How to find a cheap loan in the UK

For borrowers in the UK, there are many different options available to you if you are in need of finance. But where can you find the cheapest deals on loans?

In this article, the Loan Princess team explain what options you have, how to find a loan for yourself, and why you should consider choosing a loan broker to find a loan for you.

What options are there for loans?

When you’re looking to take out a loan in the UK, you have two main options, which are:

Secured loans

Secured loans allow you to borrow larger sums of money but they require you to put down something called security (sometimes called “collateral”) on your loans. The security you offer is something of value, normally your home. This means that, in the event that you are unable to pay off your loan, you are forced to sell up or leave your home so that you can raise the finance needed to pay the lender back.

Secured loans allow you to borrow up to the value of the equity in your home – equity is the difference between how much your home is worth and how much is left on the mortgage. For example, if the mortgage on your home is £150,000 and your home is worth £250,000, your home equity would be£100,000.

Unsecured loans

With an unsecured loan, you can borrow smaller amounts of money and the lender doesn’t make you risk your home by putting it up as security.

In the absence of security, a lender will want to know about your current financial situation and they’ll also want to look at your credit score. This process allows them to determine whether or not they think you are likely to be able to make the loan repayments. This is something called “an affordability check”.

It might sound intrusive but these checks are done just to make sure that you will be able to make all of the loan repayments comfortably.

Do you need a good credit score to take out an unsecured loan?

Many people believe this but it is untrue.

There are plenty of unsecured lenders out there who specialise in providing short-term finance to people who have poor credit. They normally charge higher rates of interest than they do for people with higher credit scores but, in many cases, the best way to raise your credit score in the future is to take out and repay short-term loans.

It’s always a good idea to start to improve your credit score as soon as possible. You can do this by paying off any outstanding debts that you may already have, paying all of your home utility bills on time, and by registering to vote.

All of the above will help improve your credit score. And a better credit score will decrease the amount you have to pay in interest on top of repaying the amount of money you have borrowed.

How to find an unsecured loan?

If you choose to find a short-term loan by yourself, it can be quite a lengthy process. You will have to start by identifying how much money you need to borrow and how long it will take you to comfortably pay off the loan with interest.

Then, you need to start the process of finding direct lenders. By applying for a loan direct, you will be able to see how much they will charge you in interest. Each loan provider will have different amounts that you can borrow, and different repayment terms. If you apply to more than a handful of lenders direct, comparing the different offers made by each lender will be laborious and sap you of a lot of time.

Be careful not to apply for too many loans, though. As a part of the credit check process, each lender will be able to see how many loans you have applied for in the recent past. If you apply for too many loans in too short a time frame, it will appear as if you keep on getting declined (even if you aren’t!) and this perception can make it difficult for you to find loans in the future.

How to find an unsecured loan with a broker

If you choose to find an unsecured loan by using a loan broker, not only will you save time, but you will likely find a much better deal and only have to be subject to a single credit check.

If you’re in need of money in a short amount of time, choosing a loan broker will significantly reduce the amount of time you need to spend searching for a loan that suits your needs. Using a loan broker also mean that there’s only one credit check – even if your broker goes to a dozen different lenders because they believe that you’re a good match. This will increase your chances of having your loan application accepted in the first place.

Find your next unsecured loan with Loan Princess

We are a loan broker, not a loan provider. This means that we don’t actually lend you the money ourselves – we connect you and your application with our trusted panel of Financial Conduct Authority-licenced lenders.

The first step is to start your application. You tell us how much you would like to borrow, how long you will need to repay the loan, whether you are in full-time employment, your address history for the last three years, and how secure your job is.

We then conduct a credit check on you along with an affordability test just to make sure that you can pay back any loan we arrange for you. Once we’re happy about that, we then show your application to our network of trusted lenders. They assess your application against their own criteria and decide whether they would like to make you an offer.

We collect all of their offers and show them to you so that you have a choice of loans in front of you. This entire process is completed in minutes and you are under no obligation to accept any of the loans that we find for you. Also, this service is entirely free for you to use – there are no hidden fees because there are no fees at all.

To get started, Click Here.