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Compare small loans
- See which small loans you could be eligible for
- Check the loan rates you could get without impacting your credit score
- Compare small loans from a range of trusted providers
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What is a small loan?
A small loan is a type of personal loan that lets you borrow a relatively small amount of money. While we know the definition of ‘small’ will be different for everyone, most lenders consider anything from £500 up to around £3,000 to be a small loan. You can compare loans from £1,000 with Compare the Market.
As with any type of borrowing, make sure you don’t overspend, only borrow for something you need and make your repayments on time, otherwise you risk a debt nightmare.
Small personal loans are typically unsecured, meaning you don’t have to put up an asset (such as your home) as security for the lender.
IMPORTANT: This guide is written on the assumption that you’re looking for a loan. But please note that credit cards with 0% interest on purchases for an introductory period can be cheaper, as we explain below.
However, they come with risks. Where you’re buying from needs to take credit cards, you have to structure the repayments so you clear the debt in the 0% period before high interest is charged, and the interest-free periods are often shorter than typical loan lengths so you’ve less time to pay them off.
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What interest rate might I pay on a small loan?
That depends on the market at the time you apply and your circumstances. But it’s important to note that interest rates on smaller loans tend to be higher than on larger loans, as the more you borrow, the less the interest tends to be.
How do small loans work?
Here’s how to get a small loan:
- Find a loan – use our loan eligibility checker to see which loans you’re most likely to be accepted for, without impacting your credit score.
- Apply for a small loan – once you’ve found a loan that could suit you, click through to the lender’s site and apply directly.
- Lender makes a loan decision – the lender will want to check your credit score, income and ability to pay back the loan. This check is likely to affect your credit score. In many cases once these checks are complete, you’ll get a decision on your application.
- Receive the funds – if your application is successful, the money will be paid directly into your bank account. Usually within one or two days.
- Pay back the loan – pay back the loan in monthly instalments, plus interest, over a set term, until you’ve cleared the full amount. The specific terms of your loan will be set out in a formal agreement with your lender.
What do I need to apply for a small loan?
To be eligible to apply for a small loan, you’ll typically need to:
- Be over 18 years old (for some lenders you’ll need to be over 21). There may be upper age limits too
- Be a UK resident
- Have a regular income
- Have a UK bank account
- Be registered on the electoral roll
- Show you can afford the loan repayments.
Individual lenders will also have their own criteria on who they’re prepared to lend to.
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.
How to compare and apply for a small loan with Compare the Market
Comparing loans with Compare the Market is straightforward. Our eligibility checker will help you find loans you’re likely to be accepted for, without impacting your credit score.
When you use our loan eligibility checker, you’ll need to tell us:
- What you want to use the small loan for
- How much you want to borrow
- Your personal details, including your employment status
- Your UK address history
- Your annual salary and any other income
- Any mortgage or rent payments
- Any financial dependants.
Once we have the information we need, our eligibility checker will run a soft credit check. This won’t affect your credit score in any way.
We’ll then show you a list of loans you’re most likely to be accepted for. Simply choose what you consider to be the best small loan for you and you’ll be taken directly to the lender’s site to apply.
Instant small loan calculator
Our loan calculator can give you a rough idea of how much a small loan could cost you. It will calculate how much your monthly repayments are likely to be and how much interest you’ll pay overall.
Can I get a small loan with bad credit?
If you’re borrowing a relatively small amount of money, it may be possible to get a small loan with bad credit. If you can’t get a loan from a mainstream lender, a loan provider that specialises in bad credit loans might be able to help.
Small loans for bad credit will typically have a higher interest rate because this helps lenders reduce the risk of you not paying them back.
Are there small loans with no credit check?
No, in the UK it’s almost impossible to get any kind of loan without undergoing a full credit check. Be very wary if you see ‘no credit check’ loans advertised online. These will most likely be unregulated, leaving you unprotected.
When you apply for a loan, always make sure the lender is authorised by the Financial Conduct Authority (FCA). You can find out if a lender is authorised by searching the Financial Services Register. (All the lenders on our site are FCA authorised.)
The good news is that you can improve your chances of passing a credit check and being accepted for a small loan by building your credit score.
What can I use a small loan for?
In most cases, you can use the money from a small loan for whatever reason you like. But it’s always best to check the conditions of a small loan before you apply, to see if the lender imposes any restrictions on how the money can be used.
While loans can help people pay for essentials, borrowing is dangerous if you’re not disciplined or you overspend. Here are a few of the most common small loans available plus examples of how you could use them.
£1,000 loans
Perhaps your car failed its MOT and you need repairs done quickly. Or maybe your washing machine has broken down?
£2,000 loans
Maybe you need to replace your boiler or update your kitchen? A small loan could help.
£3,000 loans
A small loan could come in handy if you need to boost your wedding budget or you’ve home improvements to do.
What are the alternatives to small loans?
Not sure if a small personal loan is right for you? Here are a couple of alternatives.
0% purchase credit cards
A 0% interest on purchases credit card lets you buy items upfront, then pay off what you’ve spent over a set period without paying interest.
You’ll need to pay at least the minimum payment each month. But if you pay more than this and clear your debt before the end of the 0% period, the credit won’t cost you anything.
As you can’t get cheaper than 0%, a credit card is cheaper than a loan if the place you’re buying from takes credit cards, you keep up with the minimum payments during the 0% period, your credit limit is large enough and you clear the debt before the 0% period ends. However, 0% card lengths are typically shorter than loan lengths, so you may have less time to pay one off.
Agreed overdrafts
Depending on your bank, you may be able to agree an overdraft at a low interest rate. Some banks offer current accounts with an interest-free overdraft buffer for a fixed period.
However, standard overdraft rates can be very expensive, so be careful if they’re not on a special offer. And remember it’s not free money. You need to pay it back.
What our expert says...
“If you’re considering a small loan, you may be tempted to borrow a larger amount. But if you only need to borrow £1,500, why take out a loan for £3,000?
Don’t forget the golden rule: only borrow what you need and pay it back as quickly as you can.”
- The Editorial Team, Experts in personal finance, insurance and utilities
Why use Compare the Market?
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Frequently asked questions
What interest rate will I pay on a small loan?
The interest rate you’ll be offered depends on:
- The amount you want to borrow
- Your credit score
- The length of your loan
- The current economic climate.
Small loans often come with a higher Annual Percentage Rate (APR) than larger loans. That’s the total cost of borrowing money over a year.
A lender will typically have to do a similar amount of admin for a small loan as a large one. They often charge a higher APR to ensure a small loan is worth their time.
How long can I borrow a small loan for?
It depends on the lender, but many small loans are only offered over a short period. Short-term loans are typically repaid within 12 months.
Is a small loan the same as a payday loan?
No. Payday loans are usually for small amounts, from around £50 to £1,500. But the money is typically borrowed over a very short period – such as one month – or until your next payday.
Payday loans come with extremely high rates of interest. If you can’t pay them back within the agreed period, the interest and fees will mount up.
The government’s MoneyHelper website and Citizens Advice advise that you only consider a payday loan in an in emergency, after trying alternative solutions.
Compare the Market doesn’t compare payday loans.
Can I get a small loan if I’m unemployed?
It might be more difficult to get a loan if you’re unemployed, even a small one. Usually, lenders want to see a steady of income before they’ll consider your loan application.
If you are able to get a loan with no income, it’s likely you’ll be charged a higher interest rate.
Use our loan eligibility checker to see which loans you’re likely to be accepted for, without any impact on your credit score.