Best Loan Rates for Personal Loans

Moneyfacts Star Ratings

For over 30 years, Moneyfacts Star Ratings have been the badge of quality for the retail financial industry. Every year, impartial Product Experts assess the features of financial products to identify the very best available in the market.

When looking at products a number of factors are taken into consideration. These include how many features a product has and whether it has any additional benefits, optional extras or add-ons that make it stand out from the rest of the products on the market.

How do we decide which unsecured personal loans get the highest ratings?

The Moneyfacts Star Ratings for Unsecured Personal Loans are based on the weighting of specific product features, that are likely to be the most relevant to those looking to take out an Unsecured Personal Loan agreement.

A considerable number of features will add to the final score, and some of this information includes:

Personal loans eligibility checker and calculator

Before taking out a loan, you can use our loan calculator to see how much your monthly payments could be, based on the amount you want to borrow and your chosen loan term. You can change these fields, as well as the interest rate, to see how this would affect your monthly repayments and total amount you repay.

Once you have a better understanding of the loan you want, you can check your eligibility. This allows you to see the probability of being accepted for a loan, without affecting your credit score.

You can check your eligibility with Loans Warehouse, our preferred loans broker, to help you find the best personal loan for your situation.

What is a personal loan?

A personal loan is a popular form of unsecured borrowing. It allows you to borrow a lump sum and pay it back in fixed monthly instalments, with interest, over an agreed number of months or years.

Because personal loans are unsecured, you don’t need to put forward your home or any other item of value as security, unlike secured loans which require some kind of collateral.

You can usually borrow between £1,000 and £25,000 with a personal loan and repay it over a term of one to seven years. However, depending on the lender and your situation, it may be possible to borrow more or less than this over a shorter or longer period.

There are many reasons why someone may take out a personal loan. Some common uses include to:

• buy a new car
• pay for home improvements
• pay for a wedding or other special event
• pay for a holiday
• cover any unexpected expenses, such as emergency repairs
• consolidate existing debts. Think carefully about the risks before taking out a loan for debt consolidation.

You can’t typically get a loan for investing, gambling, paying for a house deposit or any illegal activities.

How does a personal loan work?

You can apply for most personal loans online, although some lenders may also allow you to apply for a loan via mobile app, in branch or over the phone, if you prefer.

When you apply, you need to provide the lender with your personal details, as well as information about your income, expenditure and employment status, for example. Based on this information, lenders will assess your affordability and run a credit check to decide whether to approve your application.

Your credit and financial history will also influence the interest rate the lender charges.

Once you’ve applied for a loan and been approved, some lenders may be able to transfer the loan to your bank account within a few hours. Other lenders may take 24 hours or possibly even longer.

You can then spend the loan as you choose, making sure you repay it as specified in your agreement. The monthly payments are usually fixed and include the capital you borrowed as well as the interest charged by the lender.

To avoid accidentally forgetting to make a payment, it can be useful to set up a Direct Debit so the repayments come out of your account automatically each month.

Alternatives to a personal loan

Before taking out a personal loan, it’s worth considering if any alternatives may be a cheaper or more suitable option.

• Credit cards. These may be a cheaper option if you only need to borrow a small sum over a relatively short period, especially if you choose a 0% purchase credit card. However, it’s important to manage a credit card effectively to avoid building up debt.
• Money transfer credit cards. If you want money paid into your bank account, you could use a specialist money transfer credit card instead. While there are interest-free options available, they could become expensive if you don’t pay off your card.
• Overdraft. These could be useful for short-term borrowing if you have an interest-free overdraft on your current account. Note that, if you exceed your limit or don’t have an interest-free overdraft, this could be a more expensive way to borrow.
• Car finance. If you’re planning to use a loan to buy a car, you could consider a type of car finance instead, such as hire purchase (HP) or personal contract purchase (PCP). These forms of car finance are secured against the vehicle.
• Secured loan. These may be suitable if you need a larger loan. Secured loans may have lower interest rates than unsecured loans but, because they’re secured against your home (or other property), there’s a risk that the lender could repossess this asset if you default on the loan. See more on secured vs unsecured loans.
• Guarantor loan. If you have a less-than-perfect credit score, a guarantor loan may be able to help you access credit. These loans require you to name a guarantor who is responsible for making the loan repayments if you are unable to.
• Save up. If you don’t need the money immediately, you could consider saving up the money you need instead taking on debt.
• Ask family or friends. Depending on your situation, it may be possible to ask your friends and family for a loan. This is likely to be cheaper than going to a lender, but make sure you agree on the terms of the loan (including repayments) and consider how it could affect your relationship. Only borrow from someone you know and trust; be wary of loan sharks.