If you’re looking to spread the cost of purchases, or suddenly need extra cash, a low interest loan could help you keep your borrowing more affordable. Compare low interest rates and a range of terms lengths in our table below.
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A low interest loan is one that offers a low rate of interest, which makes borrowing more affordable.
If the interest rate is low, you will have lower monthly payments and pay less in interest overall.
There are a lot of factors that go into getting low interest loans. The APR you are offered will depend on things such as:
How much you want to borrow
Your income and and financial history
Your credit score — the better your rating, the better your chances of qualifying for the cheapest loans
The lowest rate offered to you may be lower than the rate advertised
To get a low interest loan, you most likely require a a strong credit score, along with a good credit history.
All loans fall into fall into basic two categories: unsecured loans and secured loans.
These loans are linked to something you own – usually your home. If you can’t pay the loan back, the lender could force you to sell your home to get their money back. You can usually borrow more with a secured loan, but it does put your home at risk.
These loans aren’t secured against your belongings. You just borrow the money and pay it back. This means that if you fail to pay the money back, your lender can’t get their hands on your property. You might hear these also called called personal loans.
As with most loans, your credit score will be a major factor in the interest you qualify for. The best loan rates are usually only offered to those who have good credit score.
Good credit scores lead to lower rates, and give you a better chance of getting the cheapest loans.
If you have bad credit, it'll be difficult to get a low interest loan. But it's still possible to get a bad credit loan.
There may be fewer providers willing to offer you a loan, and those who do will offer higher interest rates than you'd get with a standard loan, and you'll likely be limited to how much you can borrow.
You could also try to get a guarantor loan. That’s when someone – often a family member – guarantees to make your repayments if you can’t.
You should always try to prioritise paying off a loan as quickly as your finances allow you to. Missing payments can be very damaging to your credit score, while a long term can be expensive.
The longer your loan term, the less you will be paying every month, but you will likely end up paying more in interest overall.
Let's say you borrow £3,000 at an interest rate of 9%. Here's how your repayments and overall cost of borrowing will change depending on the loan term¹:
|Loan term (yrs)||Monthly Payment||Total interest|
There’s a lot more to choosing the right loan than just finding loans with low APR.
Some things you should look out for include:
The length of the repayment period or term
Whether your interest rate is fixed or variable
Whether you can afford the monthly payment
How much you'd repay overall, including fees
The most important number to consider when you take out a loan is the rate of interest. Shown as APR, this is the percentage amount your total debt will increase by each year.
As you can see from this graph, even a very small change in the APR can impact how much interest you pay. The longer it takes you to pay off your debt, the more interest you will pay.
We looked at repaying a loan of £10,000 with monthly repayments of £200.
Low interest loans are not always the best option. If you’re only borrowing a small amount – less than £5,000 – you might find that a credit card is better.
Your ability to do this will depend on your credit limit. Only people with good incomes and a decent credit score can borrow as much as £5,000 on a credit card. But, if that sounds like you, you might be able to get a credit card that gives you 0% interest on purchases.
If you think you’re organised and disciplined enough to pay off your credit card balance within the 0% interest period it could be the best way to borrow. Different credit cards come with different 0% periods – up to as much as 24 months. Alternatively, you could do a balance transfer to another 0% credit card when the 0% period ends.
"The cheapest way to borrow is to pay as little interest as you can. A low interest loan can be a great way to do this.
"However, make sure you know what extra fees your loan comes with – so you don't end up paying more in other areas."
If your level of debt begins to feel unmanageable, you should talk to your lenders as soon as possible. They may have schemes in place to help you, such as adjusting your repayment schedule to lower monthly costs.
You could also turn to debt charities such as Citizens Advice, StepChange and National Debtline. They offer free support and advice to anyone struggling with debt². They can help you make a structured plan to repay your creditors and get out of debt.
Typically, you can get some competitive rates for personal loans of up to £15,000. Interest rates for loans above that and up to £25,000 can be a bit more expensive.
How much a lender is willing to lend you is largely dependent on your income and overall financial history.
No, you won’t necessarily get the representative APR. The representative APR is what at least 51% of applicants for the loan are offered.
The only way to find out for sure what APR you’ll be offered is to apply for the loan.
Yes, you can. You might have to pay a penalty, so check the terms of the loan.
There’s also an option to make overpayments of up to £8,000 per year without paying any fees. Overpayments of more than £8,000 across the year might incur a cost.
It stands for annual percentage rate, which is the interest you pay on the total value of your loan. The lower your APR, the lower your monthly payments.
All the unsecured loans in this comparison offer fixed interest rates so the amount you pay will stay the same.
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.
Yes, but because the lender only has to offer their advertised interest rate to 51% of borrowers, if you have bad credit, they can charge you more.
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