More on APR
APR is short for “annual percentage rate”, which lenders also call the “representative rate”. It determines the overall interest cost you pay on your loan, regardless of the term. It can mean the difference between a cheap personal loan and an expensive one.
The APR can either be one of two types: fixed or variable. With a fixed rate, you pay the same amount of interest until the loan ends. This clearly benefits borrowers who want to know how much they pay monthly. Furthermore, a fixed rate protects you from paying more when the market rate is high. Since fixed rates do not follow market rates, you’d still pay the same monthly interest.
Meanwhile, variable rates change the amount of interest you pay every year. Variable rates follow market rates, so you pay more interest when the latter is high. But the good news is, you pay less interest when the market rate is low. If you’re lucky, the market rate may become lower than fixed rates. Check with your lender to know what kind of personal loan interest rates they offer.
The soft search
You’ve finally decided that you’ll apply for the personal loan. But, you want to know beforehand if you’ll even be approved in the first place. What if you want to save yourself the trouble of applying in case you’re rejected?
There is a way to find out early on! Most UK-based banks and lenders offer an “eligibility check”, also known as a “soft search”. It’s an automated system that quickly reviews your credit profile held by credit companies. Furthermore, it can provide a loan quote based on this review. Just put in your personal details and the loan terms you want, and voila! You get a quote that’ll tell you if you should continue your application.
Through this, you can also get a better estimate of personal loan rates. You may not always get the rates lenders advertise, simply because each customer is different. For example, your rate may be higher if you have a history of missing payments. Knowing your APR beforehand through a soft search will better inform your decision to apply. (Please note that the soft search does not guarantee the rate it provides. At the end of the day, it’ll be the lender who determines this.)
The best thing about the soft search is that it doesn’t affect your credit score. You can request this with as many lenders as you like with no worries. The results will never be visible to other lenders. Think of it as doing your homework for your financial well-being!
The application process
Dreading all of the effort that comes with applying? It’s no longer as painful as you might first think. These days, most banks and lenders make the application process for their personal loans easy. It can be even as quick as ten minutes!
To start, you need to check if you qualify for the personal loan. Although most lenders have their own requirements, you’ll often come across the following:
- 18 years of age or older
- Permanent residence in the UK
- Ownership of a UK-based bank account
- No previous history of bankruptcy
After you clear the requirements, you’ll need to fill in a form with personal details. These relate to your identity, your address, your regular income, and your regular expenses. You can usually find the form itself on the lender’s website or mobile app. Do note, you may need to provide proof of the information you’ve filled in.
Once you submit your application, the lender will perform a full credit check on you. This is the standard loan review that affects your credit score, unlike the soft search. Other lenders will see the results of the full credit check once it’s done. This is why, before you hit that “Submit” button, you’re 100% sure about applying already.
Personal loan UK FAQs
Does applying for a personal loan affect my credit score?
Yes, it does. This is why, whenever possible, you should ask the lender first for a soft search quote. This gives you an idea if you should apply for the loan at all. In turn, you can maintain your credit score if the quote shows you shouldn’t apply.
Can I use a personal loan for a house deposit?
Most lenders in the UK offer £1,000 as a minimum. On the other hand, the maximum can go up to £50,000 for some of them. Do keep in mind that the amount you borrow affects the APR.
Can I take out more than one personal loan?
Certainly! This is called the “top-up”, which we already discussed earlier. However, you’ll have to pay more interest overall. The APR on the top-up may increase too, since the lender’s taking on more risk.
Where can I get a personal loan?
As a starting point, you can check out our personal loan comparison table above. It’ll show a list of personal loan providers in the UK. From high street banks to online banks, you can narrow down your choices.
Can a personal loan be used for business?
No, you can’t. This is yet another loan purpose most lenders won’t allow for personal loans. If that’s the intention, you may want to check out secured loans instead.
A final word
While it’s terrific to achieve your personal dreams, your bank accounts have to be ready. At the end of the day, a personal loan is a serious financial commitment. You should only apply when you know you can pay, and under ideal conditions. Also, make sure that the loan terms are most suited to your personal circumstances.
For the best personal loans, check out our personal loan comparison table, higher on this page. There, you’ll see a wide range of banks and lenders, and the terms each offers. From there, you can also visit their websites and research on more details. Remember this: an educated borrower is a sure winner.
Happy shopping!
Carla is a skilled copywriter at BestFind with a background in marketing and communications. She specializes in reviewing personal loan and finance products to help readers navigate the complex world of personal finance.
