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Finding the cheapest interest rate for loans

Finding the cheapest interest rate for loans

Read our guide to find out more about cheap loans and how to search for the best and cheapest personal loan for you.

What is a personal loan?

A personal loan is a sum of money that you borrow from a lender, such as a bank or credit company, which you pay back over a set period of time. In return for having the money upfront you pay the lender an interest rate, plus a portion of the capital you have borrowed at a monthly rate over the term of the loan.

By the end of the loan term you will have repaid the full amount of the loan. The cheapest personal loans are those with the lowest interest rate and without any extra hidden charges.

A personal loan isn't secured against your home and is also known as an unsecured loan. This makes it more expensive than borrowing via a mortgage, for example.

How do I find a cheap personal loan?

If you want to know how to find the cheapest personal loan there are a couple of issues that you need to bear in mind.

  • Firstly, the amount of money you can borrow will be affected by your income and your credit record
  • The cheapest loans are available to those who fit all the lender’s criteria, so the top deals do not go to everyone
  • The low APR you are offered may not be as good as the headline rate advertised
  • There's no 'one size fits all' – the cheapest loans for you will be different from that offered to other applicants

COVID-19 and cheap personal loans

The coronavirus pandemic has hit many people hard financially. You may have been affected by redundancy, a cut in pay or working hours, or the burden of having to look after other family members.

If you're having difficulty with your loans and debts, loan companies and other providers of personal loans should give you the option to freeze your repayments for three months while you get your finances back on track.

You do need to contact your loan provider if you're struggling to pay – don’t just stop the monthly instalments. This could get you into greater financial difficulty and will certainly adversely affect your credit rating score.

If you do have a payment holiday, it doesn't mean that the loan has stopped or that the interest rate has been reduced. You will still have to repay the full amount and could up paying more overall.

If you can, try to keep up with your monthly payments, and then try not to take on any more debt at the end of the loan period.

More about cheap personal loans: In this guide we answer the following questions:

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How do I get a cheap personal loan?

The cheapest loans are built around a set of criteria that will be different for everyone. Use our comparison tables to find a loan specialised to your needs, whilst considering low APR loans.

We explain how to find the cheapest loan for you with the lowest interest rate and explain what you need to know before choosing one.

What are the best loans?

As you can compare the cost of the loan upfront, loans compete almost exclusively on price alone, so the best loans are usually just the cheapest loans with the best loan rates.

However, other things come into consideration to determine the best loans, such as, how flexible a lender is, if you can enjoy any repayment holidays, customer service, how long the term is and how long your application will take.

You can shop around for the cheapest loan rates using our comparison tool. When you have found the best personal loan for you, you can apply to the lender. Be careful not to make lots of applications for credit – this will show up on your credit record and may make you look desperate for money.

Having lots of applications on record will reduce your chances of being approved for loans or other borrowing in the future as lenders will be more wary of you.

How to find the best loan rates for cheap loans

Our personal loans comparison service can help you find the best loan rates available to you. To find a cheap loan, we will need to know:

  • how much you want to borrow
  • how long you need to repay the loan

From this information, our comparison service will find the cheapest personal loans for you.

When you're looking at your results you will want to find the low interest loans, these are the low APR (annual percentage rate) loans, they have the lowest APR for the amount and repayment period you want.

The APR takes into account the cost of interest on the loan and any set up fees or charges. You should look at the APR and not just the headline interest rate. The APR gives a figure of the overall cost of the loan including any additional charges.

Loans - Guide - Finding the cheapest interest rate for loans

Which cheap loans are best for me?

A loan is a big commitment, so when you are looking for the best loan deals, as well as the APR, there are a number of other things to think about:

  • Can you afford the monthly repayments?
  • Are your circumstances likely to change in the future in a way that could affect your repayments?
  • Will the lender allow you to pay back your loan early if you want to?
  • Is there an arrangement fee?
  • Can you take a payment break or defer your loan payments if you need to?

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Compare low APR personal loans from £1,000 to £35,000 and find the right loan for you.

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What are the types of cheap loans? Car loans, personal and secured loans in the UK

Broadly speaking there are three different types of loan you can apply for in the UK:

  • Personal loans - unsecured loans, normally offered against your credit score. You can borrow small amounts up to £35,000 but the interest rates are sometimes tiered depending on how much you want to borrow
  • Secured loans - loans which are typically secured against your home, these are more suitable for long term loans in the UK, with payment terms of up to 25 years. The interest rates on these mortgage loans will be lower than a personal loan. However, if you do not keep up with repayments your home would be at risk
  • Car loans - car loans in the UK can be secured against your vehicle, or can simply be a form of unsecured personal loan

Getting cheap loans online

Many of the cheapest UK loans aren't necessarily bank loans. Online loans have emerged as cheap loan competitors in the UK in the past 10 years, meaning many of the UK's cheapest loans are to be found with online specialist companies, or lenders such as, peer to peer loan companies.

Will my credit rating stop me getting the cheapest personal loan?

If you have had problems in the past, you may not be eligible for the cheapest loans as you will not meet the loan's requirements.

Often the best loan deals are given to people with the best credit ratings – as a result the rate you are offered may be higher than the advertised rate. Sometimes the lender will try and offer an alternative loan with a higher interest rate.

The rate you’re offered will also vary depending on how much you borrow and how long you want to repay the loan over. Make sure you do another comparison to see if you can find your best cheap loan deal with another lender.

Compare cheap loans

Compare personal loans from £1,000 to £35,000 and find the right loan for you.

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