What is the difference between a loan and other forms of borrowing?
Loans give you a fixed cash lump sum, unlike credit cards which only give you a credit limit for spending on your card.
With a loan you can spend this money as you like; most people use a loan for home improvements, large purchases (like cars or furnishings) or debt consolidation.
Unlike a credit card or mortgage the cost of a loan is fixed. This means your monthly repayments are fixed for the duration of the loan repayment period.
How does the uSwitch loan calculator work?
To use our loan calculator simply enter in the amount you'd like borrow and how long you'd like to take to pay it back.
You can then compare loans based on interest rates, total cost and monthly repayments. It's best to aim for the cheapest loan possible.
What types of loans are there and what can I use them for?
This depends on what you are borrowing the money for, your credit score, how much you want to borrow, how much you can afford to pay back each month, and how much you want to pay overall.
These loans are unsecured borrowing that you can use for any purpose. Typically you can borrow between £1,000 and £35,000 for periods between one and seven years.
These are loans designed to help you buy a car. They are sometimes secured against the car, and sometimes unsecured debt. If you want to buy a car you can get a finance offer from most dealerships, but applying for finance in advance could get you better deal and make you feel less pressured by salespeople when buying a car.
This loan can be used to pay off existing debts, which can reduce the size of monthly repayments whilst increasing the period of time the loan is repaid over. But consolidating debts with a loan will always cost more than just repaying the debts, so make sure the cost of a debt consolidation loan doesn’t dramatically exceed the cost of existing loans.
Bad credit loans and guarantor loans
These loans are designed for people who have poor credit scores. They are largely unsecured loans and typically more expensive than personal loans. Guarantor loans enable those with bad credit to borrow money if they can find a friend or family member willing to act as a guarantor (someone who will promise to repay the loan if the borrower defaults).
These loans can have repayment periods lasting as long as 30 years. This can make monthly repayments more manageable but will drive up the lifetime cost of the loan. You can borrow very large amounts (up to around £100,000) with a secured loan.
What is the difference between secured and unsecured loans?
Loans are either secured or unsecured, you should think about which option would be best for you.
Secured loans are offered against security (i.e. your property or car), which can be used to recoup the lender’s money if you default. All secured loans and some car loans are secured debt.
Unsecured loans are offered against your credit score, which means you don’t have to offer any security to borrow the money. All personal loans are unsecured, as are most bad credit loans (including guarantor loans), debt consolidation loans and car loans.
What makes one loan better than another?
The cost of a loan is the most important thing to compare. This can be compared with representative APR. It is the cost of the loan in total and includes fees and interest rates. The lower the APR the cheaper the loan.
As well as APR you can also look at the total amount you will repay and compare how much each loan will cost you over its lifetime.
You can also look at upfront loan fees that will vary with different lenders.
Is APR is the only thing to consider when comparing loans?
As well as APR and cost you should think about the repayment period of the loan.
Typically the longer this is the lower your monthly repayments will be. So if a lender offers a loan over a longer period of time this might suit your needs more. But bear in mind the longer your take to repay your loan the more it will cost.
You can also take into account how speedily your application will be processed and how long it will take the money to be deposited into your account. Some lenders can process a loan within 24 hours but most typically take round 3 days to a week, depending on credit checks and other documentations.
There are also introductory offers and incentives available with some loans, like free AA breakdown cover.
Finally you should think about which lender you are borrowing money from. This is much harder to compare, but different companies offer different levels of service. Think about reputation, look at awards and read reviews to find out if you’re going to like who you’re going to be dealing with.
What does 'will I get this loan' mean?
This button brings up a list of minimum eligibility criteria for borrowing this loan - if you can meet these, then it’s likely you will be able to successfully apply for this loan although the rate you receive can vary.
Not all loans are available to everyone. Typically you will need to have a minimum income level and an average to good credit score to be able to borrow. Often minimum and maximum age limits also apply.
Guarantor loans require you to be able to provide the details of someone willing to act as your guarantor (for both the purposes of speeding your application and to avoid surprising any family or friends it’s best to clear this with someone before entering their name and details).
On the simplest level secured loans will also require you to be a UK homeowner, but more complicated equity thresholds may apply.
Why would I be turned down for a loan?
There can be any number of reasons you may be refused a loan. Most likely is failing a credit check because you have poor credit and are applying for a loan that is only available to those with good credit scores.
Checking your credit report is always a good place to start before you apply for a loan. You can know your score to avoid applying for loans you won’t be able to get and fix errors in your report.
You can improve your credit score by paying off any existing debts and responsible borrowing through ‘credit building’ credit cards. Guarantor loans can also help you rebuild a poor credit score.
You might also not pass affordability criteria if you’re applying to borrow more than you could afford to repay each month once your expenses and income has been taken into account.
You may also be too young to apply (under 18, 21 or 22 depending on the loan), or too old (upper age limits are normally around 75).
Why would I be turned down for a loan?
This will take you through to the lender’s website where you can get more details about this loan, read the terms and conditions, and begin the application process.
Often this will involve filling out a secure online form with your personal and financial details, so if you can’t remember these you may want them close at hand.
In the case of secured loans you will be put through to a reference page, from here you can a call our broker to apply for this loan or request a call back.