Compare £5,000 loans

As long as you choose the right option for you, a £5,000 loan can help ease cashflow problems. We can help you find the £5,000 loan that suits you best, even if you’ve previously had bad credit.

As long as you choose the right option for you, a £5,000 loan can help ease cashflow problems. We can help you find the £5,000 loan that suits you best, even if you’ve previously had bad credit.

Anelda Knoesen
From the Money team
4
minute read
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Posted 27 NOVEMBER 2020

Is a £5,000 loan right for me?

Whatever your reasons for taking out a loan, it’s essential that borrowing is always carefully budgeted for and that you have a solid repayment plan in place. 

If you’re sure you want to borrow £5,000, you'll need to know you’re getting a good deal. That’s where we come in. We can explain the options available before you use our loan comparison service.

How long should I take to repay the £5,000?

If you borrow over a longer period, it could mean your monthly payments are more manageable. But this will also add to the interest you’ll pay overall.

Here’s an example of a typical loan taken out over three and seven years.

Initial borrowing APR Time to repay Monthly repayments Total repaid
£5,000 3.6% 3 years £146.60 £5,277.72
£5,000 3.6% 7 years £67.29 £5,652.76

To avoid putting pressure on yourself, it’s always better to borrow only what you can comfortably afford to repay. Borrowing too much can lead to debts spiralling out of control.

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.

What types of loans are there?

A £5,000 loan is generally at the top end of what many credit cards will offer, so a loan can potentially be a better option. To make sure you get the right loan for your needs, find out what options are out there before comparing.

  • Personal unsecured loans are for a fixed amount and length (or term), with monthly repayments usually fixed. They’re typically for smaller amounts and aren’t secured against an asset, such as your home, but you’ll normally be charged a higher rate of interest than secured loans.

  • Homebuyer secured loans are secured against your property, so you must be a homeowner (either own outright or have a mortgage) to take one out. These loans tend to have lower interest rates, but your home could be repossessed if you can’t make the repayments. You might have to pay an arrangement fee, so you'll need to take that into account when you compare costs.

  • Guarantor loans are guaranteed by someone else, who promises to pay off the debt if you can’t.

  • Payday loans can provide a short-term solution to cash shortfalls, but they’re relatively expensive and usually have short repayment periods. The penalty fees can quickly mount up, meaning you can end up in a considerable amount of debt. Think very carefully before applying for one.

  • Instalment loans are repaid regularly over a long period of time, so they can offer a lower interest rate. But you’ll need to factor in that the interest could add up to a large amount, as you’re paying back the loan over several years.

  • Peer-to-peer loans are when you borrow money from individuals, instead of a bank or building society. The rate of interest you’ll be charged depends on what the lender considers the risk of you not paying back the loan. Peer-to-peer lenders may advertise extremely low rates, but this might not apply to the loan you’re offered.

When you’re looking for a loan for £5,000, it's essential to find an affordable option that’s right for you. If you can’t repay your loan you risk being taken to court, and if you miss payments or even make late payments, your credit record can be damaged.

Should I beware of ‘representative’ APR rates?

Yes. Always remember that the advertised loan and credit card rates that you see are representative. Providers only need to offer the advertised rate to 51% of successful loan applicants. Your actual rate – the ‘real’ or ‘personal’ APR – will be tailored to you, according to your unique credit history. If you see a loan advertised with ‘guaranteed’ APR, then this is the rate you’ll get.

Learn more about APR and why it matters

Will being rejected for a loan affect my credit rating?

Yes, it could do. Each loan application you make leaves a mark on your credit report. It’s important that if you’re refused a loan or any type of credit, you try to find out why before making other applications.

It’s wise not to apply for several loans at the same time, as lenders may become concerned that you have financial difficulties or raise suspicions of fraud.

The good news is that using our loans comparison service, and seeing the various options available, helps you understand what's on offer from different lenders.

Can I get a £5,000 loan with bad credit?

Yes, it’s possible to get a £5,000 loan if your credit history isn’t great, but your options will be limited. Lenders will consider you a higher risk, which means you’ll probably have to pay a higher interest rate – potentially as high as 99% APR.

If you have a bad credit history or no credit history and can’t find a mainstream lender prepared to offer you a loan, you might have to find a specialist lender. You might also want to consider a guarantor loan. In this case, you’ll need someone with a good credit rating to guarantee that they’ll pay off the loan if you default on the payments. It could be a parent or family friend, just as long as they understand that they’ll be responsible for payments if you’re unable to pay.

Guarantor loans typically range from £1,000 up to £10,000, so it’s a possible option if you want to borrow £5,000. Loans with a guarantor usually have a lower interest rate than bad credit loans, as there’s less of a risk that the loan won’t be paid off. However, the APR is still much higher than standard loans – typically around the 50% mark. You might be able to get a lower APR if your guarantor is a homeowner.

How can I compare loans quickly and easily?

Trying to find and compare loans from lots of lenders can take a while. Luckily, we can help you with our simple loans comparison service. All you have to do is give us a few details and we’ll show you a list of loans you’re eligible for - meaning you can compare before you apply, without impacting your credit score.

You can compare information like the total amount repayable and monthly repayments to quickly find the £5,000 loan that’s right for you. You'll also be able to see if that lender allows debt consolidation and payment holidays, and if there are any early repayment charges.

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.

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