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Low cost loans | How to find low rate loans

Find a great low cost loans for you. Learn what to consider when choosing a low rate loan and how to apply.

Low cost loans

Find a great low cost loan for you. Learn what to consider when comparing low rate loans, how to find the best low cost loan for you, and how to apply.

What are low cost loans?

Low cost loans are a way of borrowing money that you repay over a set time period through regular monthly instalments. The lowest-cost loans come in many forms. You need to think about the interest rate, known as the Annual Percentage Rate (APR), and also any additional fees and charges which may affect the cost of the loan. The key to finding the best low cost loan is to compare deals from different providers and understand how low cost loans work. Read on for our independent guide to finding cheap loans.

Low cost loans

Compare all sorts of low cost loans from personal loans to debt consolidation loans.

Compare cheap loans

Compare personal loans from £1,000 to £35,000 and find the right loan for you.

How do low interest loans work?

There are two types of personal loan which may be available to you – an unsecured loan, or a secured loan. 

Secured loan

When you take out a secured loan, you are borrowing money that is secured against your assets, usually your home. Secured loans are often cheaper than other types of loan, but you could lose your home if you cannot keep up the repayments. The cheapest secured loans are low APR loans, which means that the interest rate you are charged (known as the Annual Percentage Rate) is low. These types of loans are sometimes known as homeowner loans.

Secured loans - pros
  • Low APR
  • Long repayment periods
  • Larger loan amounts possible
Secured loans - cons
  • Your home is at risk if you default
  • Longer loan terms mean you might pay back more overall
  • You need to be a homeowner with equity built up

Unsecured loan

Unsecured loans are also known as personal loans. They are not attached to your property, such as your home. You will need to have a good credit rating based on your personal financial circumstances to get the best rates, to offer reassurance to lenders of your ability to pay the loan back.

If your credit rating is on the low side, or you have had problems with credit in the past, you may be able to apply for a credit builder loan or a credit builder credit card to help boost your credit rating.

If you are looking for a low cost loan that you are planning to pay back over the short to medium term, then an unsecured personal loan might be your best option.

You can find out more out how loans work with our Guide to Personal Loans.

Personal loans - pros
  • Your home is safe if you default
  • Lower APRs available than credit cards or overdrafts
  • Fixed repayment schedules
Personal loans - cons
  • Early repayment charges can apply
  • Cheapest rates only available for people with good credit scores
  • Expensive for smaller amounts and shorter borrowing periods

How do I compare low cost loans?

You can use our comparison tool to compare different low cost loans and find the best loan for you. First, compare the APR, or Annual Percentage Rate. The APR is the interest rate you are charged on your personal loan. On the whole, choosing a low APR is the easiest way to save money on your repayments.

You can find out more about how APR works with our guide: What is Annual Percentage Rate or APR?

But how do you know you are making the right choice? New loans are introduced all the time and lenders are always changing their rates, so the only way to tell which low cost loan is the cheapest is to compare them all.

What are fixed and variable rate low cost loans?

If you are looking for a low cost loan and you want to have the security of knowing that you monthly payments are not going to increase, you can opt for a fixed rate loan. This gives you more security as you know what your loan commitment will be, even against the background of a changing financial climate.

How much does a low cost loan cost?

The lowest cost loans will come with some common costs, which may include loan arrangement fees, interest charges, and fees if you want to end your loan early and pay it off before the end of the set repayment terms.

Loan arrangement fees: Some lenders charge a loan arrangement fee when you take out your loan, in much the same way that a credit card provider can charge an annual fee for owning the card. While this fee can bring down your interest rate, it will add to the overall cost, so it may be a better option to take out a loan with a low rate and no fee. When you are working out the overall cost of the loan, you need to factor in both the cost of the interest and any loan arrangement fees.

Early repayment fees: Some lenders charge you the equivalent of two months’ interest if you choose to repay your loan early. This is because the lender will want to protect itself from losing the money it would have gained in interest over the longer period.

If you want to be able to pay off your loan early then check which loans apply a charge and which don't. Not all the best loans have an early repayment loan so it pays to shop around properly.

You can find out more with our guide to Early Repayment charges and Redemption fees.

What is the best way to choose a low cost loan?

The best low cost loan is one that has a low, fixed APR, no arrangement fee and no early repayment fee. You might think that this perfect loan is hard to find, but there are plenty out there if you know where to look.

Be careful if your credit rating has been damaged though or if you do not have much of a financial history for the lender to compare. In that case, you may only be offered loans with slightly higher APR interest rates.

It is not recommended to apply for lots of low cost loans all at once – they will show up on your credit record, your application for a low cost loan will probably be rejected and your credit score will suffer.

You can see your credit report online for more information, read our background guide to credit reports. If your credit rating is good, you can take your pick from the low cost loans available.

How does the Uswitch lowest cost loan comparison work?

Our loans comparison service will search through all these loans for you, giving you a set of results consisting of the best low cost loans for you - just answer a few questions about the type of loan you’re after to get started.

Low cost loans

Compare all sorts of low cost loans from personal loans to debt consolidation loans

Compare cheap loans

Compare personal loans from £1,000 to £35,000 and find the right loan for you.

Compare all sorts of low cost loans from personal loans to debt consolidation loans

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