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Before you take out a £10,000 loan, it’s important to understand how much it will cost you to pay it back.
Factors that influence this include:
If you spread your loan out over a longer period, the monthly payments might be lower but you’re likely to pay more interest as it’ll take you longer to pay it off
The cost of your loan and the annual percentage rate (APR) you’re charged will change based on how much you want to borrow
This includes any fees or charges you might have to pay as well as the interest rate. The lower the APR, the less your loan will cost to pay back, but be aware you might not always get the advertised representative APR
If you’re taking out a loan, it will either be secured or unsecured. Which option is best for you will depend on your financial situation and circumstances.
A secured loan is when the lender uses one of your assets, usually your home, as security in case you can’t pay the money back. Because this type of loan is less risky for the lender, interest rates tend to be lower than unsecured options.
An unsecured loan is another name for a personal loan. They tend to be offered to people who’ve got a good credit rating. You borrow money from the lender and agree to make regular payments and pay the loan back in full, plus interest accrued.
With a secured loan, you’re borrowing money against something you own to guarantee you’ll pay it back. This is usually your home.
An unsecured loan is a simple way of borrowing a fixed amount of money. You pay it back through regular instalments and don’t need to use an asset as security.
There are usually still some loan options available if you’ve got a poor credit history or haven’t built up much of a credit score yet.
These can also help you improve your credit score if you keep up to date with your repayments. Although the interest rates are likely to be much higher.
You might be able to get a ‘bad credit loan’ from a lender that specialises in products for people with poor credit.
If you’re a homeowner, you may find it easier to get approved for a secured loan.
Another option is to take out a guarantor loan, where a family member or close friend acts as the guarantor who’ll step in and repay the loan if you can’t make the payments.
Some personal or unsecured loans might still be available if you’ve got a poor credit rating, but there’s usually a limit to how much you can borrow, and the APR is likely to be much higher.
However, consider carefully your own financial situation and if taking on more credit is the right solution for your current situation. Speak to debt advice organisations to get support on improving your situation before you consider taking out more debt. Available organisations include:
There are a number of things you should consider when you’re taking out a £10,000 loan, these include:
Fixed rate vs. variable - With variable interest rates, your monthly repayments will go up and down as the interest rate fluctuates. In contrast, with a fixed-rate loan, the rate of interest you pay will stay the same. This can help you to budget
Loan term - The length of the period over which you choose to repay the loan will affect how much you end up paying back. When you borrow money over a longer period of time, you’ll pay less each month, but you’ll pay more in interest over the full term of the loan
Total amount repayable - With some loans you can borrow as much as £25,000. You can often borrow more with a secured loan and usually the more you borrow the lower the interest rate. But what lenders offer will depend on your circumstances and credit rating
Early repayment charges - If you want to pay more of your loan off each month, or pay the whole loan amount off before the end of the term, some lenders might charge you a fee. This often amounts to one or two months’ interest
Low advertised rates - You won’t always get the APR you see advertised. At least 51% of borrowers must get the advertised rate, but you may end up with one that’s higher. The lender calculates the rate you’ll get based on your credit score and level of risk
It’s important to find the right loan to fit your needs and to choose one that makes it as affordable and easy to manage as possible.
To help you make the right choice:
Do this before you apply so that you can spot any mistakes and correct any out-of-date information. Errors in your credit report can negatively impact your application, so correcting them can help to improve your credit rating
A key factor when choosing the right loan is working out what you’ll be able to comfortably pay back each month to avoid getting into debt
Using one will show you how much your loan would cost you each month, plus you can see the total amount of interest you’d pay. You can use this to compare the differences between interest rates and different loan terms
Interest isn’t the only cost you’ll need to consider. You may be charged an arrangement fee and there’ll usually be penalties for late payments or paying off your loan in full early
Applying for a loan can negatively impact your credit score, so use our smart search tool to find out which loans you’re most likely to be accepted for before you apply
When you apply for a loan, you’ll need to provide information to support your application, this typically includes:
As well as checking your credit history, this type of information helps lenders to understand your financial situation and decide whether it’s a good idea to give you a loan.
APR stands for annual percentage rate. This is the official rate that’s used to help you understand the total cost of what you’re borrowing over a year.
Unlike a simple interest rate, an APR includes any compulsory fees you have to pay.
You can use an APR to compare different loans but also different financial products. For example, you could use it to see how much taking out a loan would cost compared to a credit card.
When you see a representative APR, you’re not guaranteed to get that rate. The lender only has to offer it to 51% of customers and they may increase it if they think you’re a higher risk.
It can help you find out which loans and financial products you’ll have the best chance of being accepted for before you apply.
Once you apply for a loan, the lender will do a hard credit check to make a complete search of your credit report. But too many hard checks in a short space of time can negatively affect your credit score.
Doing a soft search can help you avoid applying for the wrong loan and harming your credit record.
This will really depend on how much you can afford to repay each month. Generally, it’s best to borrow money for the shortest time possible, so that you end up paying less overall.
Loan term lengths are typically anywhere from 12 months up to five years. Borrowing for a longer period means you’ll pay less each month, but it’ll probably cost you more in the long run.
So it’s best to look for the shortest loan term with the most manageable monthly repayments.
If you miss a repayment, you may be charged a late payment fee by your lender and it can also affect your credit rating.
If you miss payments or don’t pay the full amount for three to six months, it’s known as defaulting.
This will be recorded on your credit report and could make it harder for you to access financial products in the future.
A repayment holiday is when the lender agrees that you can pause your loan repayments for a set period.
This option is usually offered if you’re struggling to make your repayments and it’s designed to give you a bit of financial flexibility.
Keep in mind that interest will still be charged if you take a repayment holiday, so you’ll end up paying more overall and your original term will be extended.
If you’re struggling with your loan, you should contact your lender as soon as possible. They might be able to restructure your debt to reduce your monthly repayments or give you a short repayment holiday.
This usually depends on which lender is providing the loan and whether you’re already an account holder with them.
If you’ve got an existing account with the lender, the money might be put into your account as quickly as the same day, or the following business day.
Typically, you can expect to receive the loan money within one to five days from the approval of your application.
Yes, depending on your individual circumstances, it’s possible to get a personal loan up to a maximum amount of around £25,000.
Typically, the more money you borrow the lower the interest rate you’ll be charged.
You can also spread the payments out over a longer term to reduce how much you need to pay each month. But remember that doing this means you’re likely to end up paying more interest overall.