What is a personal loan?
A personal loan is an amount of money that you borrow from a lender, such as a bank or credit company, and that you pay back over a specified period of time.
When looking for a new loan, you want to compare the cheapest interest rates available. You can do this using our loan comparator on our Personal loans page. This compares the cheap personal loans in the market and helps you narrow down your search and find the best loan for you.
How does a cheap interest rate loan work?
When you get a loan, you have to pay it back over a fixed term, called the loan term.
In exchange for having the money upfront, you pay the lender an interest rate plus a portion of the principal you borrowed at a monthly rate over the life of the loan. The faster you pay back the principal you borrowed, the less total interest you will pay over the life of the loan.
For a complete guide to how loans work, check out our guide Loans explained: everything you need to know
What happens at the end of a loan?
At the end of the loan when you have repaid everything, your loan agreement ends. At the end of the loan term, you will have repaid the full loan amount.
It is really important to pay your loan payments on time and in the right amount. This way you can show that you are capable of managing your money well and you can build a good credit history.
Learn more about credit reports and credit scoring with our guide to What affects the credit rating.
The cheapest personal loans are the ones with the lowest interest rate and no additional hidden costs. The best deals are available for people with good credit rating. However, if you have had credit problems, you can still get a loan, although the interest rate is likely to be higher.
If you’ve had credit problems in the past, you can check out our guide to Bad loans.
What are the types of cheap loans?
Generally speaking, there are three different types of loans that you can apply for in UK:
Personal loans – unsecured loans, normally offered based on your credit score. You can borrow small amounts up to £ 35,000, but sometimes interest rates are staggered depending on how much you want to borrow.
Secured loans – loans which are usually secured against your house, they are more suited for long term loans in UK, with payment terms of up to 25 years. The interest rates on these mortgages will be lower than those on a personal loan. However, if you don’t meet the repayments, your home would be in jeopardy.
Auto loans – car loans in UK can be secured against your vehicle or just be a form of unsecured personal loan
How to find a cheap personal loan?
When you want to know how to find the cheapest personal loan, there are a few issues you should keep in mind.
First, the amount of money you can borrow will be affected by your income and your credit history.
The cheapest loans are available to those who meet all of the lender’s criteria, so the best deals don’t go to everyone
The low APR offered to you may not be as good as the advertised overall rate
There is no “one size fits all” – the cheapest loans for you will be different from those offered to other applicants.
The higher your credit score or credit score, the more likely you will be offered a lower APR
COVID-19 and cheap personal loans
The coronavirus pandemic has hit many people hard financially. You may have been affected by a layoff, reduced wages or hours of work, or the burden of having to take care of other family members.
If you’re having trouble with your loans and debts, loan companies and other personal loan providers should give you the option of freezing your payments for three months while you get your finances back on track.
You should contact your loan provider if you are having trouble paying – don’t just stop the monthly payments. This could cause you greater financial hardship and will certainly negatively affect your credit rating.
If you have a payment holiday, it doesn’t mean the loan has ended or the interest rate has been reduced. You will still have to repay the full amount and may pay more overall.
If you can, try to keep track of your monthly payments, and then try to get out of debt at the end of the loan period.
Learn more about cheap personal loans:
In this guide, we answer the following questions:
How to get a cheap personal loan?
The cheapest loans are built around a set of criteria that will be different for everyone. Use our comparison charts to find a loan that suits your needs, while considering low APR loans.
Where you want to find the cheapest personal loan, try to get your credit score in the best shape possible. This includes making sure that you are on the voters list and that you are not applying for a lot of credit in a short period of time.
What are the best loans?
We explain how to find the cheapest loan for you with the lowest interest rate, and what you need to know before choosing one.
Low prices: As you can compare the cost of the loan up front, the loans compete almost exclusively on price alone, so the best loans are usually only the cheapest loans with the best loan rates.
Mandate’s duration: However, other things come into consideration in determining the best loans, such as a lender’s flexibility, whether you can take advantage of repayment holidays, customer service, the length of the term, and the length of your application.
Compare loans: You can search for the cheapest loan rates using our comparison tool. When you have found the best personal loan for you, you can apply with the lender. Be careful not to apply too much for credit – this will show up on your credit report and could make you look desperate for money.
Having a lot of applications logged will reduce your chances of being approved for loans or other borrowing in the future, as lenders will be more wary of you.
How To Find The Best Loan Rates For Cheap Loans
Our personal loan comparison service can help you find the best loan rates available to you. To find a cheap loan, we will need to know:
From this information, our comparator will find the cheapest personal loans for you.
When you look at your results you will want to find the low interest loans, these are the low APR (Annual Percentage Rate) loans, they have the lowest APR for the amount and repayment period you want.
The APR takes into account the cost of interest on the loan and any fees or charges put in place. You should be looking at the APR and not just the overall interest rate. The APR gives a figure for the overall cost of the loan, including any additional costs.
Which cheap loans are right for me?
A loan is a big commitment, so when looking for the best loan deals, as well as the APR, there are a number of other things to consider:
Can you afford the monthly repayments?
Is your situation likely to change in the future in a way that could affect your repayments?
Will this loan have a long-term impact on your credit history if you don’t pay it back on time?
Will the lender allow you to prepay your loan if you wish?
Are there any arrangement fees?
Can you take a payment break or defer your loan payments if you need to?
Get Cheap Loans Online
Most of the cheapest UK loans are not necessarily bank loans. Online loans have become a competitor to cheap loans in UK over the last 10 years, which means that many of the UK’s cheapest loans can be found with specialist online companies or lenders such than, peer-to-peer loan companies.
However, make sure your loan company is regulated by the Financial Conduct Authority (FCA). Peer-to-peer lending has been hit by the Covid-19 crisis and it’s a good idea to read our guide on Peer-to-peer lending and how it works.
Will my credit score prevent me from getting the cheapest personal loan?
If you have had credit problems in the past, you may not be eligible for the cheapest loans because you will not meet the loan requirements.
Often times, the best loan deals go to people with the best credit scores – therefore, the rate offered to you may be higher than the advertised rate. Sometimes the lender will try to offer an alternative loan with a higher interest rate. It’s a good reminder that having a good credit rating can be beneficial for years to come, so if your credit rating is in bad shape, you may want to rectify that first.
The rate you are offered will also vary depending on the amount you borrow and the length of time you want to repay the loan. Be sure to do another comparison to see if you can find your best cheap loan deal with another lender.
How our cheap loan comparator works
Using our loan comparison tool, you indicate how much you want to borrow and then fill in the box to indicate how long you need to pay it back.
Then we show you a selection of different loans. The information we include shows the total amount you will repay, the fees you will have to pay, the interest rate (called APR) and how much it will cost you each month. When you find one that suits you, just hit the Apply button. Don’t make a lot of different requests for a cheap loan in a short period of time, as this will show up on your credit report and could discourage lenders from lending you.