Need to borrow £1,000? Find out what it will cost you, how to improve your chances of approval and where to find your cheapest offer.
Need to borrow £1,000? Find out what it will cost you, how to improve your chances of approval and where to find your cheapest offer.
A loan can be helpful if you need to spread the cost of a big expense over time. It’s best to use a loan for something you really need. For example, a small loan might help you pay for car repairs or to buy furniture.
Another common use for a loan is debt consolidation. This is where you merge several debts into one loan. This can help you simplify your payments and save money, although it’s not right for everyone.
It depends. Some people pay less than £100 a month while others pay much more. You can estimate your loan payments if you know the:
Annual percentage rate (APR) — this reflects the yearly cost of a loan including interest and certain fees. It’s shown as a percentage of the amount you owe. The higher the APR, the bigger your monthly payments.
Loan term — this is how long you have to pay back the loan. Some loans last a few months, others several years. The longer the term, the smaller your monthly payments.
When it comes to the overall cost of a loan, smaller payments don’t always mean the loan is cheaper. You can see how this works in the examples below.
Getting a low-interest loan may help you cut the cost of borrowing. You can boost your chances of getting a lower rate by improving your credit score.
Choosing a shorter loan term will also lower the overall cost because you won’t be paying interest for as long. It means bigger monthly payments, so make sure you can afford them.
Here are some examples of how APR and term can affect the cost of a loan.
| Example A | Example B | Example C | |
|---|---|---|---|
| Loan amount | £1,000 | £1,000 | £1,000 |
| APR | 7% | 20% | 20% |
| Loan term | 1 year | 1 year | 3 years |
| Monthly payment | £86.43 | £91.86 | £36.34 |
| Total to repay | £1,037.13 | £1,102.28 | £1,308.20 |
| Overall cost | £37.13 | £102.28 | £308.20 |
Example C has the longest loan term. It has the smallest monthly payments but it’s the most expensive overall. In fact, it costs three times what Example B costs, despite having the same interest rate.
Remember, these are examples so your loan offers may look different. Also, some fees aren’t reflected in the APR, including fees for early repayment and late payment.
Here are some important things to consider before you apply for a loan.
Impact on your credit score. Lenders do a hard credit check when you apply for a loan. Your score will dip but should recover over time if you take care of it. Try to make as few applications as possible and space them out.
Impact on other applications. Mortgage providers will take loan payments into account when deciding if you can afford a mortgage. Also, they may see recent loan applications as a sign you’re struggling with money.
Early repayment fee. If you come into some extra money, you may want to pay off your £1k loan early to try and save on interest. Lenders often charge a fee equal to around one or two months of interest if you do this.
Late payments. Missing a payment will lower your credit score and may lead to fines, defaulting and even legal action. On the other hand, making payments on time and in full should improve your score over time.
Personal loans are a common choice for borrowing a relatively small amount like £1,000. Because they’re unsecured you don’t have to put your home up as security. It also means you don’t need to own your home to apply for one of these loans. You’ll need a decent credit score to get approved for the lowest interest rates. If your credit history isn’t in the best shape, it may help to improve your score or use a guarantor.
You’re unlikely to find £1,000 homeowner loans (which are secured against your property) as these types of loans are typically for larger amounts.
You may find £1,000 logbook loans (which are secured against your car) but they’re very expensive. When you use your home or car as security, your lender can sell it if you don’t keep up with your payments.
Tempted by a £1,000 payday loan? These are a very expensive option for short-term borrowing. Try to avoid them and consider a credit union loan or bad credit loan instead.
Find the personal loans you’re more likely to get with Experian. Look out for pre-approved offers — this means you should be accepted if you apply. Searching loans is free and won’t affect your score.
No, you won’t find a reputable lender in the UK that offers no credit check loans. Lenders search information on your credit report to help them decide whether to lend to you. It’s a good idea to check your report before making a loan application.
Yes, it’s possible. Bad credit loans are often easier to get, although they usually have higher rates. Another option is a guarantor loan. A guarantor is someone who agrees to repay the loan if you can’t, such as a partner or parent. They may need a good credit score and you should both understand the risks before applying.
Worried about being refused credit? Experian calculates your chances of approval when you search loans with us, so you can apply with confidence. Searching is free, takes less than two minutes and won’t affect your score.
Some lenders may give you a loan on the same day you apply for it — sometimes even within a few hours. Check the lender’s terms before you apply. A good credit score and accurate information on your application may help you get approved faster.
A £1,000 loan isn’t right for everyone. You might be able to put a £1,000 purchase on your credit card. A credit card lets you choose how much you repay each month as long as it’s at least the minimum payment. You won’t pay interest if you pay off the amount you owe in full each month, and there are no early repayment fees.
If you borrow cash on your credit card, it can work out very expensive. You’ll pay interest from the moment you withdraw the money. The interest rate on cash transactions is higher than for purchases plus there may also be a cash handling fee.
Consider a purchase card if you want to spread a big expense. Lenders may offer you a 0% introductory period, especially if you have a good credit score. You’ll be put on their higher standard rate when it ends.
Need cash? A money transfer card lets you borrow money and pay it directly into your bank account. Another option is an arranged overdraft which is a type of credit attached to your bank account.
If you already have credit cards, a balance transfer card may help you simplify payments or save money with a 0% introductory period. Try to clear your balance before the period ends and your rate goes up. There’s usually a fee for each balance transfer.
Ready to compare offers? Searching with Experian is free and won’t affect your score.
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