Borrowing £5,000 is something many people may need to do at some point in their lives. It could be to consolidate debt, purchase a car, go on a honeymoon, or to make repairs around the house.
There are many reasons for which you may need a £5,000 loan and there's nothing wrong with it as long as you have a clear plan on how you're going to pay it back.
But before you borrow £5,000 you also need to know the cheapest way to borrow. You'll have to decided whether you use a credit card, or take out a loan.
At £5,000, you're probably at the maximum threshold for using a credit card to borrow. Credit cards have much higher interest rates compared to loans and are meant for short term borrowing. This is why a £5,000 loan may be a better option.
How long should you take to repay your £5,000 loan
A £5000 loan, UK wide, can last between one and seven years, but some lenders do offer shorter terms of just six months, or longer loans up to 10 years.
With personal loans, the longer the term your loan, the smaller your monthly repayments will be. However, the longer you take to repay your loan the more you'll end up paying in interest over all.
For example, let's say you borrow £5,000 at 8% APR ...
If you repay the loan over 3 years: your monthly repayment will be £156.04 and you'll pay £617.44 in interest over all.
If you repay the loan over 5 years: your monthly repayment will be £100.72 and you'll pay £1,043.20 in interest over all.
To avoid burdening yourself, it's better to make sure you choose the shortest loan term that results in repayments you can afford on a monthly basis for the duration of the loan.
How to get the right £5,000 loan for youSince you know how much you want to borrow you can follow these three steps:
Work out how long you need to pay the £5000 loan back
Compare rates online to find the cheapest loan
Make sure you meet the lender's rules before you apply
You can see which will be the cheapest and see how much you will pay each month using our loan calculator.
Get the cheapest loan
The cheapest loan is one with the lowest APR (interest rate) for the term you want to borrow for.
This comparison includes all the £5,000 personal loans available in the UK today, so you can compare rates to find the best loan for you.
Check the rules before you apply
Every lender has a list of requirements all their borrowers have to 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
Earning a minimum income per year e.g. £12,000
Having a good credit record e.g. no history of missing loan payments
Will being rejected for a loan affect my credit rating?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 find the deals that you can afford and that you're more likely to be accepted for.