All About Loans in the UK

What types of loans are available?

There are a variety of types of loan to consider. To find the right loan for you, it’s a good idea to get a sense of what’s available:

Personal Loan, Car Loan, Payday Loan etc.

Where can you get loans in the UK?

There are varieties of different places to get loans from, including:

  • high-street banks and building societies
  • internet loan providers
  • supermarkets and high-street stores
  • secured loan providers

You just need to find the loan provider that provides the best deal for you and your circumstances.

What do I need to think about when choosing a loan?

Before choosing your loan it’s important to consider the following factors:

  • Don’t borrow beyond your means – make sure you can afford the repayments.
  • Check the APR (Annual Percentage Rate) being charged on the loan.
  • Find out if you will have to pay an arrangement fee to set up your loan.
  • Check if there is an early repayment penalty if you pay back the loan before the end of the loan term.
  • Make sure you’re aware of any loan payment deferments or breaks available.

What is meant by a typical APR?

APR (Annual Percentage Rate) is the headline interest rate figure lenders quote when advertising a personal loan.

This is not as straightforward as it sounds, however, because although a lender may quote an Annual Percentage Rate, which is the amount the loan will end up costing you including interest and charges, you may actually end up paying more or less than that rate.

Why? Because many lenders calculate the APR of a personal loan using 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 them.

Although a lender has to offer the headline rate to 50% of people who successfully apply, it’s possible that you won’t get this rate.

What’s involved in applying for a loan?

Loan companies have to assess how likely you are to be able to repay your loan. So as well as asking for details from you, such as your address and bank details, they will often perform a credit check on you.

They do this by contacting credit reference agencies that hold information on such things as whether you have missed any bill payments, made any late payments or had any County Court Judgments recorded against you.

What are early repayment penalties?

Some loan providers penalize you if you try to repay your loan early. An early repayment penalty could be the equivalent of 1 or 2 month’s interest. Generally, the earlier in the term you repay your personal loan, the higher the charge.

However, not all loan companies do this, so if you think you might be able to repay your loan before the end of its term, shop around for a loan that doesn’t apply early repayment penalties or choose a short term loan.


  • APR. This stands for Annual Percentage Rate. This is the overall cost of borrowing if you owe money on your loan.
  • Arrangement fee. This is a fee some lenders charge for arranging your loan.
  • Credit reference agencies. Credit reference agencies keep account of your credit history. They pass this information onto financial institutions when you apply for a loan or some other form of credit.
  • Early repayment penalty. This is a charge made if you pay off your loan early
  • Loan payment deferment. This is where a loan company allows you to have a break from paying back your loan. It is sometimes known as a payment holiday.
  • Payment protection insurance. An insurance policy that can pay an agreed amount if you’re unable to earn because of illness, an accident or redundancy. This can therefore help to keep up your payments to your lender.
  • Representative APR. This is the APR a lender will offer the majority of borrowers (though not all). The representative APR will be offered to 50% of borrowers. This means that once a lender checks out your circumstances, you might not qualify for the representative APR.