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 to look out for before comparing.
- Personal unsecured loans are for a fixed amount and term, and monthly repayments are usually fixed. They are usually for smaller amounts and aren’t secured against an asset, such as your home, but normally charge 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 is at risk 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 – this is where someone else guarantees your loan and promises to pay the debt if you can’t.
- Payday loans can provide a short-term solution to cash shortfalls. They’re unsecured loans, meaning no collateral like your house or car is required to get one. But the downside is the very high rates of interest. We don’t offer this type of loan on our site. You’d typically use a payday loan to bridge the gap between the time you run out of money, to the time you get paid again.
- Installment loans – these are repaid regularly over a long period of time, so you get a better interest rate. They are typically for larger amounts than payday loans. If you need a £5,000 loan with flexible terms, and you’re unable to pay the loan off straight away, you may prefer an installment loan.
When it comes to a loan for £5,000, it’s important you take your time figuring out exactly how much you can afford each month. 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, so it's essential that you find an affordable option that’s right for you.