If you need to borrow money and are looking for a loan, getting a good deal is essential for keeping your costs down. Here’s how to find the best unsecured personal loans or secured loans available in the UK.
If you’re looking for a personal loan, getting the best deal possible can make a big difference to how much you end up having to repay.
Decide how much do you need to borrow?
Before starting your search for cheap loans, you need first to work out how much you actually need to borrow - this will enable you to compare personal loans best suited to your needs.
Ultimately the amount you need to borrow will impact the type of personal loan you will need to look for.
The maximum you can borrow with an unsecured loan is £25,000, but you may be able to borrow more than this by applying for a secured loan.
The majority of loans will specify a minimum-maximum loan bracket, for example £7,500-£15,000, so that you can see clearly if the amount you need to borrow will be available before you decide to apply.
Deciding how long you want to take to repay the loan is also essential when looking for the best loan for your circumstances.
Spreading the repayment of your loan over a longer period can reduce your monthly repayments, lower your APR and make the loan more affordable.
However you will be committed to repaying the loan for longer and likely end up paying more in interest so it's generally best to spread your repayments over the shortes time period that you can comfortably afford.
Check the application criteria
Before you apply for any financial product, including a loan, you will need to check that you meet the application criteria.
With loans this typically relates to your age, income and credit rating, although you will need also to be a homeowner if you're applying for a secured loan.
If you have had difficulties managing your borrowing in the past then finding cheap loans for bad credit can be trickier to find but not impossible.
While late payments, defaults and IVAs will all count against your credit rating there are still several lenders who will extend credit to applicants without charging extortionately high interest rates.
To compare personal loans available to people with poor credit use our Bad Credit Loans comparison table.
Interest, interest, interest
Once you have narrowed your options based upon how much you want to borrow and for how long, and have excluded deals you don’t meet the criteria for, your primary concern should be the cost.
This will largely be determined by the interest rate, as in most cases loans with the lowest interest rate will prove to be the cheapest loans.
The figure that you need to compare is each loans’ APR (Annual Percentage Rate) as it is this interest rate which will determine just how much your borrowing will cost.
The APR is the advertised rate of interest that at least 51% of applicants will get when they apply. As such it is not a guaranteed that you will be given this rate if you apply as risk based pricing is likely to be used (whereby your credit rating is used to determine the rate of interest you are charged).
As a result it makes sense to ask for a cost illustration based on the advertised APR to check what you might have to repay before asking for a full quote.
You can compare loan interest rates side by side using our loan comparison table.
Fixed or flexible?
Finally, before you apply for a loan you should check you are happy with how and when you will be able to repay it.
The majority of secured and unsecured loans will set a fixed monthly repayment for a set number of months, but you should check possible charges should you want to re-pay the loan early.
If this flexibility is very important to you, you may decide to apply for a slightly more expensive loan which gives you the freedom to repay what you want without charge.
However, you will need to make sure that you know how much this will cost you before making a decision, as opting for a lower interest loan and paying any early repayment charges could still prove to be cheaper than a more expensive flexible loan.
When looking for a secured loan you should also consider how much you can borrow in relation to the value of the item being used to secure the loan (your home for instance).
You must also double check under what cirumstances the company can seek to force you to sell it to get their money back.
For more help picking the best personal loan take a look at our guide 9 Top Tips For the Best Deal on a Personal Loan.