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Most of us need a loan at some point – and cheap loans are the most attractive.  Here’s our guide to the various options, plus guidance on how to compare bank loans and other deals.

Why should I use the Eligibility Checker?

Using our Eligibility Checker makes you less likely to be declined for a loan every year. Eligibility Checker shows you which loan you’re most likely to be accepted for, so you can avoid the ones that are more likely to decline you. Getting declined can damage your credit score, and this makes it harder to borrow money in the future.

You give us some information about yourself, and we use this to find your credit file. We match your credit file to the criteria credit card companies give us about what kind of customer they accept, and use this to work out a score out of ten to show how likely you are to be accepted for each card. Don’t worry, we don’t leave a footprint on your credit file, so your credit score won’t be affected.

So that we can make sure we’ve got the right credit file. We only use your data to find your credit file, so we can work out your eligibility score for each loan. We won’t contact you if you ask us not to.

It only takes a few minutes to give us the information we need to find your credit file and show you how likely you are to get each loan.

It’s important to know how your credit file and credit score affect your financial situation.

Credit rating agencies build up files on all of us based on a mix of publicly-available information (such as whether you’re on the Electoral Roll) and data from financial companies about products you have or have had, such as loans and credit cards.

From this they calculate a credit score, which companies check when they’re working out whether to give you a product, and on what terms. Managing your finances well and always paying off what you owe in time will give you a good score. Missing payments, as you’d expect, will lower your score.

Every time someone looks at your file, it is recorded as a ‘hard’ or ‘soft’ search.

Finance companies make hard searches when you apply to them for a credit product, and each hard search remains on your credit report for two years. This matters because, for many lenders, a clutch of hard searches in a short period suggests you might be struggling to get a product, or that you’ve opened several accounts that could prove difficult to manage.

Soft searches occur when you or someone else looks at your file, but not in connection with an actual application. For example, when you put your details into our Eligibility Checker, we look at your file and work out how likely you are to be accepted for a range of deals, based on what we know about various firms’ acceptance criteria.

A ‘pre-approval’ search leaves no trace, so it won’t affect your score. You can use the Eligibility Checker as often as you like over any period without risking damage to your file.

At least 75% of our customers search for a loan for:

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Buying a car

Getting a loan can be cheaper than car dealer finance, and we can help you find the right loan for you. Having a car loan makes you a cash buyer, which is the best start for getting a great deal on your new car.

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Consolidating debts

Gathering all your debts together into one loan may help you get them under control. You can search for a loan that’s right for you. To really tackle your debts, make sure you get your spending in check too.

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Improving your home

Doing up or extending your home is a great way to add value to your home – as well as giving you and your family a wonderful place to live. We can help you find the right home improvement loan for you.

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Personal loans

A personal loan is a type of unsecured loan, which means the debt isn’t secured against any asset. With a personal loan, you borrow a fixed amount over a fixed term and usually pay a fixed amount of interest. You then repay this over time, making set monthly repayments.

Your credit rating is very important if you want to take out a personal loan – poor credit will mean high interest rates, or a potential refusal for credit.

When comparing personal loans, make sure you review the fees and charges associated with the loan and check small details such as whether you can overpay or defer payments to get a fair comparison.

Bad credit loans

If you have a bad credit rating, your choice of loans will be very limited and it’s likely that you’ll have to pay a high interest rate. However, if you need to borrow money to help you out of a tight financial spot, a specialised bad credit loan may be the best option for you.

There are three types of bad credit loans: unsecured, a guarantor loan (where someone commits to repaying the loan on your behalf if you default), or a peer-to-peer loan (when you borrow from people instead of banks).

Make sure you review the fees and charges when you compare bad credit loans and shop around to find the most competitive deal. 

Guide to loans

Many households are struggling to make ends meet as the cost of living keeps rising. There's little spare cash around to build up an emergency fund, which means it can be tricky to pay for a new washing machine or boiler if your old one breaks down. Maybe you need a new car, or perhaps you're planning a holiday, a wedding or a home makeover?

Pros and cons of loans

Let’s face it, most people at some point in their lives need to borrow some money. So it’s important to understand the pros and cons of the different types of loan, as well as how to secure the best rates. If not, you could end up with a poor deal – and costly credit can send you into a downward debt spiral.

Secured loans

Loans can broadly be divided into two categories: secured and unsecured. With a secured loan, the lender will insist on some sort of security against the money you borrow, often a house or car. If you default on the payments, the bank or building society can then sell the asset to clear the debt.

You can usually borrow large amounts with a secured loan, and at a lower rate of interest. Plus, you can pay back the debt over a long time period, perhaps 10 or 15 years.

However, secured loans are more risky than unsecured loans because you could lose your collateral if you cannot clear the debt. You should therefore think very carefully - and consider other options - before taking out a secured loan.

Help with budgeting

You can typically borrow as little as £1,000 up to a maximum of £25,000 with an unsecured loan – also known as a personal loan.

The interest rate is usually fixed and you pay back the debt over a set term, normally one, three or five years. Personal loans can therefore help you to budget because you know at the outset the full cost of your borrowings and how long they will take to clear.

Wedding loan

For example, if you are getting married and the wedding is set to cost £7,500, you could take out a loan for £7,500 at 3% over three years. Your monthly payments would be fixed at £217.98 and you would pay total interest of £347.11 over the 36-month term.

Representative example: If you borrow £7,500, you would make 36 monthly repayments of £217.98. The total amount repayable is £7,847.11. Representative 3.0% APR, 3.0% (fixed) p.a.

Debt consolidation

If you have run up other debts at high rates of interest, a personal loan can be a good way to manage your borrowings and bring down the cost. Let’s say you have built up a debt of £3,000 on a store card that charges interest of 29%. You could take out a loan for £3,000 at, say, 9%, to pay off the store card balance and reduce the monthly payment. If you also cut up the store card, you would not be tempted to go on a spreading spree and add to your debt burden!

Interest rates

Interest rates on personal loans vary across the market, but as a rough rule of thumb, the more you borrow, the lower the rate. For example, you might pay interest of 9% on a £3,000 loan, but only 3% on a loan of £7,000. It can therefore make sense to borrow a larger amount, say £7,000 instead of £6,500. Just make sure you don’t take on a debt that you cannot afford to repay.

Term of the loan

The size of the loan will to some extent determine the term of the loan. It is, for example, difficult to pay off a £7,000 loan in just one year as the monthly payments would be relatively high. However, if you borrow only £1,000, a term of 12 months is more manageable.

You also have to consider the cost implications of the loan term as the longer the term, the lower the monthly payments – but the higher the total cost. For example, let’s say you borrow £3,000 over three years at 7%. The monthly payments would be £93, so you would pay total interest of £348. If you extended the term to five years, the monthly payments would drop to £60, but you would pay £600 in total interest.

Credit record

The interest rates on personal loans depend partly on the loan amount and term. But lenders also assess your creditworthiness, usually by looking at your credit file.

The lowest rates are reserved for the best customers – that is, borrowers with a spotless credit record. If you are judged likely to default on the loan because of a poor credit history, you will be charged a higher rate of interest or your application will be turned down.

In other words, there is no guarantee that you will qualify for the advertised rates. Lenders are allowed to boast of low representative rates if those rates are charged to 51% of successful applicants, which means almost half could be charged a higher rate.

Early repayment

You can pay off your debt before the end of the loan term if you come into some cash. But watch out for early repayment fees. Many lenders levy a penalty for early repayment, which could wipe out any potential interest savings. Some lenders also charge arrangement fees for personal loans, which you should factor into your cost calculations.

Shop around

When you take out a loan, you may be asked if you want to buy payment protection insurance (PPI) – sometimes known as Accident, Sickness & Unemployment insurance.

PPI has been widely mis-sold, but it doesn’t mean you shouldn’t buy it if you think it’s right for you. PPI is intended to cover the loan payments if you cannot work, perhaps if you lose your job or fall ill – and it can be useful. However, it’s important to read the small print of any policy and to understand the various exclusions before agreeing to anything. Only buy it if you think it’s suitable for you.

You should also shop around for the best price and not automatically accept the deal on offer from your lender.

Work out a budget

You should try to work out how much you can afford to borrow and pay back before applying for a loan. This way you can look for loans in your borrowing range, giving yourself the best chance of being accepted as well as ensuring you don’t take on a loan that you can’t afford – you could even try MoneySuperMarket’s loan calculator for guidance.

Avoid impulse borrowing

Likewise it’s better to avoid taking out a loan without thinking carefully whether you need it, and whether the cost of the loan is worth what you’re taking it out for. For example, it’s probably not a good idea to take a loan out for everyday purchases – a credit card might be more suitable.

Watch out for temporary interest free periods

Interest free periods can be useful when you’re borrowing, but you should always keep an eye on how long this will last. Once the interest free period ends you may be moved on to a high rate instead, so it can be a good idea to pay off as much of your debt as you can during this interest free period.

Plan for rate changes

Variable rate deals mean the interest rate at which you make repayments can change whenever the lender decides to change it – though often lenders will use the Bank of England base rate as a guideline. While this means that your repayments could be less if the base rate falls, they could also go up if the rate rises, so it could be a good idea to ensure you’ll be able to cope with interest rate fluctuations before taking out a variable rate loan.

Avoid loan sharks and payday loans

Loan sharks should always be avoided – they’re illegal, not regulated by any financial organisations, and they generally charge massively high interest rates. What’s more, if you aren’t able to repay them you may be pressured into borrowing even more money, which could lead to a spiral of debt.

Payday loans may be legitimate, but they can come with incredibly high interest rates sometimes reaching over 1000% - which could make even a small loan turn into a debt spiral. Learn more with our guide to payday loans.

Don’t make too many applications

Every loan application you make, just like credit applications, leave a mark on your credit report. Too many of these will give lenders the impression that you are desperate to take out a loan, which could imply that you’re struggling to manage your finances – as a result, lenders may be more reluctant to let you borrow from them in the future.

Check your credit rating

Rather than making lots of applications and hoping one will stick, you may be better off running a soft check on your credit score to see what kinds of loans you’ll be eligible for. This way you can minimise your applications and reduce the chance of you damaging your credit.

Consider borrowing more

Often with loans, the more you borrow the less interest you’ll end up paying. It can vary by lenders, but you should always check on the interest rate they charge as there might be a chance you actually pay less overall by choosing a bigger loan with a lower interest rate.

Shop around

The best way to find the right deal on a loan is to shop around, and by comparing deals on MoneySuperMarket you’ll be able to browse a list tailored specifically for you. All you need to do is answer a few questions about the loan you need and you’ll be able to compare loans from a number of different providers by the rate you’ll pay back at as well as how likely you are to be accepted.

How do I know if I’m eligible for a loan?

Different lenders and different types of loans will have varying requirements, but in general whether or not you qualify will depend on your personal details and your credit history. However you can always compare loans on MoneySuperMarket – all you need to do is answer a few questions about the loan you want to take out and you’ll be given a tailored list, which you can sort by interest rates and the likelihood of your application being accepted.

How do I apply for a loan?

You can generally apply for loans by contacting the provider you choose – either by calling through the phone, sending an application form through the post, applying online, or dropping in to their branch (if they have one) to apply in person.

What can I take out a loan for?

You can take out a loan for a number of reasons, ranging from home improvements or education to big purchases like buying a car – however it’s unlikely you’ll be approved for a loan to cover you day-to-day costs.

How much can I borrow?

The amount you’ll be eligible to borrow will depend on your personal circumstances – if you have a poor or limited credit history, you may not be able to borrow as much as someone with a good credit history.

How long can I take out a loan for?

The length of your loan can vary depending on the type of loan you take out and the provider you choose, but it could be anywhere between a year and ten years. Taking out a loan for a longer period of time may reduce your monthly payments, but you may end up paying more for the loan due to interest payments.

Do I need a good credit rating?

For many loans you’ll need a good credit history to be accepted, but some providers also offer loans designed for people with poor or no credit. For example, you can get guarantor loans where someone else will commit to make your repayments if you can’t.

What is a soft search?

A soft-search or soft-application is a way of finding out where you stand in terms of getting a loan without leaving a mark on your credit report. It’s a useful way of finding a loan you’ll be eligible for without harming your chances of being accepted.

What if I miss repayments?

Missing repayments can mean you might be fined by your lender, and it could also end any low or zero interest incentives you have. It may even lead to a hike in the interest rate you’ll make future repayments at.

What is APR?

APR, or your Annual Percentage Rate, is the interest rate at which you pay back money you’ve borrowed. It takes into account the actual interest rate you pay, plus any other fees or charges involved in the deal, to give you a more complete picture of what you loan will cost.

When you see a rate advertised as the representative APR, this means the lender is required to offer this rate to at least 51% of applicants – however it doesn’t mean you’re guaranteed to receive this interest rate yourself.

What are secured and unsecured loans?

A secured loan is a loan you can take out that’s tied to an asset of yours as security. For example a mortgage is a type of secured loan, and the asset would be the house you take the mortgage out on – when you repay the loan the house is yours, but if you don’t repay then the lender could seize your house.

An unsecured loan isn’t tied to any collateral, and as a result you normally need at least a fair credit score to qualify. There is also often a maximum amount you’ll be allowed to borrow.

What is debt consolidation?

Debt consolidation is when you take out a single loan to repay the debts you have with different providers – this way you can pay off the debt with a single monthly repayment, rather than lots of repayments to a variety of lenders.

What is a repayment holiday?

A repayment holiday is when you don’t have to make any loan repayments for a certain period of time that you’ve agreed with your lender. They’re generally good for when you’ve had a temporary change of circumstances, such as unemployment, maternity, or unexpected expenditures.

Can I overpay or pay off early?

You’ll normally be able to pay off all or part of your loan early, though some lenders may have an early payment charge.

What if I’m struggling to repay my loan?

If you’re struggling with your finances and you think you might not be able to make your repayments, you should call your lender as soon as possible – they may be able to help you work out an easier repayment plan or a repayment holiday. Not letting your bank know could mean you’ll be penalised for missing any payments.

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How our site works

1. Tell us about your borrowing need

2. We show you the monthly cost of the loans that match your borrowing need

3. You can edit your loan term or amount to find a loan you can afford

Why are we the best website for loan comparison?

Simply because we compare and match you to over 33 loans and can help you understand how the lending company will view you and your application before you apply, meaning you are more likely to get accepted for a loan first time. We want to show you loans from as many lenders as possible, so that you can choose the one that suits you best. We can’t promise to have loans from every single lender, because some lenders don’t want to be included in our Eligibility Checker tool. We show you a list of loans from the highest eligibility score to the lowest, so you can easily see which loans you’re most likely to be accepted for. You can find out more about how we work here.

How our site is paid for

We like being straightforward at MoneySuperMarket, so we want to let you know how we get paid.

How do we make money on loans at MoneySuperMarket?

For unsecured loans (also known as personal loans, where someone simply borrows money and commits to paying it back month by month) when someone clicks on a loan, applies for a loan or enquires about a loan through MoneySuperMarket, we usually get paid a fee by the loan company. Which one of those options happens depends on the loan company. For secured loans (where someone borrows money and uses their home as security on the debt), we work closely with a number of credit brokers who organise the loans and pay us a fee each time.

Do we offer loans from the ‘whole of market’?

We include loans from the companies we work directly with on MoneySuperMarket. We don’t work with all loan companies, because some companies don’t want their loans included on comparison websites. Some smaller companies can also struggle to cope with the number of customers we can show their products to. The loans featured in our Eligibility Checker are from companies we work with directly, so that we know how likely a customer is to get the loan. Our Eligibility Checker loan results show you loans by those most likely to accept your application, and then by the best APR on the loan.

How do our relationships with loan companies affect our service to you?

We never allow loan companies to get in the way of what’s best for our customers. So the way we describe or display loans is always based on their benefits to you – such as whether you’ll be accepted or the APR - never what’s best for a loan company.

Why are we telling you this?

Our services are always free to you, our customers. But we think it’s important that we’re transparent about how we earn money, so you can be confident we put our customers first. You can find out more about how we work here.