What types of loan are available?
There are two main types of loan - personal loans (unsecured loans) and homeowner loans (secured loans):
Personal loan: Also known as an unsecured loan, the amount you can borrow is based on your personal circumstances, including how much you earn, and your monthly outgoings. How good you’ve been at repaying debt in the past is another factor likely to be considered. Most financial providers offer unsecured loans up to £25,000, and repayments are usually spread over a fixed period of up to 10 years. Personal loans can be used to cover large unexpected bills such as emergency repairs for a broken boiler.
Comparethemarket.com helps you compare loans with :
Amounts from £1,000 to £50,000
Terms from 12 months to 10 years
APRs from 2.8% to 99.9%
The following is a representative example from one of the lenders on our panel:
Representative example: Assumed borrowing of £10,000.00 over 48 months at a nominal annual rate of 2.8% (fixed) would result in a representative rate of 2.8% APR (fixed), 48 monthly repayments of £220.30, total amount repayable is £10,574.40. Credit available subject to status.
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.
Homeowner loan: This is a type of secured loan, secured against your property, so you must be a homeowner (either own outright or have a mortgage) to be eligible. These loans can be for up to 25 years, and you can borrow up to £100,000. If you don’t keep up your repayments, the lender may be able to force you to sell your home, to repay the debt.
Guarantor loans are also available. These loans are designed for people with poor credit scores or no credit history, who want to borrow. Someone else – a relative or close friend – guarantees to cover the repayments, should the borrower fail to make them.
Peer-to-peer loans: with a peer-to-peer loan, you borrow the money from someone or a group of people, instead of borrowing from a financial institution, like a bank. Peer-to-peer websites connect you with people willing to lend to you, then act as intermediaries. The interest rate you’re offered will depend on your credit score.
Debt consolidation loan: this form of loan allows you to take multiple existing loan debts and transfer them into a single repayment. These are useful for getting back on top of your finances, and offer the convenience of one central debt, rather than keeping track of many. However, it’s important that you consider these carefully. You should check and compare the interest rates and term lengths for both your existing and potential loans, to ensure which option offers the best rates overall. It’s also important to note that extending your loan term through consolidating existing debts could result in you paying more overall.
We understand that the outbreak of coronavirus (COVID-19) has caused financial difficulty for some of you.
If you have a loan and you’re worried about making repayments due to coronavirus, we’re here to help you understand the options available and the assistance some banks are providing.
Money product expert
What our expert says...
"Borrowing is a normal part of life for millions in the UK – many of us need to borrow at some point to fund a major purchase, whether it be a new car or a new kitchen. Some of us will also choose to use a new loan to pay off several existing ones, bringing the debt into one place and making it easier to manage. It makes sense to shop around to find a great-value loan, and the crucial thing is to never borrow more than you can afford to pay back."
Will I be accepted for a loan?
Everyone wants the best loan rates, but, before you start applying, there are a few things you can look at to maximise your chances of being accepted.
- Check your credit score: if it’s good, you’ll likely be accepted for a loan, with better credit scores attracting the best loan rates.
- The amount you’re borrowing: this will affect the likelihood of you being accepted, with the amount you’re eligible to borrow typically being based on your income and existing debts. Therefore, if you’re on a lower salary, or have other debts, consider applying for a smaller loan to increase your chances of being approved.
- Use our eligibility checker: with Compare the Market, you can find out which loans you are eligible for by answering a few questions. This is only a “soft check” and will not impact your credit score.
How can I get approved for a loan?
If you’ve previously struggled to get a loan, or are worried about being accepted for the first time, here are some tips to help you get accepted:
- Building your credit score: if your credit score is too low, you may find it difficult getting approved for a loan. You can take steps to improve your credit score before you start applying. Find out more about building your credit score.
- Look carefully at lenders: do a soft search with different lenders to get an idea of whether your application would succeed, and apply to lenders most likely to accept you. If you have a poor credit record, you may need to look for a specialist lender.
- Don’t look to borrow too much: lenders will look at the affordability of your loan, so if you seek to borrow more than you can pay back you may find yourself being turned down.
Who do we compare loans with?
At Compare the Market, we compare loan providers including big banks, supermarkets, department stores and more, to help you find lenders that are right for you. You’ll find familiar names in banking such as HSBC, NatWest, RBS, as well as other lenders such as M&S Bank, the Post Office and the AA.
Frequently asked questions
What can I use my loan for?
Do I need a good credit rating to get a loan?
While having a good credit score is important in being accepted for a loan, having a bad credit score doesn’t mean that you’ll always be refused. A good credit score is a way of proving yourself to lenders, that you’re responsible with money and have a history of borrowing and successfully paying off loans or other debts. This is why a poor credit score may make lenders wary of approving you for a loan.
However, there are several loan options for those with bad credit. You may not have access to the rates and amounts to borrow as others, but we’ve got information on the sorts of loans that may be available to you, as well as ways to improve your credit score.
How much can I borrow?
It depends on the type of loan you’re looking for. Do you just need to borrow £1,000? £2,000? Or maybe even £5,000? These amounts would all fall under a personal loan, with unsecured loans typically allowing you to borrow up to £25,000. However, things like your credit score, income, as well as existing loans, debts and other outgoings will be taken into consideration.
If you opt for a secured loan, you’ll normally find you’re able to borrow much more, potentially as much as £100,000, if you secure the loan against your home. It’s important to know that, if you can’t meet the repayments on a secured loan, your lender could repossess the item you offered as collateral, such as your car or home.
While you might be able to borrow up to £25,000, or even £100,000, it doesn’t mean that you should. Borrowing the right amount for your needs, while ensuring that you’re able to pay it back comfortably, is arguably the most important part of borrowing money, and you should take great care when making your decision.
How long can I borrow for?
How long you can borrow for may depend on the type of loan, and the amount you’re borrowing. Normally, personal loans can last up to 10 years, with anything over one year being considered a long-term loan.
While extending your lending period will likely bring your monthly repayments down, it’s important to know that you’ll likely pay far more over the full length of the term. Therefore, if you’re able to afford the repayments, it’s best to pay off your loan as soon as possible.
If you need the initial security of a lower monthly repayment, you could consider the flexibility by loans which offer the ability to repay the loan debt early. These allow you to make further payments on your loan, as and when you’re able to, to help pay off your loan earlier and save money on your overall term.
What’s the cheapest way to borrow money?
It depends how much you want to borrow and how long for. Borrowing options include:
- 0% purchases credit cards: 0% purchase cards can be one of the cheapest ways to borrow money, provided you keep up with at least the minimum monthly repayments and ideally repay the loan in full before the interest-free period ends.
- Personal or unsecured loans: if you can get the best loan rates, this can be one of the cheapest ways to borrow.
- Secured loans: these can offer low rates, but if you’ve secured a loan against your home you risk losing it if you can’t make the repayments.
How do I work out the cost of my loan?
The best loan rates vary according to the size and duration of the loan. If you’re looking for low interest loans, you might look to borrow over the longer term, as these loans may attract lower interest rates.
But remember, you need to look at the overall cost as you’ll be paying back the loan for longer.
Borrowers with poor credit records will be charged higher rates.
What is the difference between a secured and unsecured loan?
The main difference between a secured and unsecured loan, is that a secured loan is exactly that, secured against something, known as collateral. This could be your home or a vehicle. With a secured loan, the loan provider can repossess your collateral, if you’re unable to meet your repayments.
An unsecured loan doesn’t require a piece of collateral, meaning you won’t be at risk of losing your home or car etc. However, because you’re not offering anything to secure the loan, you may be charged higher rates of interest, and be unable to borrow larger amounts.
What is a homeowner loan?
A homeowner loan is a type of secured loan, which sees your home act as collateral. Because you’re securing the loan against something as valuable as your home, it provides you with access to larger amounts to borrow, as well as potentially lower interest rates and longer loan terms.
These types of loan are potentially a better option for those with a bad credit history, as offering your home as collateral provides security to your lender. However, during your application, the lender will check whether you hold enough equity in your home to borrow against.
However, it’s critical that you know that, if you’re unable to meet your repayments, you are at risk of the loan provider repossessing your home. Meanwhile, if you’re in the fortunate position to be able to pay off your loan early, you’ll be likely charged an early repayment fee, so be aware of this amount when you take out the loan.
How can I check if I am eligible for a loan?
To find out if you’re eligible for a loan, you can use Compare the Market’s loan eligibility tool. Simply answer a few questions, and we’ll be able to run a soft search on your credit file, to find out which loans you qualify for.
What is a soft search?
A soft search is a type of search on your credit file that doesn’t impact your credit score. While it will be recorded on your credit file, it won’t be visible to lenders, and so can’t affect their decision to approve your loan application or not.
What do I need to compare loans?
It’s simple. We’ll show you available loans, once you enter:
- How much you want to borrow
- Over how long
- How much you can afford to pay each month
When you compare loans with us, we’ll show you details including:
- Representative APR
- Total amount repayable
- Monthly repayments
Can I get a loan to buy a car?
You can get a personal loan to spread the cost of buying a car, or a secured loan specifically designed for this purpose. If you take a loan secured on the car, you may lose it if you can’t make the repayments.
- Hire purchase – often available from the dealership, these loans typically require a 10% deposit. The remainder is split into monthly repayments and spread over one to five years. Hire purchase usually offers fixed interest rates.
- Personal contract purchase – this type of car financing agreement gives you the option of handing back the car or buying it when the term ends.
See more on car financing options
See more on car financing options.
Can I overpay or pay my loan off early?
It depends on the credit agreement that came with the loan. Although providers must allow you to pay back personal loans in full, there may be fees for early repayments or overpayments. See the rules on repaying loans early.
What if I’m struggling to repay my loan?
If you’re struggling to repay your loan, the first thing to do is to get in touch with the loan provider. They may give you more time to make the payment. Simply missing repayments will affect your credit score and you’ll be charged a fee for each one you miss.
What is APR?
APR is short for annual percentage rate. It represents the cost of borrowing over 12 months and includes the interest rate as well as any other standard charges. When a loan is advertised, ‘representative’ APR is shown. This is the APR available to at least 51% of applicants, but it’s not necessarily what you’ll be offered. That will depend on your personal circumstances, including your credit history.
Will searching for a loan affect my credit rating?
Searching for a loan won’t affect your credit rating. However, it’s worth noting that each time you apply for credit, a note is placed on your report saying that a business has reviewed it.
If you make several inquiries in a short period of time because your previous applications have been unsuccessful, it may be taken as an indication that you are in desperate need of a loan or that you’re taking on more debt than you can afford.
Why choose Compare the Market
See loans for your chosen amount in under 3 minutes**
See loans from a wide range of lenders
Loans available up to £100,000
**Correct as of March, 2022.Start comparing loans
What do I need to get a loan?
To apply for a loan, you need to meet certain requirements. This can vary from lender to lender, but generally, you’ll need to:
• Be 18 or above – for some lenders it may be 21, and other lenders also have upper age limits
• Have a regular income (job or benefits)
• Be on the electoral register
• Have a functioning bank account
• Be able to afford the repaymentsStart comparing loans