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What our Nerds say about personal loans

A personal loan, also known as an unsecured loan, can help you to spread the cost of a purchase over a period of time, whether that’s for a holiday, a new car or home improvements. The exact amount you are able to borrow will vary between lenders and depend on your financial situation and your borrowing history.

Rhiannon Philps Lead Writer at NerdWallet

What is a personal loan?

A personal loan allows you to borrow a sum of money that you will repay, with interest, over an agreed period of time.

Personal loans are available from traditional high street banks, online lenders, credit unions, and specialist lenders. They can be used for many different reasons, such as home improvements, holidays, weddings, debt consolidation and major purchases, such as a new car.

The amount you can borrow will depend on the provider you choose and your personal circumstances, with options often ranging from around £1,000 to £25,000.

Terms (the length of time you have to repay the loan) typically range from one to seven years.

Why should I get a personal loan?

Personal loans can be useful if you need a lump sum of money to cover a large expense. You can often apply for and receive money from a personal loan relatively quickly, especially if you use an online lender.

You may also be able to borrow more than on a credit card, for example, and interest rates could be lower than some other options. However, this will depend on your individual situation.

What can I use a personal loan for?

You can use a personal loan to pay for a variety of different purposes, including:

  • a new car
  • home improvements
  • holidays
  • weddings or other special occasions
  • large purchases, such as a new household appliance

You could also use a personal loan to pay off and consolidate existing debt.

However, before taking out a personal loan to consolidate your debts, make sure you consider the costs involved. Using a personal loan with a low interest rate to pay off debt with a higher interest rate could save you money, but make sure you consider any early repayment fees and how much you would end up paying overall.

Whatever you use a loan for, make sure you can afford to repay it before applying.

What can’t I use a loan for?

Some lenders will have a list of activities that they won’t allow their loans to be used for, such as:

  • any business-related purpose
  • sharedealing
  • gambling
  • buying property (either outright or as a deposit)

Advantages and disadvantages of personal loans

As with any credit option, there are pros and cons to taking out a personal loan.

Advantages

  • You can pay for goods or services up front and spread the cost over a longer period of time.
  • You can apply for a loan and often receive the money relatively quickly.
  • You may be able to borrow money at a lower interest rate than some other options
  • Interest rates and monthly repayments will normally be fixed, so the amount you pay each month won’t change.

Disadvantages

  • A personal loan can have a higher rate of interest than some other finance options, especially if you have a less-than-perfect credit score.
  • It may not be the best option if you want to borrow only a small sum of money.
  • There is a limit to how much you can borrow.
  • Missed and late repayments can harm your credit score.

How do personal loans work?

When you apply for a personal loan, lenders will need to know a few personal details, including your income and employment status and how much you want to borrow. They will review this information and carry out a credit check to help them decide whether to lend to you.

If your application is approved, the lender will give you all the necessary information about your loan, including the interest rate, the repayment schedule and any potential fees, so you should make sure you understand these terms before agreeing to the loan.

Once your loan is approved, the money could be in your account relatively quickly, sometimes on the same day.

You will then be able to spend the money and begin paying it back. You will repay the amount you borrowed, plus interest, in monthly instalments over the agreed period of time.

How long does it take to get a personal loan?

It may only take a few minutes to apply for a loan, especially if you apply online. However, the exact amount of time will depend on your situation and how much information you need to provide the lender.

Online lenders can typically make a decision on loan applications in a relatively short space of time, and sometimes they may even offer an instant decision.

Once the loan agreement is signed, funds could be in your account within a couple of hours. However, some lenders may take longer and could take several days to transfer the funds.

How much can I borrow?

The amount you can borrow will depend on your individual requirements and situation, as well as the lender’s criteria.

Typically, you will be able to borrow between £1,000 and £25,000 with an unsecured personal loan, but some lenders can offer smaller or larger amounts.

Your credit score and financial situation will also determine how much you can borrow. If you have an excellent credit score and a good income, you are likely to be able to borrow more than someone with a poorer credit history and a lower income.

The most important thing is to only borrow the amount you need and that you can afford to repay.

You can use our personal loan calculator to get an estimate of how much you could afford to borrow.

How much do personal loans cost?

When you take out a personal loan, you will be charged a rate of interest.

The interest rate you receive will depend on a number of factors, including your credit score and the amount you want to borrow. Typically, those with the best credit scores will be able to access the best rates.

The length of the repayment term can affect how much a loan costs, as the table below shows.

Amount borrowed APR Repayment term Monthly repayments Total amount payable
£5,000 5.5% 2 years £220.48 £5,291.48
£5,000 5.5% 7 years £71.85 £6,035.42

Source: NerdWallet loan calculator

Even though the monthly payments are smaller when you borrow over a longer period, you will end up paying more overall.

Some lenders may also charge fees on their personal loans.

To make it easier to see the overall cost of a loan and to help you compare deals, lenders will display the cost of a loan as a percentage known as the APR.

What is APR?

APR stands for annual percentage rate. It is a percentage that tells you how much a loan will cost you over the course of one year, taking into account the interest rate and any standard fees.

When you apply for a loan, you will receive a personalised APR based on the information the lender has about you.

This may be different to the advertised representative APR. The representative APR is designed to help you see the typical cost of a loan, but you’re not guaranteed to receive this rate. Only 51% of applicants who are approved for a loan need to receive the representative APR (or lower), so you could be charged more than this.

Typical interest rates

Bank of England statistics showed that the average interest rate on new personal loans taken out in August 2022 was 6.84%.

Personal loans can come with lower interest rates than other forms of credit, but if you have a poor credit history you may be charged higher rates.

Those with a better credit score and more secure financial situation are likely to access the best personal loan rates, while those who are viewed as a higher risk could face higher interest rates.

Can I top up an existing loan?

If you have a personal loan already, you may be able to extend this loan and borrow more money from the same lender. This could be done as a separate loan agreement or as an extension of your current loan.

However, this will depend on the individual lender and your own situation. The lender would want to make sure you can afford to borrow the extra amount before approving your application to borrow more.

How to manage my loan repayments

If you successfully apply for a loan, it’s important that you keep up with your repayments.

You will need to repay your personal loan each month on the date specified in your loan agreement.

What happens if I miss a loan repayment?

If you miss one of your loan payments, the lender may charge you a late repayment fee and you could be charged more interest.

The missed payment may also be recorded on your credit history and could affect your score.

If you think you’re going to miss a loan payment, or you’ve already missed a payment, you should contact your lender to see if you can work out a new arrangement.

Can I pay off a loan early?

Lenders will often allow you to make overpayments, or even pay off your loan in full before the end of the term. Some lenders will allow you to do this for free, while others may charge a fee. Check the terms of your loan agreement to see if charges apply.

If you want to pay off your loan in full, you will need to contact the lender for an early settlement figure. This is the sum you will need to pay to clear your debt. The settlement figure will include the remaining balance you need to repay, plus the cost of interest and any fees.

After receiving the figure, you will normally have a limited time to pay the money.

Am I eligible for a personal loan?

Lenders will have different eligibility criteria, but, as a rule, you will need to meet the following minimum requirements to qualify for a loan.

  • Be a UK resident.
  • Be aged 18 years or above.
  • Have a regular income.

Can I get a personal loan with bad credit?

It may be possible to get a personal loan with a bad credit history, but this will depend on the individual lender.

Some lenders may not accept loan applications from people who have a poor credit score and have a county court judgment (CCJ), for example.

However, other lenders specialise in offering loans to people with bad credit. Bear in mind that, if you have a bad credit score, you may not be able to borrow as much as someone with a better credit score. You are also likely to face higher rates of interest.

» COMPARE: Loans for bad credit

Can I take out more than one personal loan?

You may be able to take out more than one personal loan, but this is up to the lender. If the lender is confident that you can afford to take on another loan and repay it in full, then they may approve your application.

However, the lender will reject your application if they think that you would struggle to repay another loan.

You could check your eligibility for another loan before submitting a formal application to see how likely it is that your application would be successful.

How to compare personal loans

Before applying for a personal loan, it’s worth taking time to compare deals to make sure you get the best personal loan for your requirements.

Some important points to consider when you compare loans are:

  • how much you can borrow
  • how long you have to repay
  • the annual percentage rate (APR)
  • if there are any fees, such as early repayment charges
  • if there is the option of borrowing more

Why should I compare loans?

Comparing loans can help you to make sure you get the most suitable loan for your situation. If you apply for the first loan you see, you could end up paying a higher interest rate than you need to.

By comparing loans from a range of lenders, you improve your chances of finding the best loan for your situation.

You can use our comparison table to see the features of some of the loans available, including the amount you can borrow, the minimum and maximum repayment terms, and the representative APR.

How to get a personal loan

With many lenders, you can apply for a personal loan online. However, before submitting a formal application, you can often check your eligibility for a loan first.

Checking your eligibility involves a soft credit search, which won’t affect your score. You will also need to provide information such as your name, address, income, and employment status.

Seeing if you qualify for a loan, before formally applying can minimise the chances of applying for an unsuitable loan and getting rejected.

What details do I need to provide?

When you apply for a loan, you will need to provide the lender with details including your:

  • name
  • address
  • date of birth
  • employment status
  • income
  • regular expenses

You will also need to say how much you want to borrow and what you plan to use the loan for.

Lenders will use this information, as well as the results of a credit check, to make a decision on your application.

Will I need a credit check?

All lenders will run a credit check as part of your loan application. This will help to show them how you have managed your finances and credit commitments in the past, and so help them decide whether to offer you a loan and what interest rate to charge.

Does applying for a loan affect your credit score?

When you apply for a loan, lenders conduct a hard credit check. This leaves a mark on your credit history and could affect your score. One loan application and hard credit check is unlikely to have a significant impact on your score, as long as you repay the loan on time. However, multiple loan applications and hard credit checks within a short space of time could affect your score. This is why it’s important to only apply for a loan if you are confident that you will be approved.

Can I check my eligibility without affecting my credit score?

Yes, you can check your eligibility for a loan without affecting your credit score. Checking your eligibility only involves a soft credit check, which won’t be recorded on your credit history and won’t be visible to lenders that may search your credit history.

What is a pre-approved loan offer?

Some lenders allow you to see how much you could borrow and what interest rate you could be charged. This is known as a pre-approved loan offer.

The offer is based on the information you provide so, assuming it is all correct, you are likely to receive that loan if you decide to formally apply. However, if there were any errors in the initial information you sent or the hard credit check throws up any concerns, the lender may offer a loan on different terms, or it may not offer a loan at all.

Why might my loan application be rejected?

The main, overarching reason why a lender would reject a loan application is if it is not confident that you can repay the loan. Some of the individual reasons why you might be refused a loan are:

  • your credit score is too low
  • your income isn’t large enough
  • you don’t meet the eligibility criteria of the lender
  • you made a mistake in your application

» MORE: What to do if you can’t get a loan

Alternatives to a personal loan

A personal loan isn’t the only option if you need to borrow money. Depending on your situation and your individual requirements, there are alternatives you could consider.

  • Secured loan: If you’re struggling to get an unsecured loan or you want to borrow a larger amount, you could consider a secured loan. These loans use your property as security, which the lender can repossess if you don’t repay the loan. This reduces the risk for the lender, but you risk losing your property if you can’t make repayments.
  • Guarantor loan: This is a type of personal loan where a friend or family member agrees to act as guarantor and repay the loan if you don’t manage to. The guarantor can make it easier for someone to get accepted for a loan as the risk to the lender is reduced.
  • Credit cards: If you only need to borrow a small sum over a short period of time, a credit card could be worth considering. Using a 0% interest credit card means you could borrow money without paying any interest, as long as you pay off the card in full by the end of the 0% period and stick to the terms of your credit agreement.
  • Overdraft: If you have a current account with an arranged overdraft and only need to borrow a small amount, this could be an alternative to taking out a loan. However, make sure you don’t go over your overdraft limit or you could face high interest charges.
  • Car finance: If you plan to take out a loan to buy a car, you could consider taking out car finance. This is when the loan is secured against the vehicle and you make payments each month. There are several types of car finance available, including hire purchase (HP) and personal contract purchase (PCP).
  • Friends and family: If someone close to you can afford to lend you money, it may be worth asking them. However, only ask someone you trust and put the terms of the loan in writing to minimise the chances of disagreement later on.

Personal Loan FAQs

What is the easiest loan to get approved for?

If your credit score is less-than-perfect and you’re struggling to get an unsecured loan, you may find it easier to get approved for a guarantor loan or secured loan. This is because the lender has the extra reassurance of the guarantor or the property used as security.

What is the maximum I can borrow with a personal loan?

Typically, the maximum you can borrow with a personal loan is around £25,000. However, some lenders will offer personal loans that are larger than this, while some lenders may offer less. Check the terms of each individual lender to see the maximum loan they offer.

About the author

Joel Kempson
Joel Kempson is a personal finance expert and writer at NerdWallet. He has previously written for Money.co.uk and Uswitch, as well as being quoted in the Daily Express, The Mirror and The Sun. Read more
Rhiannon Philps
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

Some examples

Here are some examples from UK loan providers that you can compare using the Monevo eligibility service:

    Shawbrook Personal Loan logo

    Shawbrook Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      14.7% APR
    • Available Amounts
      £1,000 to £35,000
    • Min / Max Terms
      1 to 7 years
    Representative Example: Representative APR 14.7% (fixed). Based on a loan of £10,000 over 60 months at an interest of 14.7% p.a. (fixed). Monthly repayments of £231.62. Total amount payable £13,896.65. Maximum APR: 29.9%.
    More info
    • Broker
    Post Office Money Personal Loan logo

    Post Office Money Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      14.9% APR
    • Available Amounts
      £1,000 to £25,000
    • Min / Max Terms
      1 to 7 years
    Representative Example: Representative APR 14.9%. Based on a loan of £4,000 over 36 months at an interest rate of 14.9% p.a. (fixed). Monthly repayments of £136.65. Total amount payable £4,919.47. Maximum APR: 29.9%.
    More info
    Admiral Personal Loan logo

    Admiral Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      14.9% APR
    • Available Amounts
      £1,000 to £30,000
    • Min / Max Terms
      1 to 8 years
    Representative Example: Representative APR 14.9%. Based on a loan of £10,000 over 60 months at an interest of 13.97% p.a. (fixed). Monthly repayments of £232.53. Total amount repayable before £13,951.80. Maximum APR: 39.9%.
    More info
    • Peer To Peer
    Zopa Personal Loan logo

    Zopa Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      19.9% APR
    • Available Amounts
      £1,000 to £25,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 19.9%. Based on a loan of £10,000 over 60 months at an interest of 19.9% p.a. (fixed). Monthly repayments of £255.50. Total amount payable £15,329.80. Maximum APR: 34.9%.
    More info
    Oakbrook Personal Loan logo

    Oakbrook Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      19.9% APR
    • Available Amounts
      £1,000 to £10,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 19.9%. Based on a loan of £5,000 over 48 months at an interest of 19.9% p.a. (fixed). Monthly repayments of £147.71. Total amount payable £7,090.08. Maximum APR: 34.9%.
    More info
    My Community Finance Personal Loan logo

    My Community Finance Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      23.0% APR
    • Available Amounts
      £1,500 to £25,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 23.0% (fixed). Based on a loan of £4,500 over 48 months at an interest of 23.0% p.a. (fixed). Monthly repayments of £139.66. Total amount payable £6,703.57. Maximum APR: 23.0%.
    More info
    Abound Personal Loans logo

    Abound Personal Loans

    • Loan Type
      Unsecured
    • Representative APR
      24.8% APR
    • Available Amounts
      £1,000 to £10,000
    • Min / Max Terms
      1 to 3 years
    Representative Example: Representative APR 24.8%. Based on a loan of £2,000 over 36 months at an interest of 24.8% p.a. (fixed). Monthly repayments of £76.75. Total amount payable £2,763.00. Maximum APR: 24.8%.
    More info
    BetterBorrow Personal Loan logo

    BetterBorrow Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      27.3% APR
    • Available Amounts
      £1,000 to £12,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 27.3%. Based on a loan of £5,000 over 42 months at an interest of 27.3% p.a. (fixed). Monthly repayments of £178.12. Total amount payable £7,480.93. Maximum APR: 39.8%.
    More info
    KOYO Personal Loan logo

    KOYO Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      29.9% APR
    • Available Amounts
      £1,500 to £12,000
    • Min / Max Terms
      6 months to 5 years
    Representative Example: Representative APR 29.9%. Based on a loan of £6,000 over 48 months at an interest of 26.45% p.a. (fixed). 47 scheduled monthly payments of £205.09 and a final payment of £204.75. Total amount payable £9,843.98. Maximum APR: 34.9%.
    More info
    • Only available to homeowners
    Oplo Personal Loan logo

    Oplo Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      30.8% APR
    • Available Amounts
      £2,000 to £15,000
    • Min / Max Terms
      2 to 6 years
    Representative Example: Representative APR 30.8%. Based on a loan of £6,915 repayable over 47 months at an interest rate of 13.92% pa (fixed). 46 monthly payments of £240.33 and a final payment of £240.33. Total amount payable £11,295.71. This includes an acceptance fee of £395. Maximum APR: 30.8%.
    More info
    Finio Personal Loan logo

    Finio Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      39.9% APR
    • Available Amounts
      £1,000 to £10,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 39.9%. Based on a loan of £2,000 over 24 months at an interest of 39.9% p.a. (fixed). Monthly repayments of £116.07. Total amount payable £2,785.68. Maximum APR: 69.9%.
    More info
    Lifestyle Personal Loan logo

    Lifestyle Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      49.9% APR
    • Available Amounts
      £1,000 to £5,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 49.9%. Based on a loan of £3,000 over 36 months at an interest of 49.9% p.a. (fixed). Monthly repayments of £146.37. Total amount payable £5,269.32. Maximum APR: 49.9%.
    More info
    118 118 Personal Loan logo

    118 118 Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      49.9% APR
    • Available Amounts
      £1,000 to £5,000
    • Min / Max Terms
      1 to 3 years
    Representative Example: Representative APR 49.9%. Based on a loan of £2,000 over 24 months at an interest of 41.2% pa (fixed). Monthly repayments of £123.64. Total amount payable £2,967.43. Maximum APR: 79.9%.
    More info
    Bamboo Personal Loan logo

    Bamboo Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      59.7% APR
    • Available Amounts
      £1,000 to £8,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 59.7% (fixed). Based on a loan of £3,000 over 30 months at an interest of 47.73% p.a. (fixed). 29 Monthly repayments of £173.02 and a final payment of £172.92. Total amount payable £5,190.50. Maximum APR: 69.9%.
    More info
    • Only available to NHS/Public sector workers
    Salad Money Personal Loan logo

    Salad Money Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      74.9% APR
    • Available Amounts
      £500 to £1,000
    • Min / Max Terms
      12 to 18 months
    Representative Example: Representative APR 74.9%. Based on a loan of £1,000 over 18 months at an interest of 57.24% p.a. (fixed). 17 monthly repayments of £87.57 and a final repayment of £79.94. Total amount payable £1,568.63. Maximum APR: 74.9%.
    More info
    Minty Personal Loan logo

    Minty Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      98.1% APR
    • Available Amounts
      £1,500 to £3,000
    • Min / Max Terms
      2 years
    Representative Example: Representative APR 98.1%. Based on a loan of £2,250 over 24 months at an interest of 44.4% p.a. (fixed). Monthly repayments of £177. Total amount payable £4,248. Maximum APR: 98.1%.
    More info
    Everyday Loans Personal Loan logo

    Everyday Loans Personal Loan

    • Loan Type
      Unsecured
    • Representative APR
      99.9% APR
    • Available Amounts
      £1,000 to £15,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 99.9% (fixed). Based on a loan of £3,000 over 24 months at an interest of 71.3% p.a. (fixed). Monthly repayments of £237.75. Total amount payable £5,706. Maximum APR: 299.8%.
    More info

If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.

Our service is free of charge but we receive commissions from the providers we refer you to. This table is initially ordered by representative APR. You can use the options above the table to order it according to various criteria. You may be offered different rates depending on your personal credit rating.

Our comparison service features a selection of providers from whom we receive commission.

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