Need to borrow £5k? Read on to learn where to find a £5,000 loan, how to repay it and some important things to know before applying.
Need to borrow £5k? Read on to learn where to find a £5,000 loan, how to repay it and some important things to know before applying.
Loans can be a convenient way to spread a large expense over time. You may be able to borrow £5,000 and pay it back (plus interest) in monthly instalments. Whether a £5k loan is right for you depends on several things including:
Your reasons for borrowing. How important and urgent is it?
How much you can afford. Can you comfortably afford the repayments on your budget?
Total cost of the loan. Is it worth it? Are there cheaper options?
How long you want to borrow for. How will loan payments affect your future? Remember, you’ll usually pay a fee for repaying the loan early.
Your chances of approval. Is your credit score good enough for the loan you want?
Other credit applications. Are you looking to get a mortgage soon? Getting a loan could lower your chances of approval.
Learn more about what to consider before applying for a £5k loan below, as well as some alternatives.
You may come across several types of loan if you’re looking to borrow £5,000. Here’s a quick overview of some common loan types:
Secured loans – these loans are tied to an asset (something valuable like your home or car). This can make it easier to borrow more and for longer. If you miss payments, there’s a risk your lender will sell the asset to get its money back.
Personal loans – also called unsecured loans, these aren’t tied to an asset, meaning there’s less risk for you. You may need a good credit score to get approved. Small loans are more likely to be unsecured than secured.
Debt consolidation loans – it’s possible to move your existing debt to this type of loan. Done right, debt consolidation can simplify payments and reduce interest costs. But they aren’t right for everyone. There are lots of things to consider such as the impact on your credit score, if you can afford the loan, and the total cost compared to what you pay now.
Guarantor loans – if you’re finding it hard to get approved for a £5,000 loan, one option is to use a guarantor. This is someone (often a parent or partner) who agrees to pay the loan if you can’t. They may need a good credit score and you should both understand the risks before applying.
Bad credit loans – if you have a low credit score, you may find it easier to get approved for this type of loan. You may need to accept a higher interest rate and lower amount though.
Payday loans – these are a very expensive type of loan designed for short-term borrowing. Think carefully before getting one as this type of debt can grow quickly. You may not find a £5,000 payday loan as they tend to be smaller.
Your chances of getting a £5k loan depend on if you meet the lender’s criteria. Each lender has different criteria, meaning one may refuse you credit while another may accept you. Lenders won’t tell you what they’re looking for. Luckily, you can check your chances of approval with Experian. We match your unique data against lenders’ criteria when you search loans with us.
It’s harder, but still possible to get a £5k loan if you have a poor credit score. Personal loans tend to require a higher credit score, so consider a bad credit loan or guarantor loan instead. Another option is to improve your credit score before you apply for a £5,000 loan.
It’s possible to “pay off” your existing debt with a debt consolidation loan. Your debt doesn’t disappear though — it simply moves to the new loan, meaning you still have to pay it back. Some people are able to simplify payments and save money with debt consolidation. But it isn’t the right solution for everyone. There are lots of things to consider, such as if you can get a low interest loan and how much it will cost overall.
It depends on things like your interest rate and loan term. Getting a low-interest loan can make your monthly repayments smaller. So will taking longer to pay off the loan, although you’ll make more payments overall. Here’s an example:
If you have a £5,000 loan over 5 years with a 10% interest rate, the monthly payments are £105.18
If you increase the interest rate to 20%, the monthly payments go up to £127.98
If the rate stays at 10% but you have the loan for 10 years, the monthly payments go down to £64.89 (although it’s more expensive overall as you pay interest for longer)
Your monthly payments can go up or down if you have a variable interest rate. They’ll stay the same if you have a fixed rate.
Also you may pay fees for things like setting up the loan, missing a payment or repaying the loan early.
Loans aren’t right for everyone. If you’re looking for a more flexible option, consider credit cards. Unlike loans, you can choose how much to repay each month so long as it’s over the minimum amount. There are no early repayment fees on cards.
Need an alternative to debt consolidation loans? Consider moving existing card balances to a 0% balance transfer card. It’s possible to save money on interest by paying down the balance during the 0% period. Once it ends, you’ll be put on the lender’s standard rate which is usually expensive. There’s usually a fee for transferring a balance.
Purchase cards also offer introductory periods but on new purchases. They can be a good option if you need to spread the cost of a large expense.
If you’re after cash, consider a money transfer card which lets you borrow money and pays it directly into your bank account. Another option is an arranged overdraft which lets you take out more money than is currently in your bank account.
You can usually apply for a loan online or over the phone. Some high street providers may let you apply in person. Make sure you have all the necessary information and documents to hand — such as your address history, employment details, proof of income, passport, driving licence, and so on.
Find the right £5,000 loan with Experian. We calculate your chances of approval to help you save time and apply with confidence. Searching loans is free, takes less than two minutes and won’t affect your credit score.
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