How your loan amount affects the interest rate

If you took out a personal loan of £4,500, would you expect the interest you pay back to be:

A. less than if you borrowed £5,000?
B. the same as if you borrowed £5,000?
C. more than if you borrowed £5,000?

You might be surprised to learn that the correct answer is C.

You’d be forgiven for thinking that if you were borrowing less money, you’d pay a lower interest rate, but more often than not this isn’t the case. Here, uSwitch explains how and why loan interest rates are affected by the amount you want to borrow.

The impact of loan amount on loan APR

While most of us have an idea that the amount you want to borrow will have an impact on the interest rate you pay, the ins and outs of loan interest rates can come as a surprise.

As in the example given above, if you wanted to borrow £4,500, when we did our test in December 2009, the best APR on the market was 12.9% – meaning you’d pay back £1,533 in interest over a 5 year term.

However, if you borrowed £5,000 instead, you could get an APR of 8.8%, so you’d pay back £1,150 in interest over the same term. So, you end up paying back £383 more in interest for borrowing £500 less.

Why you pay a higher APR for a smaller loan

Why? It’s not always clear, but generally speaking, the APR that a lender sets for a loan is an indication of the risk the company feels it is taking and of the likelihood they think they have of getting their money back. It could be that loan companies see the need to borrow smaller amounts as an indication that the borrower doesn’t have any savings to fall back on, and is therefore less responsible with their personal finances.

When you think about the wider borrowing market, it starts to fall into place – think about mortgages, which typically have a high loan amount and lower interest rates, while at the other end of the scale, payday loans are generally for very small amounts but have huge APRs.

How to get a better loan rate

When you’re looking for a loan, checking what APRs are available for a few different loan amounts. You might find that by borrowing more, you can reduce the amount you pay back in interest. If you’re worried about the temptation of borrowing more money than you really need, you could put the extra money into a savings account or, if there’s no penalty, pay the excess back straight away. Compare loans now.

Alternatively, if you’re looking to borrow a small amount of money, read our article on small loans to find out more and see what different options are open to you.

Comparing loans

Compare loan deals with uSwitch

With so many personal and secured loans available, knowing how to find the best loan for your needs can seem daunting. uSwitch.com makes it easy. Tell us a few details about why you need a loan, your circumstances and we’ll do all the hard work for you.

Why compare personal or secured loans?

People take out secured (homeowner) or personal (unsecured) loans for a variety of reasons – everything from a new car or home improvements, to the need to consolidate existing debts. There are a huge variety of loans on offer, which is why it is important to compare all available loans.

Whether you want to compare personal or secured loans there are a number of factors to be taken into account:

• the interest charged on the loan
• early repayment charges or penalties
• personal circumstances that could affect your ability to pay

In addition, for secured loans we need to ask you some questions relating to your property and any borrowing against this property. This will produce a more accurate and tailored set of results. Use our loans comparison service and we’ll use all these factors to find the best loans for your circumstances.

How to use our loans comparison service

Comparing loans with us only takes a few minutes. Our loans comparison service compares all available lenders, including high street and internet providers. All you need to do is decide whether you want to compare personal or secured loans, how much you want to borrow and provide a few personal details. Your results are sorted in order of the monthly repayment for each loan, but you can order them in other ways depending on your priorities.

Personal loan guide

With so much competition in the marketplace, personal loan interest rates are falling. So to make loans profitable, providers often add hidden charges to a loan that may catch out those who did not read the small print.

Read on to learn more about those hidden costs.

What is ‘Representative APR’, and how it can be tricky?

Representative APR is the headline interest rate figure lenders quote when advertising a personal loan. It’s tricky because although a lender may quote an Annual Percentage Rate (APR), which is the amount the loan will end up costing you including interest and charges, you may end actually paying more or less than that rate.

This is because many lenders calculate the representative APR of a personal loan in conjunction with a system called risk based pricing. This means that they assess each individual’s circumstances and credit history before deciding what interest rate to offer the individual. Although a lender has to offer the representative rate to 50% of people that successfully apply, it is possible that you won’t get this rate.

Personal loans and early repayment charges

Repaying your personal loan early could cost you, rather than save you money. An early repayment penalty can be the equivalent to one or two month’s interest. The earlier in the term you repay your personal loan, the higher the charge.

But some providers have scrapped this charge, so it pays to shop around.

Our loans comparison service shows which personal loans have an early penalty fee attached.

Comparing secured loans: step by step

Applying for a secured loan

Whether you want to compare secured loans or consolidate your existing debts with a secured loan, the uSwitch loans calculator provides a free comparison of loans to suit your specific requirements.

What you’ll need to have ready

Before you start, decide how much you want to borrow. As long as you’re a homeowner, you can apply for loans of up to £250,000.

You will also need to know:

• the current value of your property
• the amount still outstanding on your mortgage
• your monthly mortgage payment
• the total of other loans secured against your property (if applicable)
• the annual salary of your household
• details of previous credit problems relating to any of the applicants e.g. arrears or County Court Judgments

Step 1: Choose a secured loan from our loans top deals table

To compare secured loans quickly, use our best-buy tables.

Just enter the amount you would like to borrow and the period you want to pay it back over, and we’ll show you a table of our top secured loan deals.

Pick the secured loan that’s right for you and click apply.

We’ll show you a summary of the secured loan you have chosen and ask you for a few details, including your name, address, email and phone number.

You will then get a call from our expert loans brokers to discuss your application and complete the process.

Step 2: Tell us how long you need to repay the loan

The shorter the loan term (the amount of time allocated to repay the loan), the more money you save on interest, but make sure you can afford the monthly repayments.

The maximum secured loan term you can apply for is 25 years.

For loans intended to pay off other debts such as credit cards, remember you won’t have to pay the interest on those debts any more, so this can come off your budget.

If you would like to talk over your options with an expert, call our loans broker on 0800 061 2178.

Step 3: Decide whether you want Payment Protection Insurance (PPI)

Payment Protection Insurance (PPI) covers your loan repayments if you have an accident, become ill or lose your job and can’t pay them off.

Our service allows you to compare loans with and without PPI to help you decide whether you want to pay the extra for it.

PPI isn’t right for everyone and has some drawbacks – for more information on PPI, read our background guide.

Step 4: Tell us whether you’re making a single or joint application

Legally, if you’re married or share a mortgage, you must make a joint application.

Step 5: Tell us some more details about you

Tell us about your property - your home will be used as security against the loan, so be as accurate as possible when providing your mortgage details and property value.

Tell us your annual household salary - include the joint income of the homeowners, but if you’re the only one, we just need your salary. There’s no need to include income from children or lodgers.

Tell us about your credit history - we can still find you a loan if you have credit problems but your choice may be more limited. Loan providers will run a credit check before they accept your application so make sure you tell us if you have a history of adverse credit.  You can check your credit rating online before you apply.

Step 6: Click ‘Continue’ to see a list of secured loans and pick one

Our comparison tool will show you a list of secured loans and works out the monthly repayments for you. This includes the extra cost of PPI, if applicable.

Loans are ordered by cost – so the lowest monthly repayment comes first. You can choose to sort them by other criteria, including APR or total amount repayable.

No loans that match your specific requirements? You can amend your details or start the application process again.

Step 7: Complete your application

Click on ‘Contact me’ to submit your application.

Within 24 hours, you will get a call from our loans broker. They will run through your requirements and help to process your application.

If you don’t hear from our loans broker within 2 days, call freephone 0800 404 7968 or email CustomerServices@uswitch.com.

How long will it take for the lender to confirm that my application has been successful?  

The time it takes to process an application varies depending on the lender. From start to finish, it can take up to 2 months.

What happens afterwards?

Can I speed up the time it takes to process the loan?  

Make sure the details you provide are as accurate as possible. Any discrepancies between the information you give us and the provider’s own checks will delay the process.

Am I allowed to repay the full amount before the end of the loan term?  

Yes, although some lenders will charge you. Read the small print and look out for the terms:

• early repayment penalty
• early redemption fee
• redemption charge
• financial penalty

When you compare loans with uSwitch, you will be able to see which providers charge for early repayment.

Comparing loans: step-by-step

Applying for a loan

If you’re looking for a loan, the uSwitch loan comparison service can provide a free, impartial comparison of both personal and secured loans.

We search through loans from a range of different lenders, so it’s quick and easy to find a great deal.

What you’ll need to have ready

Before you start, you need to decide how much you want to borrow. With uSwitch, you can apply for personal loans up to £25,000 and secured loans up to £100,000.

If you are applying for a secured loan you will also need to know:

• the current value of your property
• the amount still outstanding on your mortgage
• the total amount of any other debts
• your annual salary
• details of previous credit problems relating to any of the applicants e.g. arrears or County Court Judgments

Step 1: Choose a loan from our top deals tables

To compare loans quickly, use the personal loan and secured loan tables on the loans homepage.

Just enter the amount you would like to borrow and the period you want to pay it back over, and we’ll show you a table of our top deals – pick the loan that’s right for you and click ‘apply’.

We’ll show you a summary of the loan you have chosen and ask you for a few details, including your name, address, email and phone number and then redirect you to your chosen provider’s website to view and complete your application.

If you provide your phone number, you will receive a call from our expert loans brokers to discuss your options. The loans service may be able to find a loan which suits your circumstances better and also has deals that aren’t available online.

Any personal details you give us are protected by encryption software and sent securely to prevent fraud.

Step 2: Tell us how much you want to borrow, how long you need to repay the loan and whether or not you’re a homeowner

The APR on a loan can vary depending on how much you want to borrow and how long the loan is for - the shorter the loan term (the amount of time allocated to repay the loan), the more money you save on interest. Always be sure that you can afford the monthly repayments.

For loans intended to pay off other debts such as credit cards, remember you won’t have to pay the interest on those debts anymore, so this can come off your budget.

We also ask whether or not you are a homeowner, so we know whether or not include secured loans in your results. If you are a homeowner we will also ask how much your property is worth, how much you have outstanding on your mortgage, how much debt you have, your employment status and your annual income so that we can give you the most relevant results.

If you have any questions, call us on 0800 404 7968.

Tell us if you have any CCJs

We ask whether or not you have any CCJs so we can tailor you results accordingly. If you have had CCJs or credit problems in the past this does not mean that we won’t be able to find a loan for you.

Step 4: Tell us if you want to be able to apply online

If you choose to apply for a loan online through uSwitch, all the loans we show you allow you to go through to the lender’s website to complete your application.

If you do not select the option to see ‘Loans you can apply online for with uSwitch’ the results will include all the loans on the market, including those that aren’t available through uSwitch.

Step 5: Add your contact details

We keep your basic contact details so we can help you with any future queries. Your name and telephone number only will be passed on to our loans broker service who will give you a call to help you find the best loan for you.

You can apply online for the loan you choose if you wish, but the loans service may be able to find a loan which suits your circumstances better.

Any personal details you give us are protected by encryption software and sent securely to prevent fraud.

Step 6: Click ‘Continue’ for the loans that match your requirements

Our calculator works out which loans which loans are on offer, the typical Annual Percentage Rate (APR), the monthly repayments and the total amount you will pay back.

Step 7: See a list of loans and pick one

If applicable, we will show you both personal and secured loans – you can use the tabs at the top of the results table to choose whether you see both kinds of loans or one in particular.

Loans are ordered by cost - so the lowest monthly repayment comes first. You can choose to sort by other criteria, including APR or total amount repayable.

For loans that include online sign-up with uSwitch, click “Apply” to complete your application on the lender’s website.

No loans that match your specific requirements? You can go back and amend your details or start the application process again.

Step 8: Complete your application with your chosen lender

Your chosen lender will need additional information about your finances, employment status and your partner’s situation. They will then run a credit check.

What happens afterwards

What can you expect after you’ve applied for your loan online? Here are a few common questions:

I applied for a loan online and then got a call from the uSwitch loans broker – why?
Choosing a loan is an important decision. We believe you should have the best advice to help you make it. To help you find the right loan, our expert loans broker will give you a call to discuss your requirements. They have access to many loans, some of which are not available directly through the uSwitch website, which may be better for your personal circumstances and borrowing amount.  If you need any help at any stage of your application, call uSwitch on 0800 404 7968.

How long will it take for the lender to confirm that my application has been successful?

They should be in touch within a week or so, once they’ve done a credit check.

I’ve been turned down by a loan lender – what can I do?

You may not be eligible for a particular loan, but sometimes the lender will offer an alternative with a higher interest rate. To see if you can find a personal loan with another lender, do another comparison.

Your credit rating is a key factor in whether or not you are accepted for a loan. Check your credit rating online now.

I’ve noticed that my personal loan is being referred to as an unsecured loan – why?
They are one and the same. Both personal loan and unsecured loan refer to a loan that is not secured against any property (home or car). A personal loan is given on the basis of your credit rating.

Am I allowed to repay the full amount before the end of the loan term?
Yes, although some lenders will charge you. Read the small print and look out for the terms.

Secured loans guide

What are secured loans?

A secured loan is a loan where you will be required to use your property as security against the loan, so the lender is able to balance the risk of lending to you.

The amount that can be borrowed differs from lender to lender and your individual circumstances.

The amount that can be borrowed, the term available and the Annual Percentage Rate (APR) will depend on:

• the value of your property
• your ability to repay the loan
• your personal circumstances

You need to think very carefully about how you manage a secured loan. If you default on the loan you risk losing your home.

Why should I choose a secured loan?

Secured loans allow you to borrow more and repay over a longer period than a personal loan – up to 25 years. They can normally be used for almost any purpose and as the lender has the benefit of security they can be offered to people who may be excluded from other loans. Borrowers who are self-employed, have recently changed jobs or have previous credit problems will be considered for a secured loan. They are also useful for borrowing larger sums or where the applicant requires a longer repayment period.

How can I find the best secured loan?

Finding the best secured loan for your situation can be complicated as there are many factors for the lender to take into account. With so many providers offering secured loans, trying to compare them all yourself could take forever. Luckily uSwitch.com can do all the work for you with our secured loans comparison service.

All you need to do is tell us a few details about the secured loan you’re looking for and your personal circumstances. It’s free, impartial and any information you give us will remain confidential and secure.

How can I be sure it’s the best secured loan for me?

As well as comparing the available secured loans, uSwitc refers you to a broker where appropriate to ensure you get the best possible deal. Some lenders prefer to only work through brokers. It is for this reason we have chosen to work with an approved broker as they will have access to a wider range of lenders and will use their expertise to match a secured loan to your circumstances.

Find a secured loan today

So now that you know all about secured loans, why delay? Let us help you find the best secured loan for you right now. Just go to our secured loans calculator.

Compare secured loans

What is a secured loan?

With a secured loan your property is used as security against the loan and they’re therefore only suitable for homeowners. The amount that you can borrow differs between lenders and depends on your individual circumstances.

You need to think very carefully about how you manage a secured loan as if you default on the loan you risk losing your home.

Who should choose a secured loan?

Secured loans allow you to borrow more and repay over a longer period (up to 25 years) than a personal loan does.

Because your property acts as security, secured loans are sometimes an option for people who can’t get a personal loan. Borrowers who are self-employed, have recently changed jobs or have previous credit problems will be considered for a secured loan.

Find a loan today

If you’re not sure whether a personal loan or a secured loan is right for you, try ourloans calculator to compare both.

Best secured loans deal

Does the best secured loan exist?

Secured loans – also known as homeowner loans – are subject to market forces and competition amongst providers. There are multiple providers whose rates change regularly with low rates of interest being offered to attract customers.

Shopping around and comparing secured loans, rather than responding to the first ad you see, means you are more likely to find the best deal for you.

Access the best secured loans deal

In the past, customers who wanted to compare secured loans in the past were often faced with a limited choice of providers to compare. This is because certain secured loan providers only worked with loan brokers and were not available directly to the general public.

uSwitch works directly with suppliers and trusted brokers to ensure that you can compare the widest selection of loans available. By working only with reputable brokers and direct loan providers we aim to protect you from the pitfalls of borrowing from the wrong type of provider.

Secured loans and bad credit

Secured loans can offer the opportunity to borrow money for customers who have experienced money issues in the past and have damaged their credit history as a result. A secured loan can be your best deal as:

• you are more likely to be accepted for a secured loan rather than a personal loan
• the interest is likely to be more competitive than personal loans which are available to customers with adverse credit
• the repayment term can be longer

However secured loans work because the provider has the security of your property to fall back on if you default on your payment. A secured loan needs a lot of careful thought to ensure you are 100% confident you can meet the monthly payments over a number of years and will not find yourself in a situation where you could lose your home.

Secure your best loan deal now

To find your best secured loans deal use the uSwitch.com secured loans calculator. We compare the widest selection of available secured loans available to make finding the best deal quick and easy.