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To find out if you’re eligible for a loan, you can use Compare the Market’s loan eligibility tool when you compare loans with us. Simply answer a few questions, and we’ll be able to run a soft search on your credit file, to find out which loans you qualify for.What is the difference between a secured and unsecured loan?
The main difference between a secured and unsecured loan is that a secured loan is exactly that – it’s secured against something, which is known as collateral. This could be your home or a vehicle. With a secured loan, the loan provider can repossess your collateral if you’re unable to meet your repayments.
An unsecured loan doesn’t need collateral, meaning you won’t be at risk of losing your home or car, for example. However, because you’re not offering anything to secure the loan, you may be charged higher rates of interest and be unable to borrow larger amounts.Do I need a good credit rating to get a loan?
While having a good credit score is important in being accepted for a loan, having a bad credit score doesn’t mean that you’ll always be refused. A good credit score is a way of proving to lenders that you’re responsible with money, and have a history of borrowing and successfully paying off loans or other debts. This is why a poor credit score may make lenders wary of approving you for a loan.
However, there are several loan options for those with bad credit. You may not have access to the rates and amounts to borrow as others, but we have information on the sorts of loans that may be available to you, as well as ways to improve your credit score.How much can I borrow?
It depends on the type of loan you’re looking for. Do you just need to borrow £1,000? £2,000? Or maybe even £5,000? A personal loan would typically be used for borrowing these amounts, up to as much as £50,000. However, things like your credit score, income, as well as existing loans, debts and other outgoings will be taken into consideration.
If you opt for a secured loan, you’ll normally find you’re potentially able to borrow as much as £500,000, or even more, if you secure the loan against your home. It’s important to know that if you can’t meet the repayments on a secured loan, your lender could repossess the item you offered as collateral, like your car or home.
While you might be able to borrow up to £50,000, or even £500,000, it doesn’t mean that you should. Borrowing the right amount for your needs, while ensuring that you’re able to pay it back comfortably, is arguably the most important thing to consider when taking out a loan.What is a representative example?
When a loan is advertised, you’ll see what’s called a ‘representative example’. This will show the loan amount, the interest rate, the length of the loan, the representative APR, the repayment instalment amount and the total amount payable. It will tell you what borrowing that amount of money over that time period could cost with that representative APR. Here’s what a representative example might look like.Loan amount Interest rate Loan term Representative APRMonthly loan repayment Total loan repayment£5,0003.6% (fixed)24 months3.6%£216.11£5,186.64
APR is the total cost of borrowing money over the course of a year. It includes fees that automatically come with the loan, as well as the interest rate. Bear in mind that the representative APR must be offered to at least 51% of successful applicants, but it isn’t necessarily what you’ll get. That will depend on your credit record and personal circumstances.How long can I borrow for?
How long you can borrow for may depend on the type of loan, and the amount you’re borrowing. Normally, personal loans can last up to 10 years, with anything over one year being considered a long-term loan.
While extending your lending period will likely bring your monthly repayments down, it’s important to know that you’ll pay more in interest over the full length of the term. Therefore, if you’re able to afford the repayments, it’s best to pay off your loan as soon as possible.
If you need the initial security of a lower monthly repayment, consider taking out a loan that allows you to repay the debt early. This type of loan allows you to make additional payments as and when you’re able to, to help pay off your loan earlier and save money on your overall term.What’s the cheapest way to borrow money?
It depends how much you want to borrow and how long for. Borrowing options include:0% purchases credit cards: 0% purchase cards can be one of the cheapest ways to borrow money, provided you keep up with at least the minimum monthly repayments and ideally repay the amount in full before the interest-free period ends.Personal or unsecured loans: if you can get the best loan rates, this can be one of the cheapest ways to borrow.Secured loans: these can offer low rates, but if you’ve secured a loan against your home you risk losing it if you can’t make the repayments. How do I work out the cost of my loan?
The best loan rates vary according to the size and duration of the loan. If you’re looking for low interest loans, you might look to borrow over the longer term, as these loans may attract lower interest rates. But remember, you need to look at the overall cost as you’ll be paying back the loan for longer. Borrowers with poor credit records will be charged higher rates.What is a homeowner loan?
A homeowner loan is a type of secured loan that uses your home as collateral. Because you’re securing the loan against something as valuable as your home, it provides you with access to larger amounts to borrow, as well as potentially lower interest rates and longer loan terms.
This type of loan is potentially a better option for those with a bad credit history, as offering your home as collateral provides security to your lender. When you apply, the lender will check whether you hold enough equity in your home to borrow against.
It’s important to be aware that if you can’t meet the repayments on your homeowner loan, the provider can repossess your home. On the other hand, if you’re able to pay off your loan early, it’s likely that you’ll be charged an early repayment fee. It’s important to be aware that if you can’t meet the repayments on your homeowner loan, the provider can repossess your home. On the other hand, if you’re able to pay off your loan early, it’s likely that you’ll be charged an early repayment fee.What is a soft search?
A soft search is a type of search on your credit file that doesn’t impact your credit score. While it will be recorded on your credit file, it won’t be visible to lenders and so can’t affect their decision to approve your loan application or not. We’ll carry out a soft search when you compare loans with us.Can I get a loan to buy a car?
You can get a personal loan to spread the cost of buying a car, or a secured loan specifically designed for this purpose, known as car finance. If you take out car finance, you may lose the vehicle if you can’t make the repayments. You can use our car finance calculator here. Compare the Market can help with: Hire purchase – these loans typically require a 10% deposit. The remainder is split into monthly repayments and spread over one to five years. Hire purchase usually offers fixed interest rates, but are only an option when buying through a car dealer. You won’t be able to use a hire purchase finance plan with a private seller.
Other options, which are not available through Compare the Market, include: Personal contract purchase – this type of car financing agreement gives you the option of handing back the car or buying it when the term ends.Personal contract hire (PCH) - pay a monthly rental fee and give the car back at the end of the agreed period.Logbook loans – this is a type of secured loan, when the car acts as the collateral that the loan is secured against.
See more on car financing optionsCan I overpay or pay my loan off early?
It depends on your loan agreement. Although providers must allow you to pay back personal loans in full, there may be fees for early repayments or overpayments. Read more on repaying loans early.What if I’m struggling to repay my loan?