Home / Money Articles / Cheap personal loans

Cheap personal loans

cheap personal loans
Loading 

Written by:

If you need to borrow a substantial amount of cash, you’ll want to ditch the credit card in favour of a personal loan. The loan market is incredibly competitive at the moment, meaning that providers have been forced to lower their rates to attract customers.

Competition has been so fierce that rates fell to an all-time low of just 3.6%, from 7.5% two years previously. Rates aren’t quite that low at the moment as they have crept up over the past couple of months, but you can still get some fantastic deals if you know where to look.

How much to borrow

One of the key things to achieving a great rate with a personal loan is borrowing between £7,500 and £15,000. Generally speaking, you should only ever borrow what you need, so if you don’t need that much cash you should look elsewhere as a loan for less than £7,500 as it costs more to borrow less, as rates tend to soar to above 10%.

However, on rare occasions it can actually cost less to borrow more. When you need just less money than one of the interest rate boundaries set by the lenders, it can pay to borrow a few more pounds as the rate can be much lower.

How long to borrow for

When applying for a personal loan you will have a choice of not just how much money you need, but also how long you want to borrow for. Increasing the term will reduce the fixed monthly payment, but it will increase the total amount of interest paid. For example, a £10,000 at 7% APR will cost £1,100 over three years, or £3,900 over 10 years.

How much will it cost?

cheap personal loansAs you can see from above, the longer you borrow for, the more it will cost in the long run. However, that’s not the only contributing factor. You also need to consider the amount you’re borrowing, and the APR.

While the total cost of a loan is obviously important, you also need to budget for how much you can afford to repay each month. You should have a clear picture of your income and expenditure before applying for any credit, as failing to keep up with repayments could get you in serious trouble.

What is APR?

The APR is the annual percentage rate, a rate used to describe the cost of a loan over the course of a year. This includes the interest as well as any fees or charges. The lower the APR, the cheaper the loan.

Most personal loans are attached to a representative APR, but this advertised rate is only the rate that the majority of applicants must achieve. A majority means 51%, so 49% could end up with a much higher rate.

Comparing personal loans

Unfortunately, the representative APR is the only way to compare the cost of personal loans, as you’ll only find out the actual APR once you’ve applied. When comparing, look at the APR, the total cost of the loan and the monthly repayment to find out if it matches your budget.

LenderLoan Amount
over 60 months
Representative APR%Cost 
£5,00015.9% APR £121.32 per monthApply
£5,00048.5% APR £222.76 per monthApply
£5,0006.9% APR £98.28 per monthApply
£300 over 65 days574.86% APR£136.51 per monthApply

 

 

 

Share

Comments

About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

View all posts by