Personal loans

How to get a personal loan

At Experian you can compare offers from leading providers to give you more choice and help you find the best loan for you.

You tell us how much you want to borrow and we then browse the market and look for the best deals for you. We’ll ask you a series of questions to help us do this, such as what do you need the loan for, your status, tell us about your finances, tell us about you and what is your address and contact details?

Alternatives to personal loans

If you’re looking to borrow a relatively small amount and don’t want to have to pay back a set amount on the loan each month, there are other options.

Credit cards: these allow you to borrow money for spending, up to a set limit. You can use as much of this credit as you choose and as long as you make the minimum monthly repayment on your card, it’s up to you how much you repay each month.

Find out more about credit cards

Overdraft: if you have a current account, you probably have an overdraft facility. This lets you withdraw money or pay bills from your bank account (up to a set limit) even if you don’t have enough money in there. You may have a small interest-free overdraft facility on your account. Or you could ask for an agreed overdraft facility. If you use this, you can expect to pay interest on any borrowing and if you go over this amount the interest rate will be higher.

If you’re looking to borrow a larger amount or are having trouble getting a personal loan, a secured loan might be a good alternative.

Secured loans: These loans use an asset, such as your home or car, as security for the loan. This means the lender can get its money by selling your property if you don’t keep up with the repayments.

Find out more about secured loans.

How do personal loans work?

When you get a personal loan from a company, you borrow a specific amount of money for an agreed period of time. Each month you'll pay back a set amount.

The interest rate on a personal loan is usually fixed, meaning it won't change while you're paying back the loan.

How is interest charged?

Interest is calculated as a percentage of the total amount you owe. It's usually charged on a monthly basis, which means the longer you have the loan, the more interest you'll pay overall. But paying off your loan over a shorter period means larger monthly payments. So, it's important to decide what you can afford each month and how much interest you're willing to pay overall.

For example, say you borrowed £10,000 at an interest rate of 5% over 10 years. You'll make monthly payments of £105.52 and pay a total of £2,662.82 interest over the term of the loan.

If you were to take out the loan for five years rather than 10, your monthly repayments would be more at £188.20, but the amount of interest you pay overall would be less at £1,292.24.

When you compare loans, it's useful to look at their APR. This is the interest rate plus any additional fees for taking out the loan.

You can compare loans with Experian. It's free and it won't affect your credit score. Just remember, we're a credit broker, not a lender^† – that means we don't provide credit, but we can help you find credit offers.

How can I get a low-interest personal loan?

The interest rate you're offered can also depend on how well you fit the lender's criteria. You can get an idea of how lenders may see you by checking your free Experian Credit Score. This is a number between 0-999. The higher it is, the better your chances of being approved for lower rates.

Remember that not everyone gets the advertised loan rates. You could apply for a loan with a 6.5% APR, for example, but be offered a loan with a 10.5% APR. This is because where a loan is advertised with a ‘representative APR’, it means that the lender must offer that rate to at least 51% of customers. The lower your credit score, the more chance you’ll pay a higher than advertised rate.

To get a low-interest personal loan:

• Shop around: Compare loans from across the market
• Be aware of your credit score: Check your credit score for free – then if necessary, see if you can improve it
• Try to avoid applying for multiple loans: If you make multiple credit applications over a short period of time, this can harm your credit score
• Consider a credit card: If you’re looking to borrow a relatively small amount (less than £5,000) then you could consider a 0% purchase credit card. If you pay off the card within the 0% period, it could be cheaper than a loan

Can I get approved for a personal loan?

To get approved for a personal loan, you'll need to show the lender you're likely to repay them. The company will assess the likelihood of you doing this by calculating your credit score. Typically, they look at:

• Your application details
• Information from your credit report
• Any data they already hold on you (e.g. if you've been a customer before)

Each company has its own criteria for acceptance, but they won't tell you what this is. This means people often have to apply for a personal loan just to see if they are eligible for it. As every credit application creates a hard search on your report – this can lower your score and reduce your chances of approval.

Luckily, you can check your eligibility rating for personal loans when you compare loans with Experian – and it won't affect your score.

How should I manage my personal loan?

A well-managed personal loan may improve your credit score, while a badly managed loan can reduce it. Here are our top four tips for managing your loan and protecting your score:

1. Stick to your repayment schedule to avoid penalty fees and negative marks on your credit report
2. Keep a monthly budget so you've always got enough money for your repayments
3. If you think you'll miss a payment, talk to the company as soon as possible to discuss your options
4. If you need additional credit make sure you can comfortably afford the payments on top of existing loans and be prepared for your credit score to be lower after adding more borrowing

We're a credit broker, not a lender