With competition among lenders getting stiffer, borrowers now have cheaper options to choose from. The ongoing price war has continued to push the market interest rates lower than ever. Good news for all borrowers but just like before, it pays to be extra careful. Remember that even the best deals have more tricks than you may not know of unless you roll your sleeves and research.
To help you find the cheapest loans in the UK, below is a list of providers you can check out.
For loans below £5,000 using a credit card, the best providers include Tesco, Hitachi and The AA. The AA has 11.9 Rep APR for loans from £3,000 to £4,999 while Hitachi is even cheaper with 7.8% Rep APR for the same amount range. While relatively more expensive, Tesco is recommended anyway as it’s still cheaper than other providers at Rep APR of 14.9 % for loans from £1,000 up to £2,999.
If you’re looking to borrow more than £5,000, the best providers to check are Zopa and Mark & Spencer for amounts from £5,000 to £7,999 at Rep APR of 4.5%. Tesco, Hitatchi and Zopa offer loans from £7,500 to £14,999 at Rep APR of 3.8%. For loan amount beyond £15,000, First Direct is your cheapest bet at 3.6% Rep APR. Finally for over £25,000 loans, Sainsbury’s has a Rep APR of 6.9%.
As you can see from the Rep APRs, it might be smarter to borrow more if you want the loan cheaper and more affordable. This is especially true if you’re borrowing near the threshold offers. You might as well round it up and borrow from the next threshold instead to lower the interest rate significantly. If you do borrow more, remember to keep it within what you can afford to repay per month to avoid any financial consequences.
When you have bad credit and you need cash, finding a personal loan at an affordable rate is never easy. If you borrow from banks, chances of rejections are pretty high. You are tagged as a high risk borrower and we all know major financial institutions don’t want that. You can always check out alternatives too. Borrowing from family makes sense especially if you only need a small sum you can repay back as soon as possible. Taking a cash advance is another option you can try.
But what happens if you’ve exhausted the alternatives? Should you just forego your plan to take out a loan? Of course not. You still have bad credit loan options as your last resort. There’s just one major downside to consider. Loans designed specifically for people with bad credit come with steep interest rates. If you really need the cash, you’d better prepare to pay for the high cost that comes with the promise of easy cash.
In the UK, two of the most popular bad credit loan options are payday loans and logbook loans. Payday loans are unsecured hence the lower loan amount offer, typically somewhere from £100 up to £1000, which you need to repay in 28 days or on the next payday. Logbook loans, on one hand, are secured hence the higher loan amount offers typically from £500 up to £50,000 depending on your vehicle’s trade value.
Both types of loans do no require credit checks. Even if you have a history of defaults, ccjs or even bankruptcy, you can still avail the loan. It’s quick and easy with many lenders now offering same day approval. You can’t really blame borrowers for resorting to such loans especially when the financial situation calls for a quick fix solution.
While I haven’t taken a logbook or payday loan, I have read and heard the controversies surrounding the financial products. Payday loans, in particular, are vehemently criticized by financial experts for its high interest rate. More than that, the product often gets you in a debt trap. And this right here is why I wouldn’t want to take or recommend payday loans as well.
With logbook loans, it’s a different story altogether. Yes, the interest rate is still significantly higher than traditional personal loans. There’s also the risk of vehicle repossession since the loan is secured against your vehicle. But when used right, logbook loans actually come handy to meet a wide range of personal needs.
Between logbook loans and payday loans, the former always wins in my opinion. It’s harder to avail since you need to own a vehicle but the loan is certainly more flexible and more affordable as opposed to payday loans. As borrower, you just need to make sure that you know exactly what you’re getting into meaning you need to know the risks and whether you can handle it or not.
Contrary to what other experts say, I believe logbook loans have a place in the lending industry. It is especially helpful for people with bad credit who’ve been refused a loan elsewhere. But again, it’s important to remember that logbook loans should be a last resort not your go to loan when you’re in a financial bind.
If you’re in a financial bind or planning to make a major investment and you need financing, you can take out a personal loan. When it comes to personal loans, options are quite aplenty. Most unsecured loans, for instance, are quick and easy to avail. But if you’re looking to borrow a large sum, secured loans are the more appropriate option. And if this your first time taking out a secured loan, here is a quick beginner’s guide to help you along:
What is a secured loan?
Let’s start off by defining what exactly is a secured loan. As the name suggests, secured loans are personal loans that require a security, typically your home or your car or any eligible property you own. The loan is secured against said asset. Depending on your preference and the value of your security, you can borrow at least £10,000 payable in one to 25 years or longer.
Since secured loans involve a collateral, they are less risky for lenders hence the lower interest rates. There’s just one major downside, however. In the event that you can’t repay the loan, your lender can repossess your property to recover their loss.
What are the types of secured loans?
There are several types of secured loans offered in the UK market. The most common of which are homeowner or home equity loans, mortgages, car loans and some debt consolidation loans.
Mortgages are loans that are secured against the property you are buying. If you’re hoping to buy your first home, for example, your lender, which in most cases is a bank, can foreclose the property if you fail to keep up with the mortgage payments. This type of loan typically takes 15 to 30 years to pay. You’ll also need to provide a down payment equivalent to 10 to20% of the property’s selling price.
Car loans work similar with mortgage loans where the car you are buying serves as collateral. This type of loan is perfect for those who are in the process of buying their first car. If you only have 10 o 20% of the down payment, a vehicle loan can help you get the car that you want. Like with mortgage loans, you’ll get tied with monthly repayments, which can lead to vehicle repossession if left unpaid.
Though not all debt consolidation loans are secured, this is one type of loan you may want to check out if you are planning to consolidate all your other debts into one monthly repayment. Debt consolidation loans may be secured against your home, which again means repossession in the event of nonpayment.
Other types of secured loans include title loans and savings-secured or CD loans. With title loans, you take out a loan against a fully paid vehicle. These are also known as logbook loans where you hand over your car’s V5 document to your lender. It’s now quite popular in the UK for its promise of quick cash especially for people with bad credit. No credit checks are run on applicants hence faster and super easy to avail that mortgage loans or vehicle loans.
Another option for people with poor or little credit history is a personal loan secured against CDs or savings accounts. When you opt this route, what happens is that your lender, usually the bank, freezes or holds the funds in the account. You can borrow up to 95% of your CD or savings funds while the 5% is what your lender earns for interest and other related loan costs.