Personal Loans Guide
Below is our informative guide to Personal Loans, we have listed relevant information, common questions, products and services from the most trusted finance companies on the market.
Welcome to the Personal Loans Guide
A personal loan is simply a way of borrowing money that you’re required to pay back over an agreed period with interest. Knowing where to get the best deal can be difficult, so we’ll compare a broad range of personal loans from across the market to find the right fit for you.
Personal loans are usually unsecured, which means you’re not putting your valuable possessions, such as your home or car, up as security or collateral against the debt. But this limits how much you can borrow – it’s typically up to about £25,000.
Table of Contents
- What Is a Personal Loan?
- How do Personal Loans work?
- Best Personal Loans
- Advantages and Disadvantages of Personal Loans
- Benefits of a Personal Loan:
- Drawbacks of a Personal Loan:
- How to Apply for a Personal Loan
- Alternatives to Personal Loans
FAQ about Personal Loans
- What happens if I miss a personal loan repayment?
- Do I need a good credit score to get a personal loan?
- Can you be pre-approved for a personal loan?
- How long will it take to get my money?
- What can I do if I need to borrow more than they’ll lend?
- What happens if I can’t repay my loan?
- Can I repay my loan early?
- What will happen if UK interest rates change?
What is a Personal Loan?
A Personal Loan lets you borrow an amount of money from a lender over an agreed period (or term). The amount you borrow, plus interest, is typically paid back in fixed monthly instalments.
You can use a personal loan to pay for any wedding expenses:
- Rings
- Venue
- Catering
- Honeymoon
- Decorations
- Entertainment
- Photographer
- Invitations
- Hair and makeup
- Wedding dress and tuxedo
- Travel for destination weddings
Many personal loan lenders rebrand their general-purpose personal loans into specific uses, even though they’re all the same thing.
Best Personal Loans
If you’ve done the work and figured out that a personal loan makes sense for you, there’s no shortage of options to choose from. There are thousands of personal loan lenders out there, we break down a few of the best personal loans to choose from.
- Best for Low Rates
- Best for Bad Credit
- Best for Small Loans
- Best for Fast Funding
- Best for No Fees
- Best for Credit Cards
See Which Loans You Qualify For
Best Personal Loans for Low Rates
Loan.co.uk
- Loan Amounts £1000 – £30,000
- Loan Terms from 3 to 18 months
- No Minimum Credit Score
About Loan.co.Uk
An award winning, UK based loans and mortgages fintech, we have helped 1,000’s of people to consolidate their debt and fund home improvements, weddings and other life changing purchases. We have also helped 1000’s people to consolidate their over expensive debt.
We are rated 4.97 out of 5 on Reviews.co.uk from more than 1650 reviewers. We provide completely free, no obligation quotes after searching our extensive panel of lenders with 1000’s of secured loans products from across the market using the most advanced technology in the country. Loan.co.uk is a credit broker not a lender. Loan.co.uk is authorised and regulated by the Financial Conduct Authority, FCA reg number 718486.
Best Personal Loans for Bad Credit
PostOffice.co.uk
- Loan Amounts £1,000 – £50,000
- Loan Terms 12 – 84 months
- APR Range 8.49% – 35.97%
- No Minimum Credit Score
About Post Office Personal Loans
At Post Office®, we aspire to be at the very heart of customers’ choice by becoming the most trusted provider of essential services to every person in the land.
We’re the UK’s largest retail network and the largest financial services chain in the UK with more branches than all of the UK’s banks and building societies put together. We also have growing direct channels such as contact centres and online – meaning we’re there for more customers, in more ways.
Best Personal Loans for Small Loans
AA Loans
- Loan Amounts £1,000 – £40,000
- Loan Terms 12 – 60 months
- APR Range 8.05% – 36.00%
- No Minimum Credit Score
About The AA Loans
AA Loans offer unsecured personal loans, they can be used for debt consolidation, car, home improvements etc. The rate is currently 3.3% (from 23rd June 2020) and is provided by Bank of Ireland UK.
USPs
- Fixed monthly repayments for the duration of the loan
- Spread the repayments over 1-7 years
- No arrangement or set up fee
- Other Loan amounts and terms available. Loan amounts range from £1,000 to £25,000, with terms available from 1-7 years.
Best Personal Loans for Fast Funding
MasterLoan.co.uk
- Loan Amounts £2,000 – £36,500
- Loan Terms 12 – 72 months
- APR Range 7.99% – 35.99%
- No Minimum Credit Score
About MasterLoan.co.uk
Masterloan.co.uk compare 100’s of different loan plans, no matter where you are in the UK. Our dedicated home loans team will search and find the best solution for you and at all times we will keep you informed of you home loan application. We offer homeowners and business owners loans and mortgages and offer loans from £1,000 up to £2.5 Million with fast market leading completions.
Best Personal Loans for No Fees
Quick Car Finance
- Loan Amounts £5,000 – £100,000
- Loan Terms 12 – 84 months
- APR Range 8.99% – 23.43%
- No Minimum Credit Score
About Quick Car Finance
As one of the leading car financing companies in the UK we are delighted to be able to offer no obligation car loans without arrangement fees. It’s our mission to only offer a premium service and that’s why we are well on the way to being the number one car financing company in the United Kingdom. We have over 72 different finance tiers and we are renowned for offering a high quality service. With 5* Trust Pilot customer ratings, we’ve arranged car financing for thousands of happy customers – will you be our next?
Best for Credit Cards
Score Mastercard
About Score MasterCard
The Secured Score Mastercard® is one of the first credit building solutions the UK, providing a credit building solution to both consumers and new businesses looking to establish positive trade history.
Since 2000, DND Finance has established itself as a multi-national finance company helping the underserved corporate and consumer finance arenas in both the UK and Canada. As a division of D&D Leasing UK, the company was founded by Bill Dost, offering business financing solutions in the loan, vehicle, equipment finance and leasing markets in the UK. DND Finance is fully authorised and regulated by the FCA, and is a member of….
Advantages and Disadvantages of Personal Loans
If you’re thinking of taking out a personal loan, here are some pros and cons to weigh up first.
- You can use the money for whatever you like – you could pay for home improvements, a wedding or a car, for example. You’re not tied to a specific purpose, unlike with car finance.
- Flexible terms – you can choose how much you want to borrow and how long you’d like to repay it. However, this does depend on your credit score and will affect the amount of interest you’ll have to pay.
- Fixed interest rates and repayments – with personal loans, interest rates are usually fixed, unlike credit cards. And you’ll repay a fixed amount every month, which makes it easier to budget.
- Debt consolidation – consider paying off multiple debts with one loan. A single repayment plan could make your debt more manageable by combining multiple monthly payments into one. You may be able to secure a better interest rate too. But bear in mind that extending the length of your loan means you may pay more in the long run.
- Apply and receive the money quickly – you can often apply online and, if you’re approved, the lender will usually deposit the money into your account within a few days (or even a few hours if you’re already a customer).
Benefits of a Personal Loan:
Drawbacks of a Personal loan:
Higher interest rate than some alternatives – personal loans tend to have higher interest rates than loans secured against an asset. So, if you’re looking for cheap loans, this might not be the best option.
Some credit card providers also offer interest-free deals for an introductory period, making them a potentially cheaper option than a personal loan.- Long-term commitment – if your income changes after taking out the loan, you might struggle to keep up with your repayments.
- Good credit score needed for the best rates – the interest rate advertised may not be the rate you’re offered (unless it’s a guaranteed rate). A poor credit score makes it difficult to qualify for the best personal loans.
- Penalties if you default – if you fail to make your repayments on time, this will damage your credit score. Your lender may even take legal action to settle unpaid debts.
How to Apply for a Personal Loan?
When you use our eligibility checker, we’ll show you a list of personal loans you might qualify for.
Once you’ve chosen a personal loan, you’ll be taken to the lender’s site to apply. You’ll need to have details including:
- All the addresses you’ve lived at for the past three years
- Your email address
- Your employer’s details, including their address and phone number
- Details of your monthly income and outgoings
- Your bank or building society account details.
This helps the lender assess whether you’ll be able to make the loan repayments.
What are the Alternatives to Personal Loans?
There are five main alternatives to personal loans:
Secured loan
If you’re having trouble getting accepted for a personal loan or you’re looking to borrow more than £25,000, you could try applying for a secured loan. This type of loan is also known as a homeowner loan.
You’ll need to offer an asset such as your home or car as collateral. This could be recovered by the lender if you fail to make the repayments.
Because secured loans are less risky for lenders, they tend to offer:
- Lower interest rates
- Longer terms
- Higher borrowing limits.
Get a Instant Secured Loan Quote
Credit cards
If you’re looking to borrow a small amount, a 0% interest credit card could be a useful alternative to a personal loan.
Make sure you can afford to keep up with the minimum monthly repayments and ideally repay the full amount before your 0% period ends.
Overdraft facility
If you only need to borrow a small amount of money for a very short time, consider using an interest-free overdraft, if you have one. If you don’t, it could be worth looking at alternative current accounts that offer this facility.
Peer-to-peer personal loan
Peer-to-peer (P2P) loans work in a similar way to standard personal loans. The difference is you borrow money from another person or group of people, instead of a bank or building society.
You can find P2P lenders on dedicated websites. Interest rates vary and can be affected by your credit score. However, P2P lending can sometimes offer lower interest rates compared to traditional lenders.
Car Finance
Car finance helps people buy a car that they couldn’t normally pay for up front. You’ll typically pay a deposit, followed by monthly repayments (with interest) over a fixed term. This could be from two years up to five years.
There are several different types of car finance available:
- Hire Purchase (HP) – your loan will be secured against the car, and you’ll split its cost into monthly repayments. Once you’ve made the last repayment, the car will be yours to keep.
- Personal Contract Purchase (PCP) – this type of agreement is based on the amount of value the car will lose during the loan term (its depreciation) rather than its total value. At the end of the agreement, you can hand the car back, buy it by paying a one-off balloon payment, or use any positive equity as a deposit in a new loan.
Compare Personal Loans
Click a comparison website below to recieve a personal loans quote.
Frequently Asked Questions about Personal Loans
There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.
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How Much do Personal Loans cost?
The cost of a personal loan depends on how much you want to borrow, the APR and how long you take to pay back the money. Interest rates vary according to the size and length of the loan. A longer loan term may attract lower rates, but the overall cost will be higher than a short-term loan. And borrowers with poor credit scores will be charged higher interest rates. We can arrange finance for most cars and vans and cover the majority of UK dealers.
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What happens if I miss a personal loan repayment?
If you miss a loan repayment, the lender may add extra charges and interest to your loan. Missed payments will also be noted on your credit report, which could harm your credit score and make it harder for you to borrow in the future. If you think you’re going to miss a payment, contact your lender. The sooner you discuss your options, the more flexible the lender may be.
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Do I need a good credit score to get a personal loan?
You may be able to get a personal loan with bad credit, but it will affect how much you can borrow and the amount of interest you’ll be charged. The better your credit score, the better terms you’ll be offered for a personal loan because the lender will be more confident you’ll be able to repay it. However, buying a car on finance can be more expensive than buying outright. Unless you get a 0% finance deal, you’ll likely be paying interest over several years and there’s a cost to that. Make sure you’re fully aware of the costs involved and only commit if you’re confident you can pay the car off.
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Can you be pre-approved for a personal loan?
Yes, you can be pre-approved for a personal loan. Pre-approval means your loan application will be accepted based on the information you’ve provided. The interest rate, loan amount and term length will all be guaranteed, pending final checks from the lender. Put simply, it’s a ‘what you see is what you get’ deal. Credit is subject to status and additional affordability checks.
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How long will it take to get my money?
With some lenders, you can get your money on the same day as your application if you already hold an account with them. But you can normally expect to get your money within a week. The quote will be valid for 30 days, so it gives you time to look for your dream car if you haven't already found it. Once you have decided, you'll need to provide the details of the car and of your approved dealer. The money will be transferred to the dealer and you'll receive the deeds to the car when you collect it.
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What can I do if I need to borrow more than they’ll lend?
If you need to borrow more than the lender is willing to offer you, or you need more than the typical £25,000 limit, consider a secured loan. You can borrow £100,000 or even more with a secured loan, but you’ll need to offer something of value as collateral, like your home. Think carefully before taking out this type of loan. If you miss repayments, the lender can seize the asset you put up as collateral to repay what you owe.
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What happens if I can’t repay my loan?
If you’re struggling to repay your loan, contact your lender as soon as possible. They may be able to support you with managing your repayments. Alternatively, contact a debt advice service. They’ll be able to help you organise a debt repayment plan with your lender. If you can’t reach a compromise with your lender, you’ll probably be charged penalty fees for partial, late or missed repayments.
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Can I repay my loan early?
You can pay off your personal loan early, but you might have to pay an early repayment charge (ERC). Early repayment charges vary, but you can usually expect to pay the equivalent of one to two months’ interest.
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What will happen if UK interest rates change?
If your personal loan has a fixed interest rate, it won’t be affected if UK interest rates change. Your monthly repayments should remain the same, regardless of what happens to the Bank of England base rate.
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How long will it take to get the money?
Every lender differs. Some can get you the funds same day. However, it's usual for the money to come through in about three to five days. You can then arrange with the dealer to pick up your new car.
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How do I calculate my deposit?
Your deposit is the amount of money you have available to pay the dealership upfront. This could include savings and/or the value of a current vehicle as a part-exchange, and it’s taken off the total sum of the car you’re buying.
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Can I sell my old car, as a deposit?
Yes, you can sell your car online and use the money as a deposit for your new car. You can sell your car online with the AA, thanks to our partnership with Motorway. Get the best price for your car from 5,000+ dealers. It’s completely free with home collection.
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Can I pay off the loan early?
Yes, you can pay off your loan at any time without incurring any early repayment charges. You will receive a rebate of interest if you pay off the loan early. You can also make overpayments with most of our lenders to help shorten the length of your loan.
Other Types of Loans Available
There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.
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