Getting the best deal on a personal loan

To get the best interest rate for a personal loan to fund a purchase or unexpected expense, we recommend you follow our tips when applying.

How much do you need?

The first questions should always be why do you need to take out the money, as well as how much and for how long you need to take the loan out.

This is an important step, as you are better prepared to compare rates and figure out what different lenders will be charging for borrowing the same amount.

Check your credit file

Your credit score will likely impact the interest rate you receive on a personal loan. That is why you should always check your credit report before applying to see if there are areas for improvement, as you can change your score. You can do this easily by applying online through one of the main credit reference agencies in the UK.

A credit score does not remain static and depending on how you manage the credit you can improve or worsen it.

When it comes to getting a good rate on your personal loan, remember that the higher your credit score, the greater the chance you will receive a better rate.

Checking your credit report also gives you a chance to check for errors on file. This is important as it may be impacting your credit score negatively if you have inaccuracies on file.

The loan term is important

When it comes to good deals, keep in mind that the longer the term of the loan, the more interest you will pay for it. So whilst monthly loan repayments are smaller if you pay over a longer period of time, you do so at a cost. It is up to you to determine if it is worth it.

 

Shopping around for personal loans

Whatever the loan product may be, it is highly recommended you compare deals online before making a final decision. Find out more information here.

Take your time when comparing loans online and thoroughly compare loan rates.

You should also look at the representative APR of any personal loans you are interested in. This rate includes the cost of the loan as well as the interest rate and other fees.

However, you should be aware that the representative rate will only be given to approximately 51% of customers, and may only be for a fixed loan amount.

Check the application criteria

It is no use comparing personal loan products that are the best on the market if you do not meet the eligibility criteria. Furthermore, applying when you do not meet the criteria can also worsen your credit score.

Consequently, always make sure you are comparing loan products like-for-like and that you meet the eligibility criteria.

Don’t assume loyalty pays

Many people tend to get a personal loan with the bank they have a current account with assuming its cheaper, but it often isn’t. It is much more likely you will get a better personal loan deal with a lender who is trying to get new customers.

For you, this could mean a more flexible loan term or a lower APR. Don’t automatically assume loyalty pays with lenders!