Other loans may be available in the UK loans market that are not included in this service.
Table of Contents
- Cheapest unsecured personal loan rates
- What can I use an unsecured loan for?
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- What’s the difference between unsecured and secured personal loans?
- How do unsecured loans work?
- How much do unsecured loans cost?
- How do I get an unsecured loan?
- Are there unsecured loans for bad credit?
- Pros and cons of unsecured loans
- Types of unsecured loan
- Alternatives to unsecured loans
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Unsecured loans, also called personal loans, let you borrow money from a lender such as a bank or building society without the risk of losing your home or other asset if you can’t repay.
You can typically borrow between £1,000 and £25,000 with an unsecured loan, which you then repay plus interest in monthly instalments. Some lenders offer a higher maximum loan size, but £1,000 is generally the smallest amount you can apply for. You can choose how long you need to repay the money, with many secured lenders offering terms of between one and seven years.
Cheapest unsecured personal loan rates
You’ll want to find the cheapest unsecured personal loan for your financial situation and credit history. You can do this by comparing unsecured lenders’ representative annual percentage rates (APRs). The figures in our table below show the cheapest unsecured loans based on a representative example of up to £10,000 repaid over five years.
The interest rate you receive will depend on your credit history, financial situation, how much you need to borrow and how long you want to pay the unsecured loan over. Only borrow what you need and if you can comfortably afford repayments.
The unsecured loans below are listed by APR, from lowest to highest. Where lenders offer the same representative APR, we’ve ordered the loans by our star rating.
Provider | Representative APR | Loan Amount | Available Term | NerdWallet’s Rating | |
|---|---|---|---|---|---|
 | 6.1%* | £3,000 to £35,000 | 1 to 10 years | 5.0 / 5 | |
 | 6.2% | £300 to £50,000 | 1 to 7 years | 5.0 / 5 | |
 | 6.2% | £1,000 to £25,000 | 1 to 5 years | 4.5 / 5 | |
 | 6.2% | £1,000 to £25,000 | 1 to 7 years | 3.5 / 5 | |
 | 6.6% | £1,000 to £50,000 | 1 to 10 years | 4.5 / 5 | |
 | 6.6% | £1,000 to £25,000 | 1 to 8 years | 3.5 / 5 | |
 | 6.7% | £1,000 to £50,000 | 1 to 7 years | 4.5 / 5 | |
 | 6.9% | £1000 to £25,000 | 1 to 5 years | 3.5 / 5 | |
 | 6.9% | £1,000 to £35,000 | 2 to 7 years | 3.5 / 5 | |
 | 8.7% | £1000 to £25,000 | 1 to 7 years | 4.0 / 5 |
* People with a Clubcard receive a preferential rate – the representative APR for non-members is 6.5% for the same amount and term.
A loan from John Lewis Money is provided by Zopa Bank.
Missed or late payments can lead to increased debt and negatively impact your credit rating.
Important information: APR is checked weekly with data supplied by the independent financial information service Defaqto. We haven’t included products with limited availability, for example they are only available to existing customers or limited solely to homeowners. We aim to provide accurate information but prices, terms and conditions of products and offers can change, so double-check first. Our Star Ratings do not consider the product provider’s lending rates and therefore do not reflect how much it costs to borrow from the reviewed brand. Loan rates can be dependent on your personal circumstances and specific loan requirements. Representative examples are based on information from the lender and are not necessarily based on the same loan amount or loan term.
What can I use an unsecured loan for?
You can use an unsecured loan for many different reasons. You might want to borrow money for a large expense you can’t cover with savings, or to pay off more expensive existing debts.
Here are some common reasons to apply for an unsecured personal loan:
f you have a handful of debts with different creditors, you can take out an unsecured loan to consolidate your debts.
Debt consolidation can be a good option if your overall debt is currently expensive and you’re confident you can get a cheaper unsecured loan to pay it off. You’ll then make a single monthly repayment to the new lender.
However, debt consolidation could also extend the term of your borrowing and mean you pay more interest overall. It’s important to compare the total cost of your new unsecured loan against how much it will cost to settle your existing debts.
Buying a car or other type of vehicle is often expensive. An unsecured personal loan is one of the ways you can finance the purchase.
An advantage of taking out an unsecured loan to buy a car is that you’ll own the car outright straight away. With car finance, you usually only own the car properly at the end of the contract.
But there are advantages to car finance versus a loan, for example you may be eligible for a 0% APR car finance deal.
Home improvements can enhance your enjoyment of your property and potentially add to its value in the process. But depending on the type of work you want to do, you’ll be faced with the question of how to fund the renovations.
Plenty of lenders offer the option of applying for up to £25,000, with some giving you the option to apply for more if needed, so an unsecured personal loan could fund many types of home improvements. Make sure you only apply for what you need to complete the work and if you can comfortably afford the repayments.
An unsecured loan can help to pay for education, whether you’re thinking about going to university or there’s a course from a different institution you’d like to take. Because of the eligibility requirements for an unsecured loan, it’s likely you’ll only be able to get a loan if you’re studying part-time alongside earning an income.
It’s important to consider all your options for funding education. Government student loans are how most students fund university, because of favourable terms including the fact that you only start repaying the loan when you’re earning a certain amount.
Unsecured loan providers sometimes advertise wedding loans, but these aren’t a separate type of product. A wedding loan is usually an unsecured loan that you use to pay for your big day.
You may want to apply for an unsecured loan to help pay for wedding costs, potentially alongside money you’ve already saved in preparation.
If you need money urgently, for example to repair a broken boiler or to help pay for an expensive vet bill, you could consider applying for an unsecured loan.
The minimum you can apply for with most unsecured loan providers is £1,000, which should help you only apply for what you need to cover the emergency. Some lenders will transfer you the money within hours of approving your application.
What’s the difference between unsecured and secured personal loans?
The main difference between an unsecured and a secured loan is that if you’re accepted for a secured loan and can’t keep up with the repayments, you could lose the asset you put up as security.
Secured loans are commonly secured against your home, making them risky for you as a borrower. You may also find loans that you can secure against your car.
The maximum secured loan you can apply for with many lenders is usually much more than the maximum you can apply for on an unsecured loan. The maximum loan term is often a lot longer too. This could make them an option for expensive projects such as home improvements.
Secured loans sometimes have lower interest rates than unsecured loans, because the security reduces some of the risk to the lender. If you’re thinking about applying for a secured loan, it’s important to compare them carefully to make sure you’re getting the best deal.
» MORE: Best secured loans
How do unsecured loans work?
Most typical unsecured loans work in a similar way. You apply to borrow a certain amount of money from a lender. If approved, you then repay this amount plus interest in monthly instalments over the agreed period. Your annual percentage rate (APR) is usually fixed, so it stays the same over the whole loan term.
- Choose the amount you need to borrow and the period you want to pay it back over. You can often borrow between £1,000 and £25,000, although you may be able to borrow more or less depending on the lender and your situation, for example a £5,000 loan or £10,000 loan.
- Check your eligibility before applying for an unsecured loan. Many unsecured loan providers allow you to check your eligibility for the loan. This helps you see if you might qualify beforehand without affecting your credit score, reducing the chances of having your application declined. This is important because too many applications for credit over a short time can damage your credit score.
- Apply for the unsecured loan. The lender will usually run a hard credit check when you apply, which appears on your credit report. This can help it work out how much of a risk it is to lend to you and it can influence the interest rate you’re offered. Checking your credit score before applying can help you see how the lender may view your application.
- Repay the loan in fixed monthly instalments. If approved the lender will transfer you the money. The lender then collects your monthly payments on a specific date each month. You can usually change this date, but it may change your subsequent monthly repayment or the amount you owe in interest overall, because you’re changing the loan term.
- Missing a payment damages your credit file. If you miss a payment, you’ll face late payment charges and damage to your credit report. If you fail to repay the loan, the lender could take you to court to get the money back.
How much do unsecured loans cost?
The cheapest representative APR advertised by an unsecured loan provider is currently 5.9%, according to the independent financial product analyst Defaqto. The most expensive rate advertised is 79.5% and is offered by a bad credit loan provider, although there are other unsecured bad credit loans available that Defaqto doesn’t analyse.
You can see how much a loan may cost over one year by looking at the advertised APR. This figure includes interest charges as well as any fees, which makes it easier to compare the costs of loans from different lenders. The advertised APR is known as the representative APR and is the rate the lender expects to offer to at least 51% of applicants. Your personal APR may be higher or lower depending on your credit score and financial situation.
Bear in mind that APR doesn’t tell the whole story. The overall cost of a loan depends on two factors, the interest rate and length of time it’s paid back over. Even though secured loans sometimes have lower APRs than unsecured loans, they won’t always be cheaper. You can usually choose to pay back secured loans over a longer loan term than unsecured loans, which means they can be expensive.
Here’s an illustrative example of how the cost of a £30,000 loan and the monthly repayments change depending on the APR and the loan term:
| Unsecured loan | Secured loan | |
|---|---|---|
| Interest rate | 9.9% | 7.4% |
| Loan term | Seven years | Fifteen years |
| Monthly repayments | £496.49 | £276.40 |
| Total repaid | £41,704.89 | £49,752.30 |
| Total interest | £11,704.89 | £19,752.30 |
If the loan term is the same and the secured loan has a cheaper rate, the secured loan will be cheaper overall:
| Unsecured loan | Secured loan | |
|---|---|---|
| Interest rate | 9.9% | 7.4% |
| Loan term | Seven years | Seven years |
| Monthly repayments | £496.49 | £458.67 |
| Total repaid | £41,704.89 | £38,528.20 |
| Total interest | £11,704.89 | £8,528.20 |
Your interest rate depends on:
- the lender
- the amount you want to borrow
- the time you want to pay it back over
- your credit score
- your financial circumstances
If you have a poor credit score, the lender may view you as riskier to lend to, so you’re likely to be offered higher interest rates.
You may be able to reduce the amount of interest you pay overall if you repay your loan early, although the lender may add an early repayment fee or interest charge to your settlement figure.
More often than not, the lender will have a loan calculator on its website that you can use to see the potential APR and total cost of the loan over different amounts and terms.
You can also use our personal loan calculator to find out how much the loan repayments and total cost of a loan could be.
How do I get an unsecured loan?
When you apply for an unsecured loan you need to give the lender some basic information, including your:
- name
- current address and previous addresses
- age
- employment status
- income and financial commitments
This information helps the lender check that you are who you say you are, you live in the UK and you meet its lending criteria.
When you submit the application, the lender will usually take a detailed look at your credit history by running a ‘hard’ credit check. The lender will want to see that you’ve successfully managed to repay credit in the past and that you haven’t missed any recent payments.
A credit check also helps the lender confirm your identity. Being registered to vote shows on your credit report and helps the lender check for fraud.
A lender may be less likely to accept your application If it sees that you’ve recently made several applications over a short time because it could suggest you’re in financial difficulty.
Before you formally apply for a loan, it’s worth checking your eligibility first. Many lenders allow you to see if you qualify for a loan, and you can also check your eligibility on our site. Make sure that the eligibility checker only involves a ‘soft’ credit check, which doesn’t affect your credit score.
If you don’t qualify for a loan or your options for borrowing are limited, you could consider improving your credit score, which should unlock more loan options and better interest rates.
What credit score do I need for an unsecured loan?
There isn’t a set credit score you need for an unsecured loan. Each lender has different eligibility requirements and credit scoring systems, so it’s always worth checking your eligibility first.
Keep in mind that each of the credit reference agencies calculates your credit score differently too. This means it looks different depending on who you’re checking it with, whether it’s a score based on Equifax, Experian or TransUnion data.
That being said, a good credit score indicates that you have more options for borrowing money at better rates than someone with a bad credit score. A better credit score often means that the lender has more evidence you’re a reliable borrower, so it’s worth trying to achieve a credit rating that’s in the ‘good’ or ‘excellent’ categories with the credit reference agencies.
» MORE: What credit score do I need for a loan?
Are there unsecured loans for bad credit?
If you have a poor credit score, you might find it easier to get an unsecured loan from a specialist bad credit lender. These lenders have less strict eligibility requirements and sometimes have extra ways to check whether you’re likely to repay the loan, such as open banking.
Bad credit loans are usually a lot more expensive than mainstream unsecured loans. Of the bad credit lenders we’ve reviewed, representative APRs range from around 25% to 100%, but some bad credit loans are much more expensive.
If you don’t need the money right away, it’s worth building a better credit score before applying for a loan. This could improve your eligibility for a cheaper mainstream unsecured loan, rather than needing to apply for a costly bad credit loan.
Otherwise, be sure to check your eligibility and compare loans at a range of bad credit providers to make sure you can get the cheapest loan rate for your situation.
» MORE: Best bad credit loans
Pros and cons of unsecured loans
| Pros | Cons |
|---|---|
| Unsecured loans are less risky for you as a borrower than secured loans, because you won’t lose your home if you can’t keep up with the repayments. | The maximum loan size is generally smaller than the maximum amount you can apply for with secured loans. |
| Your repayments will usually be fixed each month, making budgeting easier. This is different to secured loan rates which are sometimes variable, meaning your rate could change throughout the loan. | The minimum term is usually a year even if you’re able to pay it off faster. |
| Interest rates are often lower than rates on most credit cards, making them a better option if you want to spread your repayments over several years. | The minimum loan size is generally £1,000, so you may need to apply for more than you require. |
Types of unsecured loan
When people talk about unsecured loans, they’re likely referring to a wide range of both long and short term loans offered by banks, building societies, credit unions, and online lenders.
Some examples of unsecured loans include:
Although they’re not loans, most credit cards are a type of unsecured borrowing. When you spend money with your credit card or another type of card such as a store card, the debt isn’t usually secured against your home or another asset.
Alternatives to unsecured loans
The right unsecured loan deal for you will depend on your circumstances and in some cases, you may have better alternatives.
You should consider the differences between unsecured and secured loans to see which option is the right form of borrowing for your situation. A secured loan could allow you to borrow a larger sum at a potentially lower interest rate, but your property will be at risk if you default on the loan.
For short term borrowing, a credit card could be cheaper than an unsecured loan. You’re only charged interest if you don’t settle the balance in full each month, so you can spread the cost of a big purchase over a couple of paydays.
A credit card’s disadvantages start when you’re unable to pay off the whole balance each month, because it then becomes an expensive way to borrow and can lead to a costly debt building.
You may be eligible for a 0% interest credit card, which offers an introductory interest-free period that often lasts several months. This will be a cheaper alternative to an unsecured loan if you can pay off the balance by the end of the 0% introductory period. Otherwise, you’ll be charged interest on the remaining balance and the rate will usually be more expensive than a personal loan.
This can be a problem if you’ve continued to use the card for other purchases, making it difficult to settle the balance before the end of the 0% period.
If you don’t make at least the minimum repayments on a credit card, your credit file will be damaged and any 0% interest-free period may be removed.
An overdraft lets you borrow from your bank and can tide you over until money comes into your account next, making them useful for short term borrowing.
They can be a good alternative to an unsecured loan if you only need to borrow a small amount, but the interest charges are usually expensive. You’ll need to apply for an overdraft and agree with your bank on how much you can borrow, because an unarranged overdraft can affect your credit score.
[DROPDOWN] Borrowing from friends and family
Borrowing from friends or family could be an option if you have a close friend or family member who’s willing to lend you money. This type of loan will likely be cheaper and it also won’t affect your credit file.
A disadvantage of borrowing this way is the potential for disputes, damaging your relationship with the person you’ve borrowed from. Make sure you agree on how the money will be repaid and put the details in writing to help avoid any potential disagreements.
If you’ve got savings, think about how much of a spend you can fund without needing to borrow money at all.
Keeping an emergency savings fund is a good money habit that can avoid the need to borrow money urgently, such as when your car or boiler breaks down.
Otherwise, if you’re planning a big spend and can afford to wait before going ahead, putting a regular amount aside into an Individual Savings Account (ISA) can help your money grow tax-free.
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