In the market to compare loans for £4,000? Our guide could give some useful pointers
GoCompare’s guide can help you find the right rate for you when it comes to a £4,000 loan.
- If you have a good credit rating, you could potentially borrow £4,000 via a credit card
- A £4,000 loan could be a secured or unsecured loan
- Don't use a payday lender. Their APRs tend to be proposterous
Sometimes life throws things at us we’re not expecting. Things like a repair bill or an emergency. And we might not have the option to pay for it out of our regular income. These are times when people might consider taking out a loan.
Yet it's not a decision that should be rushed into. If you need a £4,000 loan then our guide can help you spot the things to look out for...
Would a secured £4,000 loan or unsecured £4,000 loan for you work?
An unsecured loan is a personal loan. You could borrow £4,000 from a bank, building society, or somewhere else. You then pay back the lender over a set period of time. If you need the £4,000 now, are you ok with paying back more in the future?
Pros for an unsecured or personal loan:
- Tend to be more straightforward than a secured loan
- More flexible repayment plans can be available
Cons for an unsecured or personal loan:
- Usually charge higher interest rates than secured loans
- Your credit rating could be at risk if you miss payments
- The best deals are usually only for people with high credit ratings
If you put something you own up to borrow money then that is a secured loan. Usually with a secured loan its your home you offer as collateral, but sometimes it can be your car. Usually secured loans are used to lend large sums of money - for instance over £10,000, but they can start from £3,000.
Pros for a secured loan:
- Usually lower monthly payments than unsecured loans
- If you have poor credit history, a secured loan might be easier to qualify for than an unsecured loan
- Typically paid back monthly and over a longer period
Cons for a secured loan:
- You'll probably end up paying more back to the lender in the long run
- If you struggle to repay the £4,000 loan then could lose your car or your home
- Your monthly repayments may increase if you take out a variable interest rate loan
- There may be an expensive arrangement fee
- Also look out for early repayment penalties (sometimes called lock-in penalties)
You might see secured loans called home equity loans, homeowner loans, and second mortgages.
When you see the word loan, the phrase APR is never far behind. It stands for annual percentage rate and is pretty important. Yet it’s not the only number you should note. Figure out what you'll need to pay monthly as well as the total amount payable.
A £4,000 loan can be either a secured or unsecured loan. Weigh up the pros and cons mentioned above to see what could work for you.
Here's some things to keep an eye on with a £4,000 loan
Will you be paying a fixed rate or variable rate? Variable rates mean your repayments could increase. Variable rates are more common with secured loans, but always check.
Next think about how long you want to repay the loan. Once you know this you can calculate the total amount you'll pay for the £4,000 loan. Then figure out the monthly instalment payment - can you afford it? After that, check if there are fees for paying back early. Finally, look into the penalties of missing a payment.
Beware low advertised rates. These may look great but lenders only have to offer this rate to 51% of customers. You might be in the 49% and paying more than the advertised rate. So even though a loan is advertised with a low APR, it doesn't mean it will automatically be for you.
Always check for fees and charges. And always look around and compare quotes
£4,000 loan over three years or longer? How long should you get a loan for?
A good length of time to repay a loan is up to you and your circumstances. There's a rule of thumb though. Borrow only what you need and repay as soon as you can.
Spreading it over a longer time can mean lower monthly costs, often at a lower interest rate. But you'll almost always end up paying more for the loan in the long run if you spread it out for years.
The Money Advice Service has a loan calculator to help you figure out what you'll be paying.†
Most lenders will offer one, three or five-year personal loans.
Got bad credit or no credit? Here's how you could get a £4,000 loan
There may well be lenders out there that will lend you £4,000. Yet interest rates are probably going to be very high. Have a peek at our guide to bad credit loans for more info.
Please note that if you've had a county court judgment (CCJ) against you or have been declared bankrupt, you're unlikely to be accepted for a loan offered through GoCompare.
There are other options available though. You're more likely to be offered a secured loan rather than an unsecured loan if you have a poor credit rating. If that's the case then consider talking to your mortgage provider first and seeing if they can help.
Credit unions can be really helpful if you’re struggling to find a loan. They are not-for-profit organisations that work within the community. There are over 350 credit unions in Britain. You can find your nearest credit union here.†
Where can I find a £4,000 loan that's suitable for me?
At the time of writing (April 2018), the market is competitive and rates have lowered. Yet it's still a good idea to approach cautiously and weigh up your options. Taking out a loan is not something to be treated lightly.
And just because rates may be favourable doesn’t mean a loan is the right way to get £4,000. You might want to consider a credit card to do this borrowing on. Many credit cards have a credit limit of £5,000. This approach only really works with 0% or interest-free credit cards. And even then you will need to be sharp with payments.
- How to cut the cost of debt
- Car finance and loans
Missing payments on a credit card will affect your credit score. Make sure you at least make your monthly payments and try and clear the debt as soon as possible.
Before you apply for a £4,000 loan, have a check of your credit score. Every time you apply for a loan, you leave a little footprint on your credit history. Too many can be seen as a bad sign. So check your score and don't apply for lots in one go.
Anyway, here’s a few quick tips:
- Do your research – work out what you need
- Use a loan calculator to see what all the costs are
- Look at the terms and conditions for charges and fees
- Use GoCompare to do a smart search and see which £4,000 loans you may be eligible for...