Personal loans for individuals are provided on an unsecured basis (i.e. there is no need to pledge security such as your home which would otherwise be at risk if you couldn't repay the loan). Full details, terms and conditions can be found on the lenders' websites.
Rates do vary considerably based on your credit rating but be careful in making multiple applications as this can impact adversely on your rating. Some companies will allow you to make an application without running a credit search which can be an advantage. See our article for more details on credit scoring and credit rating, and how to check your current standing.
Before starting - if you think you might be able to repay your loan early and have a good credit rating consider Zopa. The peer to peer lender charges no early repayment fees and offers loans from £1,000 to £25,000. If you haven't heard of them - they have been voted 'Moneywise Customer Service Awards' winner for Trusted Loans Provider 2018 and the winner of the 2019 British Bank Awards Best Personal Loan provider.
Also see what offers your own bank have available. More and more banks are offering better rates to existing customers. This is not really surprising, as they clearly have a better view of how you manage your affairs, but don't assume that as you have been offered a special rate it's the best in the market.
One impact of the credit crunch a few years ago was that it really affected the small value loan. Lenders have just decided that it is not economically viable to consider a loan and arrange for it to be opened and run unless they charge a very high arrangement fee. And that would open them to widespread criticism - so they have just pulled out of the market.
Credit Unions do however specialise in lending at this level - see more in our special Credit Union feature. Another alternative would be to use a credit card - consider an interest free purchase or balance transfer card if your credit rating is strong - it could save you a small fortune. Do call us if you would like to discuss your options.
For the reasons mentioned before there is little demand for smaller loans so, without the competition, rates tend to be higher in this market, M & S offer some decent rates. At the moment Santander are offering fairly low rates too. Also consider an interest free purchase credit card if your credit rating is strong enough.
Rates are starting to drop once you get over the £5,000 mark. M & S again offer lower rates along with the Post Office and the AA.. Currently those three are all offering the same rate for loans between £3000 and £4999. Sainsburys are also offering competitive rates if you are borrowing over £5000.
At this point the competition for your business really steps up so a big drop in the Annual Percentage Rates (APR) kicks in. With loans over £7500 you can expect some much better deals - so take advantage of it. Some of the better rates are through HSBC, Tesco and M&S.
These rates are correct at the the time of writing but they do change (and fairly quickly!) so please do your own research as this information is based on journalistic research only and is not intended to give advice.
This content was last reviewed on 09/05/2023