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Tired of living from payday to payday because of monthly payments on credit card debts and rent or mortgage? If you are, then taking out low interest rate loans might be the break that you have been looking for. There are those who believe that clearing of existing debts by taking out another debt is not the best decision to make but sorting out your finances through a cheap loan is not the same story especially if those debts are incurring hefty interest rates.

But low interest loans are not just limited to consolidating debts and restructuring your finances to make them more convenient and manageable. Many people in the UK rely on them to satisfy a myriad of needs and purposes from covering home improvements and major expenses, to financing a business idea, and even taking a long vacation.

But before you invest your time and energy in finding a reputable lender that will give you that least expensive loan deal that you have been looking for, here are a few things that you might want to know first.

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Unsecured Low interest Loans in the UK

In you are looking for minimal risk then unsecured low interest loans in the UK should surely be your prime targets. This is because these types of affordable loans are not tied to any collateral, like your home or car, which means that you don’t need to find a high value asset to secure the funding that you need. This also means that you won’t lose any of your precious assets once you miss out on your payment duties.

The three most important things that you need to know about unsecured low interest loans are:

Unsecured low interest loan provides will take a closer look at your credit score to decide whether or not they should approve your application and on what interest rate. Generally, unsecured forms of loans tend to have higher rates than their secured counterparts but this will depend entirely on your credit worthiness.

Unsecured low interest loans are multipurpose loans which means you can use them in just about anything as long as it is legal. You can use the money that was lent to you to purchase certain items, add another room to your house, or cover the expenses of your wedding. It’s completely up to you on how you are going to use the funds that you borrowed.

Unsecured low interest loans are instalment types of credit. This means that you will be given a set period of time in which you will have to pay back the money that you borrowed, typically 2 – 5 years, with fixed monthly interest rates. The lender will give you the approved loan amount in a lump sum and you will have to pay it back with an agreed interest rate through fix monthly instalments.

If you think that unsecured low interest loans are the ideal options for you, the best thing to do would be to choose a loan deal that offers a fixed interest rate. Majority of the loans in the UK feature this kind of interest rate agreement but there are some that don’t so be sure to go over the terms and conditions of your loan agreement carefully before you sign the dotted line.

Credit score plays an important role in unsecured low interest loans

Credit scores can fall anywhere from 250 to 850. The higher the number, the more credit worthy you will appear in the eyes of lenders which will in turn generally translate to a lower interest rate agreement. If your credit score falls anywhere from 735 to 759, your credit rating will be deemed as “very good”. If it’s somewhere in 760 to 850, it will be taken as “excellent”.

Here’s what you need to think about when it comes to unsecured interest loans and their relation to credit scores:

Unsecured interest loans are significantly cheaper than most credit card loans for people with very good and excellent credit scores.

For those who have less than stellar scores, the interest rates can be similar or higher than credit card loans.

For people with bad credit ratings, the interest rates are almost always higher than credit card loans and can sometimes go as high as 35%.

Low interest loans are attractive to numerous borrowers in the UK mainly because they provide smaller monthly payments that are likely to be affordable and easy to maintain. And if you successfully complete your loan’s repayments on time on the agreed terms and conditions, this can positively affect your credit score, adding more points to it, and this in turn will provide you with even better options with more affordable rates in the future.

Existing customers have better chances of obtaining low interest loans

Obviously, the best way to secure low interest rate loans is to shop around and search for lenders that provide the most affordable deals in the market. Once you are in the process of shopping however, you may realize that interest rates will vary slightly from existing customers to new ones. This is pretty normal as majority of lenders are more eager to provide lower rates to borrowers that they already know and have a history working together with.

Part of the reason is the fact that lenders have more information on existing customers than on new ones particularly in the financial side of things and this is an important aspect that they look into when deciding how credit worthy a borrower is.

Mostly, existing customers can expect to enjoy 2 or more points better of interest rates than new ones. This means that if a certain lender is advertising an interest rate of 6% for its £15,000 unsecured loan, for instance, this kind of deal may only be available to current account holders. If you don’t hold an existing account, you may need to come into terms with an 8% interest rate agreement.

 

 

Representative Example:
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)

Please note:
Loanora is NOT a lender – we are a licensed broker working with the most popular direct lenders in the market to find you the most suitable short-term loan plan. Our FREE quoting service compares more than 40 lenders quickly and finds you a lender with the lowest rate that they are willing to lend to you today.

Rates from 45.3% APR to 1575% APR – we provide a no obligation quote, your APR will be based on your personal circumstances