Looking to borrow £2k? This guide will help you decide if a loan is right for you. You’ll find useful information about things like the different types of loan, your monthly payments, and where to find the cheapest offers.
Looking to borrow £2k? This guide will help you decide if a loan is right for you. You’ll find useful information about things like the different types of loan, your monthly payments, and where to find the cheapest offers.
A £2,000 loan is generally considered a small loan. It’s common to get a personal loan to borrow this amount. Personal loans are also called unsecured loans because they aren’t tied to an asset, such as your home.
Secured loans are tied to your property or car, which your lender can sell if you don’t keep up with the loan repayments. You’re less likely to find a £2,000 secured homeowner loan as these typically offer larger amounts. You may find £2,000 logbook loans which are secured to your vehicle, but they’re very expensive and risky.
Another expensive option to watch out for is payday loans. These short-term loans often have interest rates of up to 1,500% so it’s worth looking for something cheaper. If you need emergency cash and are struggling to get approved, consider a credit union loan. If you have a decent credit score and want to borrow over the short term, consider a low-interest credit card.
A personal loan can be used for most things, although lenders may have a few rules such as not using it to gamble. Some people use a loan to spread a big expense like a car, wedding or home improvements. Avoid using a loan for everyday expenses — a credit card is usually more suitable for this.
It’s also possible to use a loan for debt consolidation. This means grouping what you already owe on to one account. Debt consolidation can be a way to simplify payments and save money, but it isn’t right for everyone. There’s lots to consider, including the impact on your score and the overall cost.
Looking for a personal loan? Compare loans from various lenders with Experian. Comparing is free, takes less than two minutes and won’t affect your score.
It depends on things like the term and annual percentage rate (APR).
APR reflects the yearly cost of interest and certain fees. It’s calculated as a percentage of the amount you owe. A lower APR means lower monthly payments. It’s worth trying to improve your score if you want to increase your chances of getting a low-interest loan.
The term is how long you have to pay back the loan. This is usually 12 months or more with a personal loan. A longer term means smaller monthly payments. But it makes your loan more expensive overall as you’ll pay interest for longer.
Smaller monthly payments don’t always mean a cheaper loan. It’s worth working out the overall cost to make sure you’re getting a good deal. Let’s look at some examples.
| Example A | Example B | Example C | |
|---|---|---|---|
| Loan amount | £2,000 | £2,000 | £2,000 |
| APR | 10% | 25% | 25% |
| Loan term | 2 years | 2 years | 5 years |
| Monthly payment | £91.89 | £104.27 | £55.83 |
| Total to repay | £2,205.42 | £2,502.57 | £3,350.06 |
| Overall cost | £205.42 | £502.57 | £1,350.06 |
Example C has the longest term. It has the smallest monthly payments but also the greatest cost overall. In fact, it’s much more expensive than example B despite having the same APR.
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.
Yes, lenders must allow you to pay back the loan early. Ask your lender for a settlement statement — this shows how much you still owe and what you’d save by paying it off early. Some lenders charge an early repayment fee of 1-2 months’ interest.
Lenders don’t offer 0% interest loans, although some people may be able to get one from the government. Luckily there are other ways to borrow without paying interest.
One option is a 0% credit card. These offer an interest-free period that typically lasts between 3 to 30 months. Pay off the card before this period ends or you’ll start paying interest at the lender’s standard variable rate, which is often expensive.
You usually need a good credit score to get an interest-free card. You may lose the 0% rate early if you miss a payment or go over the credit limit. There may be fees for setup, balance transfers, spending abroad and other things.
Some banks offer an interest-free arranged overdraft, which is a type of credit attached to your current account. This is typically offered on student bank accounts.
You’re more likely to get approved with a high score, but it isn’t guaranteed. Each lender has its own criteria, meaning some may refuse you while others accept you. Lenders won’t tell you what credit score you need. But you can check your chances of approval when you search personal loans with Experian.
Searching is free, takes less than two minutes and won’t affect your score. Look out for the pre-approved label — this means you should get accepted at the rate you see if you apply.
If you have a low score you may find it easier to get a bad credit loan, although they often have higher rates. Another option is a guarantor loan. This is where someone (like a parent or partner) agrees to repay the loan if you can’t. Your guarantor may need a good credit score and you should both understand the risks before applying.
Here are some other important things to think about before you apply for a loan:
What you can afford to borrow. The monthly payments should fit comfortably into your budget, with room to spare in case your income or spending changes.
The impact on other applications. When you apply for a loan, a hard search is recorded on your report where lenders can see it. Try to space out applications and make as few as possible. It may be wise to avoid a loan if you have a mortgage application coming up.
How you’ll manage your payments. Making your loan payments on time and in full can increase your credit score over time. But missing a payment will lower your score and may lead to fines, a default and even legal action.
Your alternatives. Make sure you understand the pros and cons of loans versus credit cards. Research other options too, such as an arranged overdraft if you need cash or car finance if you need a vehicle.
Want to apply for a loan? Find your best offer with Experian. Compare loans from different lenders and see your chances of approval. Searching is free, takes less than two minutes and won’t affect your score.
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