When you apply for a loan, you state how much you want to borrow over how many years. The lender will assess your credit and financial information to decide whether to approve your application and, if so, what interest rate to charge.
Once approved, the lender will send the money to your bank account for you to use however you choose. You will need to pay this sum back with interest over the agreed period, typically in fixed monthly instalments.
Note that the best loan rates for UK borrowers will typically be reserved for those with excellent credit histories and a stable financial situation.
The table below indicates how much a £10,000 loan could cost based on an APR (annual percentage rate) of 8.0%.
| Loan term | Monthly payment | Total amount payable |
| Three years | £312.08 | £11,234.79 |
| Five years | £201.43 | £12,085.83 |
| Seven years | £154.47 | £12,975.90 |
You can use our loan calculator to work out how much you may need to repay.
Unsecured personal loan rates haven’t changed much in 2026, despite the volatility seen in the UK economy. Indeed, at the start of June 2026, average personal loan rates across a range of tiers were lower than they were one year ago. For example, the average rate on a £10,000 loan borrowed over five years dipped from 8.2% to 8.0% over this period.
“Thankfully, year-on-year, loan rates are lower across the board, and the market appears to be relatively stable in spite of wider concerns over the economy,” Rachel Springall, Finance Expert at Moneyfacts, noted.
“Pricing has been a delicate balance for lenders, considering their appetite to risk as cost of living pressures remain, alongside the need to entice new business,” she explained.
There are several types of loan you can choose from, including:
Personal loans are a type of unsecured loan. This means the borrower doesn’t need to put forward any collateral, or security, to qualify for the loan.
You can typically borrow up to £25,000 (although larger loans may be available), which you then repay over an agreed number of years. You pay off the loan, and the interest charged, in monthly instalments.
If you have a poor credit history, there are loan companies that specialise in offering bad credit loans. These are standard personal loans, but they often charge a higher rate of interest than if you had a good credit score. See our chart to compare bad credit loans.
Note that guarantor loans are a specialist type of personal loan. They work in the same way as a standard personal loan, except the borrower can name another individual as a guarantor who agrees to repay the loan if the borrower can’t. Guarantor loans may be particularly appealing to those with poor credit histories who may not be eligible for a standard loan.
Unlike personal loans, secured loans require some form of security, such as your home or another item of value.
This could help you to borrow a larger sum over a longer term and access lower rates of interest, but the item you put forward as security is at risk if you fall behind on repayments. The lender is entitled to repossess your property (or the item used as security) to get back any money owed.
Bridging loans are a specialist type of short-term secured loan. See more on our bridging loans page.
Car finance is a type of secured loan that uses a vehicle as security.
Business loans can be unsecured, which means they don’t require any form of collateral, or secured, which means the business needs to use their premises or another item of value as security for the loan.
There are a wide variety of business loans available, designed to suit a range of businesses and requirements.
Bear in mind that the Financial Conduct Authority (FCA) doesn’t regulate business loans (with some exceptions). By contrast, all lenders offering secured or unsecured loans for personal use need to be regulated by the FCA.
See our guide on business loans vs. personal loans.
To find and compare some of the best loan rates in the UK in 2026, visit our personal loans charts.
Loans can be used for many different purposes, including to:
Business loans can also be used for a range of business expenses, such as buying new equipment.
Lenders typically stipulate that you can’t borrow money for certain purposes, including:
It’s also not a good idea to borrow money to cover bills and other essential expenses. If you’re struggling financially, taking out a loan is unlikely to be the best option and could make your situation worse. Seek professional help if you need support with your finances.
The amount you can borrow depends on a range of factors, as explained below. Some lenders allow you to borrow up to £50,000 with an unsecured personal loan, although other lenders only offer loans of up to £25,000, for example.
Borrowers may be able to access a larger loan by putting forward their property (or other valuable item) as security. Depending on the value of the collateral, this could enable you to borrow hundreds of thousands of pounds, or even millions of pounds.
Many factors affect the amount you can borrow, including your:
When taking out a secured loan, the value of the property put forward as security will also be a crucial factor in how much a lender will offer you.
Lenders will look at the above information to work out how much you can afford to repay, and so how much you can borrow.
You will receive a lump sum of cash that you can use as you choose.
Loans are typically repaid in fixed monthly payments, which can make it easier to budget for.
They can be a relatively quick way to access funds without needing to save up over time.
Making loan payments in full and on time can help your credit history.
The best loan interest rates will go to those with the best credit scores and financial situation; those with less-than-perfect credit histories are likely to be charged higher rates.
To borrow a larger sum, you may need to put forward your property as collateral
Missing a loan repayment could damage your credit history and, if you fail to repay a secured loan, the lender could repossess the property used as security.
It’s important to ask yourself a number of questions before taking out a loan, including:
Just because you're eligible for a loan, doesn't mean it's necessarily the best decision for you. Think about whether you really need it, or if you can afford to wait to save up money instead, for example.
Work out how much you need to borrow and only take out a loan to cover the sum you need. You pay interest on your loan, so the more you borrow, the more interest you'll need to pay.
It's always worth double-checking that a lender is authorised by the Financial Conduct Authority (FCA) and that it isn't a loan shark (illegal lender) or a scam.
Compare loans and their interest rates to make sure you choose the most affordable option. You can use our loan calculator to see how much your monthly repayments would be and how much you'd pay overall, depending on interest charged.
Before applying for a loan, it's a good idea to check whether you're eligible as this can minimise the chances of your application being declined. You can check your loan eligibility without affecting your credit score.
It's important to choose a repayment term that works for you. The longer the repayment term, the smaller your monthly payments will be. However, a longer repayment term means you'll pay more interest overall, so it's worth choosing as short a term as you can afford.
The interest rate and APR (annual percentage rate) both tell you how much a loan will cost.
However, the APR includes the cost of any standard fees, as well as the interest rate, to show you the total cost of borrowing over one year. Lenders legally need to display the APR, which is designed to make it easier to compare different loans on a like-for-like basis.
Note that the representative APR advertised by a lender is a figure that only 51% of successful applicants need to receive; you may receive a higher or lower rate than this if you apply.
As a minimum, most lenders will only accept applications from UK residents aged 18 or over. Borrowers often need to have a UK current account and may need to provide a UK address history from the past three years.
Moreover, to be eligible for a loan, borrowers will also need to show they have some form of income and can afford to make the monthly payments in full and on time.
Each individual lender will set its own eligibility criteria and may require a minimum annual income, for example.
Some loans may only be available to those with a good credit history, with some lenders not accepting applications from those with county court judgments (CCJs) or bankruptcy on their credit file. However, there are specialist lenders and loans available that may be able to cater for those with a poor or bad credit history.
Note that, if you’re applying for a secured loan, you will need to own a property (or other valuable item) that can act as collateral.
You can apply for many loans online, although you may be able to apply for some in branch, via app or by phone.
It’s worth comparing loans and checking your eligibility before applying for a loan to ensure you choose the most suitable one for you.
Whatever type of loan you apply for, the lender will need to know some key details, including your:
When using a loan comparison service or applying for a loan, you’ll also need to say how much you want to borrow, the term you want to borrow over and what you plan to do with the money (if approved).
Bear in mind that if you’re applying for a secured loan, you’ll typically need to provide more in-depth information than for an unsecured personal loan.
Once you’ve filled in the required information, the lender will assess your application and run a hard credit check as part of the process. This check will be recorded on your credit report.
Don’t submit multiple loan applications (or any other applications for credit) within a short space of time as this could affect your credit score.
Depending on the lender and your application, you may receive a decision within a few minutes. The lender may then be able to transfer the loan to your account within a couple of hours , although other lenders may take one day or longer.
Applying for a loan can affect your credit score as lenders will typically conduct a hard credit check as part of the application process.
A hard check is recorded on your credit file and may temporarily affect your score but, as long as you make all your repayments on-time, your score should start to improve.
Your credit score is more likely to be negatively affected if you make multiple applications for credit (and so have multiple hard checks) within a short period of time. Moreover, bear in mind that any missed or late payments, or defaulting on the loan, are likely to harm your credit score.
See our guide for tips on how to improve your credit score.
Before applying for a loan, it’s worth considering some alternatives to see if they could be a more suitable option.
Credit Cards
Credit cards can be more flexible and cheaper than a loan for borrowing smaller sums over a short period, as long as they are managed effectively.
Remortgaging
Remortgaging and borrowing slightly more on your mortgage could be an alternative to a secured loan, although it's important to consider the potential downsides to this and to seek advice if you're unsure.
Car finance
Car finance may be an option if you were thinking of using a loan to pay for a new vehicle.
Buy now, pay later
Buy now, pay later can help to spread the cost of smaller purchases and, if you pay it off in full before interest charges apply, it won't cost anything.
It’s possible to get a loan with a bad credit history, but this will depend on the borrower’s individual situation and the lender’s criteria. Although those with less-than-perfect scores may not qualify for the cheapest loans or loans from more mainstream providers, there are lenders that specialise in offering personal loans for bad credit and secured loans for bad credit.
If you don’t have any credit history, you may also find it more difficult to get a loan as lenders will have less information to base their decision on. However, some lenders may still be willing to offer you a loan.
If you’re eligible for a loan with bad credit or with no credit history, you are likely to face higher interest rates and may not be able to borrow as much as someone with a better credit score.
Before applying for a loan, make sure that you really do need it and that you would be able to afford the repayments. It’s also worth checking your eligibility first (this won’t affect your credit score).
This depends on your financial situation and how much you want to borrow. Unsecured loans can be more suitable for smaller sums and carry less risk as they don’t require you to put forward any kind of security.
On the other hand, secured loans require some form of collateral (or security) which the lender could repossess if you fail to repay the loan. But, if you can afford to pay off a secured loan, they may be worth considering if you need to borrow a larger sum. See our guide for more information on secured vs unsecured loans.
Select a chart above to see the latest loan rates available. While well-known banks may offer some of the lowest rates, particularly to those with a good credit score, online lenders and other providers may also be worth considering.
For borrowers with a less-than-perfect credit history, a specialist lender may be more suitable for your requirements than a more well-known bank. It’s always a good idea to check your eligibility for a loan before applying so you can see your chances of approval and the interest rate you may be charged.
If you’re not sure whether a lender is legitimate or not, check that it’s authorised by the Financial Conduct Authority (FCA). Search for it on the FCA register and verify that the details (name, address and FCA registration number, for example) match with those on the lender’s website.
Be wary if a lender contacts you out of the blue about a loan as this may be a scam, particularly if it asks for a fee upfront or guarantees that you will be approved without any checks. If you’re ever unsure that a lender is legitimate, don’t provide any personal details or transfer any money. Note that all the lenders on our charts are regulated and are legitimate.
Not necessarily. You should only ever borrow the amount you need. Even if a lender says you’re eligible to borrow more, taking out a larger loan than necessary means you will be paying interest on money that you didn’t need in the first place.
Some of the fees to look out for when applying for and paying off a loan include:
Always check with a lender to find out more about the fees they may charge.
This depends on the lender. You will often be able to overpay a certain amount without facing any penalty charges, while a handful of lenders may allow you to pay off your loan in full without extra charges. However, many lenders will charge several days’ interest if you want to settle your loan early.
Under the Consumer Credit Act, lenders can charge up to 28 days’ interest (for unsecured loans with a term of less than one year) or up to 58 days’ interest (for unsecured loans with a term longer than one year). If you repay more than £8,000 over one year (in one or more payments), extra fees may apply.
Secured loans also typically come with early repayment charges, which may be a percentage of your outstanding balance.
Contact your lender to find out how much it would cost to pay off your loan early.
If you miss a payment, the lender may charge a late payment fee and report it to credit reference agencies (CRAs), which could harm your credit score.
It’s important to contact your lender if you think you’re going to miss a payment, or if you’ve already missed one.
If you can afford to make the payment, you should pay it as soon as possible to minimise the impact on your credit score and to minimise any penalty charges. However, if you can’t afford the payment, it’s crucial that you contact your lender to see if you can work out an alternative arrangement.
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Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.
Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.
Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.
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