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What is the best way to get a £5,000 loan?
Personal loans for £5,000 are available from lots of different providers and on a variety of terms.
The questions you need to ask yourself when taking one out are:
How long will I need to pay it back?
How much can I afford to pay back each month?
How good is my credit score?
The right sort of loan for you will depend on how you answer these questions.
The different ways to borrow £5,000
Personal, or unsecured, loans are paid back on a fixed schedule typically over anything from 12 months to eight years - although the maximum term for a small loan of £5,000 is likely to be seven years.
The cheapest rates go to people with the best credit scores - but bad-credit personal loans are available too.
As the name implies, the loan is tied to you and your credit score - so you're not putting any assets at risk if you miss payments.
However, missing payments or defaulting on your loan will at the very least hurt your credit score and could result in county court judgments against you or your debts being passed to a debt collection agency. You may also have to pay late fees and charges.
If you're looking to buy something specific - you could borrow £5,000 on a credit card to do it. In fact, with a 0% purchase credit card, you could then spread the cost of this interest-free.
Even if you just need the money paid straight into your bank account, this is possible with a money transfer credit card, although there will usually be a fee attached.
Credit cards let you pay back your loan far more flexibly than a personal loan - with a low monthly minimum repayment and any amount over that allowed. You can even flex the amount you pay back each month.
If you pay back the full loan within the 0% period, you’ll save a packet on interest. However, if you still owe money at the end of the introductory period, you’ll be switched to an expensive APR, which will cost you a lot more. You may be able to switch to another 0% deal, but this isn’t guaranteed, so you should set your repayments to clear the whole debt before the 0% period ends.
You will need a good credit score to take out the best cards, including 0% offers, and you usually won't know your credit limit until after you've been accepted for a card.
Missing payments or defaulting on your debt will result in a lower credit score and potentially county court judgements against you or even bankruptcy.
If you're a homeowner or have another valuable asset, you could get a cheap loan by putting it up as collateral.
Secured loans are available over much longer terms than personal loans - you repay over a set term that can be up to 30 years - and it can be easier to take out as lenders have more certainty in the case that you default.
However, the money can take longer to reach you - as the lender needs to assess your collateral - and your asset is at risk if you don't meet repayments.
A guarantor loan could be an option if you have a poor credit history or are struggling to get a loan.
With these you need a third party – typically a family member or friend – to “guarantee” to pay off the debt if you can’t. The guarantor and borrower must have separate bank accounts.
Other than that, they work the same way as a personal loan - with a fixed interest rate, set monthly payments and typical terms of between one and five years – although some may be longer.
The different ways to borrow £5,000
Personal loan
Credit card
Secured loans
Guarantor loans
How much does a £5,000 loan cost?
There are two aspects of the cost of a £5,000 loan to consider - the monthly repayments (made up of capital owed and interest) and the overall cost across the full term of the loan.
The longer you take to pay off the loan, the lower your monthly repayments will be but the more you will pay in interest over the lifetime of the loan.
For example, let's say you borrow £5,000 at 8% APR...
If you repay the loan over three years: your monthly repayment will be £156.68 and you'll pay £640.55 in interest overall.
If you repay the loan over five years: your monthly repayment will be £101.38 and you'll pay £1,082.92 in interest overall.
While the shortest term possible will save you the most money in the long term, you need to be realistic about how much you can afford to pay back each month. Missing a payment can end up hurting your credit score.
You can use our loan repayment calculator to see what your repayments will be for different loan terms.
You need to balance monthly costs with overall costs to get the best deal for you.”
£5,000 loan payments for different terms
For an 8% loan, this is what you'd pay back each month and total interest charged on a £5,000 loan over one, two, three, four and five year terms.
How to get the right £5,000 loan for you
You can see how much a loan will cost you each month and overall by using our loan calculator.
Just put in the amount you want to borrow (£5,000), the interest rate shown against your chosen loan and then alter the number of years you want to borrow the money to see how much the monthly repayments will be.
Once you know which loan you want and the term you need to repay it, you're ready to apply.
How to compare £5,000 loans
When presented with a string of offers, this is how you pick the best one for you
Check your eligibility
Compare personalised loans
Apply online
Check eligibility and compare loans
Will I qualify for a £5,000 loan?
Every lender has a list of requirements all their borrowers must meet before they lend to them, so it pays to check you fit the bill before you apply.
Typical requirements can include:
Being a UK resident, sometimes for a minimum period such as three years
Earning a minimum income per year e.g. £12,000
Being over a certain age, e.g. 21
Being below a certain age by the end of the term, e.g. 70
Having a good credit record e.g. no history of missing credit repayments
Having a UK-based bank or building society
What happens if I'm rejected for the loan?
Every time you apply for credit, it leaves a mark on your credit report. If you're rejected for a loan application, it's important to try to find out why before you apply again.
It's also vital that you don't make many applications at once, as that may give the impression that you are struggling financially.
This is where our comparison service can help, as you can compare the deals that you can afford and find the loans that you're more likely to be accepted for.
FAQs
APR (annual percentage rate) is the cost of your loan over a year. This typically includes any arrangement fees as well as the interest. Lower APRs mean lower loan costs.
Applying online can take minutes if you have your details ready. Some secured loans take longer as the lender will need to value your property.
All the loans in this comparison offer fixed interest rates so the amount you will pay will stay the same. However, it is possible to get personal loans with variable rates. This means the amount you pay each month can change.
The cost of the repayments depends on the interest rate and how long you take to pay back the loan. You can use our loan calculator to check what your payments could be.
Yes, you might have to pay a higher rate if you have bad credit. The lender only has to offer its advertised interest rate or lower to 51% of borrowers, so if you have bad credit it can charge you more.
If you’re struggling to repay your loan, you should speak to your provider as soon as possible. It may be able to give you a payment holiday or work out a plan to pay off what you owe. Speaking to it upfront, before you miss a payment, may mean it delays reporting the default to credit reference agencies, which can protect your rating. There are several free charities that can give you advice if you’re struggling with problem debt, including StepChange, National Debtline and Citizens Advice.
Many loans will have penalties if you want to pay off what you owe early, often known as early repayment fees. The cost will typically be worked out as a portion of the interest you would have paid if you’d stuck to the terms of the loan. Do your sums to find out what interest you will have to pay by sticking with the loan till the end vs. paying the charge. Not all loans have penalties, so if you think you might want to clear your debts faster, check the small print before you apply.
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