Compare £1,000 loans

Many of us have had to take out a small, short-term loan at some point in our lives. Whether it’s to fix the fan belt on the car or see us through the expensive Christmas period, we’ve all turned to a bank, online lender or a generous relative for some financial help.

Many of us have had to take out a small, short-term loan at some point in our lives. Whether it’s to fix the fan belt on the car or see us through the expensive Christmas period, we’ve all turned to a bank, online lender or a generous relative for some financial help.

Anelda Knoesen
From the Money team
3
minute read
Do you know someone who could benefit from this article?
Posted 2 NOVEMBER 2020

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, like a broken washing machine, car repairs or home improvements, a low interest £1,000 loan can make all the difference. But before you look for a loan, it’s worth considering your options. There may be cheaper alternatives, like a credit card.

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?

A £1,000 loan is usually the minimum amount most lenders will offer. You might find there are cheaper alternatives, though, like 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.

If you’re looking for a loan, there are several different types available:

Personal unsecured loans Since you’re not using any of yor assets, such as your home or car, as a guarantee that the lender could sell to get their money back if necessary, you’ll usually pay a higher interest rate than you would with a secured loan.

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, your home can be repossessed. You might be asked to pay an arrangement fee, so you'll need to add this to the overall cost when you’re doing your sums.

Instalment loans These are repaid over a long period of time, which means that they sometimes offer a lower interest rate. But because you repay your loan over a long period, the interest can add up to a large amount over time.

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 will 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. Peer-to-peer lenders make claims that their “rates are often among the lowest out there”. But, of course, this may not apply to your loan.

Payday loans These are relatively 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 very carefully before applying for one. If you need advice on getting your finances back on track, see the Money Advice Service.

Credit union loans Credit unions also offer small loans, although they may have different eligibility criteria – for instance you may have to live in a local area, or belong to a particular trade union or work in a specific industry. But they can have rules about how soon you can borrow money and that you must have saved with them first. This means you might not be able to access this kind of loan quickly.

Before you compare £1,000 loans, work out how much you can afford to pay back each month. Missing repayments and even paying late can damage your credit record, 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. If you’re accepted, the process should be pretty quick and you may be able to access the money in 24 hours. As long as you can keep up with the repayments on the loan, you could improve your credit rating for future borrowing.

Lenders usually charge a higher interest rate for borrowers with bad or limited credit. You may also find that lenders have more restrictive terms for the amount you can borrow and the length of loan period, compared with borrowers with a good credit history. You may also need to demonstrate your ability to pay back the loan.

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?

You don’t necessarily need to get a guarantor loan for £1,000 - but it might be the only option for some bad credit borrowers.

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 £10,000, 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 go onto your credit file. 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 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:

Loan terms 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.

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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