If you want a low interest loan, you’ll need to shop around to find the cheapest loans available. A good way to find cheap loans is to use our comparison tool at the top of this page.
The cheapest loans available have a low annual percentage rate (APR). The APR is the rate lenders charge you for taking out a loan with them. It factors in the interest, as well as all the other costs of your loan. By finding the best APR loans, you’ll save money on the overall cost of your borrowing.
Low interest loans are great, but you should search specifically for the best APR loans, as these take all the fees into account and not just the interest. This’ll help you find the cheapest loans.
Banks and building societies don’t always offer the cheapest loans, so you should check out all the options before you apply.
What to consider when looking for low APR loans
There’s a lot more to choosing the right loan than just finding loans with low APR. There are some decisions you’ll need to make before you start to compare cheap loans.
You’ll need to think about what kind of low interest loan you want. Different loans come with different benefits and risks. So it’s important to choose the right type for your needs, and then find the best APR loans within that category.
What type of low interest loan do you need?
There are lots of types of loans out there, but they all fall into two categories: unsecured loans and secured loans.
Secured 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. Although you can usually borrow more than with a personal loan, you need to think carefully before taking out a personal loan, as it puts your home at risk.
Unsecured loans aren’t secured against your belongings. You just borrow the money and pay it back but, if you can’t pay it back, they can’t get their hands on your property. They’re sometimes called personal loans.
How long do you need to pay it off?
The length of time you spend paying off your loan is called your loan term.
The longer your term, the less chance you have of finding cheap loans. Although you’re likely to find the lowest APR loans by going for a longer term, it doesn’t mean your loan will be cheaper overall. This is because you’ll be paying interest for longer.
It’s wise to choose the shortest loan term that still keeps your monthly payments affordable. Our loan calculator will help you work out how different loan terms affect your monthly payments, and the overall costs of your loan. You can find low rate loans using the comparison at the top of this page, and then use the loan calculator to find out how much they would cost you.
How much do you need
The bigger your loan, the more likely you are to find the lowest loan rates. But remember that even if you have a low interest loan, a large loan can still make the repayments high.
The more you borrow, the higher your repayments will be. So you shouldn’t borrow more than you need. And you should only ever apply for a loan you can afford to pay back.
How do credit scores impact loans with low APR?
If you’re looking at low interest personal loans and you have good credit history, you’ll be pleased to hear that you might be able to get lower rates.
When you apply for any form of credit, the lender will do a credit check. That’s when someone checks your financial history in your credit file.
The APR a lender’s willing to give you depends on your financial status and credit history. Good credit scores lead to lower rates.