider: 

APR
The Annual Percentage Rate (APR) shows the total amount you’ll pay for your loan over the course of a year. It takes into account interest and any other standard charges added to the loan. Be aware that you might not get the advertised APR. It’s often ‘representative’ and only needs to be offered to 51% of customers – typically those with the best credit rating. If your credit rating is less than perfect, the interest rate you’re offered might be much higher.

The total cost of the loan
Although spreading your loan over a longer period can mean cheaper monthly repayments, it will cost you more in the long run. That’s because you’ll be paying interest for longer. 

Monthly repayments
Make sure you work out a repayment plan you can comfortably afford each month. There’s no point in trying to pay off the loan over a shorter length of time if you’re struggling with the repayments each month.

Early repayment fees
If you think you might be able to pay off the loan earlier, check if the lender charges a fee for early repayment.

How do I apply for a £4,000 loan? 

You can apply for most loans over the phone, in person at your local branch or online via the lender’s website or app. Be aware that peer-to-peer borrowing is only available online. 

When you apply for a loan, the lender will carry out a ‘hard credit check’ which will be marked on your credit file. Too many applications can damage your credit score. 

Before you apply for a loan, use our eligibility checker to see which loans you’re most likely to be accepted for and how much you could borrow. It’s a ‘soft search’ that doesn’t affect your credit score in any way.

Can I get a loan if I have bad credit? 

Although it might be more difficult, it’s still possible to get a loan for £4,000 if you credit rating is poor. In fact, a bad credit loan could help build your credit score if you make your repayments on time each month. The bad news is interest rates are usually far higher than on other types of loans.  
 
Another option is a credit building credit card. Although your credit limit won’t be as high as £4,000, regularly paying off your balance could help improve your credit score over time.  

Can I use a £4,000 loan to pay off other debts? 

If you’re paying high interest on other debts, such as credit card or store card debts, you could combine them into a debt consolidation loan. That way you’d have just one monthly payment to make. It could be a good idea if you can find a loan with a lower interest rate than the debts you already have. 

However, it’s still a debt and might not work for you, especially if you’re tempted to start spending again. The last thing you want is to build up more debt on top of what you already owe. Plus, there may be charges for settling your other loans early, and you may end up paying more in interest overall. 

Find out more about the pros and cons of debt consolidation loans

Top tips for taking out a loan 

  • Before you apply, check out your credit score to make sure it’s in good shape.   
  • Remember the golden rule: borrow as little as possible and pay it back as quickly as possible.
  • Work out a sensible budget before you apply for a loan to make sure you can afford the monthly repayments.
  • Be careful of borrowing to pay off existing debts – it could get you into more debt in the longer term.
  • It’s best to avoid payday loans – the interest rates can be astronomical.
  • Take time to shop around and compare what’s on offer – don’t just rush in and settle for the first rate you’re offered.

How to compare £4,000 loans

With the amount of loan providers out there, finding a £4,000 loan that works best for you can be time-consuming. 

Fortunately, you’re in the right place. All you need to do is use our comparison service, answer a few questions and we’ll help you compare providers and products to find the right one for your needs.

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