Loans

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An introduction to loans

From time to time, many of us can find ourselves struggling with money and looking for financial help. Even if you’re in a good place financially, you might still find it tricky putting some money aside for a family holiday or some home improvements, for example.

A loan can be a quick and handy way of getting some financial help but it’s a decision that shouldn’t be taken lightly. If you’ve worked out a budget and are comfortable with the financial commitments and the repayments, a loan might be what you want.

Compare loans with us and we’ll show you our best rates based on your circumstances and help find the right deal for you.

What are the different types of loans?

Personal loans

A personal loan is a type of unsecured loan. This means the it isn’t secured against an asset like a house, for example. It lets you borrow a fixed amount over an agreed amount of time, which is called the “term”. During this term, you’ll also have to pay back interest on the amount you've borrowed. The rate of interest is usually fixed and will be included in your monthly repayments.
Compare personal loans with us to find out what you can borrow today.

Secured loans

A secured loan, sometimes called a homeowner or guaranteed loan, secures the amount you want to borrow against an asset such as your home. If you’ve got a bad credit score, you might want to use this type to borrow a larger sum of money. Securing the money you're borrowing against your home reduces the risk to the lender and means you’re more likely to be accepted in comparison with an unsecured variant. Please be aware that if you fail to keep up with the repayments, the lender could seize your property. It’s important to understand the risks before you apply. We don’t currently compare secured loans. However, if you’d like to learn more, visit our unsecured vs secured guide.

Loans for bad credit

If you’ve got bad credit, it might be because you’ve struggled to keep up with credit payments in the past. A bad credit rating will probably mean you only have a limited choice when it comes to choosing a loan, and the one you choose will probably come with a high interest rate. So all the more reason for shopping around and comparing bad credit providers. If you’re in a tight financial spot and need to borrow money, our comparison service is here to help. Compare loans for bad credit today and find the deal that’s right for you.

Debt consolidation loans

A debt consolidation loan is a handy way of combining all your existing repayments into one manageable payment. This could potentially save you a lot of money and take the stress away from having multiple monthly payments. By adding up how much you owe on all your payments, you could then apply for that exact amount. You may even be able to find a better interest rate. And once you’ve combined all your payments, you could find things much more manageable. Potentially, it’s a nice way to save a bit of cash!

Home improvement loan

If you’re looking to improve your home and potentially add some value to it, a home improvement loan could be what you’re after. This is a handy option if you’re looking to add a new kitchen or bathroom or even carry out a total renovation. It allows you to pay for any work done on your home upfront and then pay back the money over a set period of time. A home improvement loan isn’t just a great way of adding value to your house, it could also give you and your family the home you’ve dreamed of.

Wedding loan

A wedding should be one of the happiest days of your life but planning your big day while trying to save for it too can be stressful. It’s important to save as much as you and your partner can and stick to a budget. However, sometimes you might need some extra help for your special day which is where comparing with us can come in handy. We can help you compare wedding loans from a range of lenders to find what’s best suited. It’s important to weigh up whether a loan is right for you. If in doubt, our wedding guide could help you with your decision.

Holiday loans

Simply put, a holiday loan is a personal loan you take out if you don’t quite have the funds to pay for a holiday up front. Like with all forms of borrowing from a lender, it’s important to weigh up whether you can afford the repayments. You should also compare as many options as possible to find what’s right for you.

Guarantor loans

A guarantor loan is a type of unsecured loan where a second person, usually a family member, will have to step in to cover your debts if you fail to make the repayments. This type of credit isn’t something to be taken lightly. However, it could be the right option if you’ve struggled to be accepted to borrow money in the past. For a full breakdown of how it works, give our guarantor loans explained guide a glance.

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Pros and cons of a loan

Pros

Quick access to cash

A loan is a great way of quickly getting money into your account. After getting approval from your chosen lender, the money could arrive in just a few short days – or even sooner. Perfect if you need the money urgently to consolidate debts or make an important purchase.

Flexible repayments

A loan can be suited to nearly all financial situations. Need to pay back the money over a few years? We can help with that. Able to pay back the money you borrowed in less than a year? We can accommodate that too!

Cons

High interest rates

If you take out an unsecured loan, you may be faced with high interest rates. Your credit score can also affect these rates as well as a history of not making repayments.

Repossession of assets

Missing repayments may force the lender to repossess the asset you used as security against the loan. This could be a car or even your home. Not making repayments can also have a negative effect on your credit score, further damaging your chances of being approved for a loan in the future.

Before you apply for a loan

Try and take some time to work out how much you can afford to borrow and if you can afford to pay it back. By working this out first, you’ll be able to view loans in your price range which should make it easier to compare. It could also bring you the added benefit of increasing your chances of being accepted, as you won’t be applying for what you can’t afford.

When budgeting, you might think to extend the length of your loan to reduce your monthly payments. Whilst this could help, extending the borrowing term could mean increased interest rates. Be sure to check whether the increased rates don’t mean you’re re-paying more over this longer period compared to a shorter one.

You might be asked for proof of address and of your earnings to support your application for a loan. Having these to hand will speed along your application and help make sure you don’t miss out.

Your credit rating can limit how much you can borrow and can also affect the interest rate lenders offer you. Try to improve your score as much as you can before applying and you may see better offers. We’ve come up with a few helpful tips on improving your credit score which might come in handy.

What you'll need to apply

  • The amount you'd like to borrow
  • The purpose of your loan e.g. holiday, one-off purchase
  • How long you’d like the loan to run for (the term)
  • Your personal details
  • Your UK address and any previous addresses you’ve lived at over the last 4 years
  • Your annual income and general outgoings

Understanding credit reports and credit checks

Credit report

A credit report provides information on how you’ve used credit in the past. This includes whether or not you’ve paid bills on time and how much debt you have. These reports are produced by credit agencies like Experian and Equifax. They get your credit information from a range of sources, including lenders.

When you apply for credit like a credit card, a mortgage, a student loan or finance to make a purchase for your home, lenders will check your report. They’ll use it to decide whether or not to lend to you, which is based on what they see when they run what’s called a hard credit check.

Credit score

Using the information on your credit report and the personal information you’ve entered, you’re given a numerical score that represents your credit history and shows how creditworthy you are. Different credit agencies use different marking systems, but your score will be marked out of hundreds. Lenders then use your score, along with your report, to work out whether or not you’re a good investment to lend to.

Worried your score isn’t as good as it could be? We’ve got some helpful tips that could improve your credit score.

Will comparing loans affect my credit score?

Simply put, comparing with us won’t affect your credit score. When you compare loans, we’ll carry out what’s called a ‘soft search’. This will help us match you to your credit report to get a feel for your borrowing history.

You can compare with us as many times as you like and it won’t affect your credit score, so feel free to compare your options!

What are hard and soft credit checks?

Hard credit check

A hard credit check happens when you apply for credit from a lender. When the lender is deciding whether to approve your application, they’ll take a look at your credit report. This is called a hard credit check. It’s far more thorough than a soft credit check and it can leave a semi-permanent mark on your report.

To make sure they get a full picture, a lender might check your report from more than one major credit agency. It’s worth remembering that these hard checks are tied to your credit application and that they can affect your credit score.

If you have too many failed applications for credit, then the hard credit check marks left on your report could damage your credit score. Lenders will see these and might think that you’re having financial difficulties or that you can’t pay back bills. This could bring down your chances of being approved, so it’s always worth comparing loans first rather than applying straightaway.

Soft credit check

A soft credit check happens when a comparison site like ourselves check your credit report to get you loan offers for you to compare. It also happens when you look at your own credit report or when a financial company views your credit report to pre-approve you.

These types of checks are designed so that businesses can take a peek at your credit report to get an idea of what offers you might be eligible for. Soft credit checks aren’t marked on your credit report and they won’t affect your credit score, so you can get as many as you like.

By comparing with us first rather than applying straight to the lender, you’ll be able to get an idea of what offers are available to you. Our loans partner, Monevo will only ever run soft credit checks on your credit report. A lender will need to run a hard credit check once you’ve chosen their offer and applied for credit from them.

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How to understand APR 

An annual percentage rate (APR) helps you understand the total cost of borrowing. Like when you take out a loan. APR takes into account the interest rate and any additional charges, to give a complete picture of how much a loan you're looking into will cost you. You'll see APR expressed as a percentage on our site. 

The APR shows you the combined total cost of all the compulsory charges that you'd have to pay per year. The APR won't include things like administration fees, payment protection, late payment charges or exit fees. So, take care when reading the terms and conditions. If you'd like a more in-depth look into APRs and how they affect your borrowing, our APRs explained guide  could help.

Exterior and interior view of a home

Term of the loan

The term of the loan is how long you’re making repayments for. To a certain degree, how much you want to borrow will determine the length of the term. For example, a loan of £8,000 will be difficult to pay off in 12 months as the monthly repayments might be too high. However, if you only borrow £3,000 for the same term, this could be much more manageable.

The term can also have an effect on the total cost you’ll have to pay back. A longer term could mean lower monthly payments. However, it does have an effect on the interest you’ll be paying back, which means the total interest could be higher than if you chose a shorter term.

Be careful not to borrow more than you can afford to pay back and weigh up your options carefully. Working out a budget first is always a good idea! Whatever your financial situation, it’s worth shopping around and comparing as many offers as possible to find the best deal for you.

Whilst we encourage you to shop around with us and find our best deal, it can be easy to get carried away by the amounts available to you. Setting a rough but flexible monthly budget could be the best approach before diving in to compare deals.

Will I be accepted for a loan?

Whether you’re accepted or not mainly comes down to your personal details and your credit history. Both will help to give the lender an idea of whether or not you’ll be able to afford the repayments. Of course, different types of loans and lenders will look for different things when they’re approving your application, which makes it all the more important to compare.

Tips on how to manage your loan repayment

Knowing how to manage your loan once you have it is very important. Making sure your repayments are on time, for the correct amount and for the full term means you’re doing a great job! Here are some helpful answers to some questions you might have:

How do I pay back a loan?

When taking out a loan, you’ll have to set up an agreement with the lender on how long you’ll have to make the repayments for. This will usually be between 1 to 5 years. You’ll then receive the amount in a lump sum and the lender will probably ask you to repay it in instalments every month.

The amount of these instalments will depend on the size of the loan, the term length and the interest rate.

Can I make changes to my loan?

If your personal circumstances change or you get into financial difficulty you should let your lender know as soon as possible. If you move house, update your contact details or change your name or your employment status, make sure you let them know. They can then update their records.

If you’d like to extend the length of your term or increase the amount you’ve borrowed, it’s worth getting in touch with your lender. You may not be able to adjust your existing deal but they might offer you a new one that suits you better.

Can I pay off my loan early?

If you’re lucky enough to be in a position to pay off your deal earlier than expected, you may be able to ask your lender for what’s called an early settlement amount. This will show your outstanding balance, interest that’s been deducted, any early repayment charges and the final settlement you need to pay. But be careful – sometimes, paying off early might not save you any money.

Be sure to check what the early repayment fees are before you agree to anything, as you could be better off letting the repayments run their course.

What if I’m unable to pay off my loan?

Situations may crop up that may make you think you can’t make any more repayments. For example, if you’re emigrating to a different country your deal won’t change. You’ll still need to make the agreed payments back to the lender. If this is a problem for you, talk to your lender and they might be able to offer you some flexibility.

For any circumstances that might affect your repayment plan, make sure to speak to your lender as soon as possible.

If you have any questions we haven’t covered, head over to our FAQs page to see if we’ve got what you need there!

Comparing loans with Confused.com and Monevo

We’ve teamed up with experts Monevo to offer the best possible deals on unsecured, secured and guarantor loans. With Monevo’s service you get:

A free service with no obligation to apply once you’ve got your rate

Eligibility checks with no impact on your credit score - lending partners run a soft search on your credit file which doesn’t affect your score

If you’re thinking of applying for a secured loan: think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

If you’re thinking of consolidating existing borrowing: you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.

Get a quote
No effect on your credit score

Compare quotes to see your exact monthly payments without affecting your credit score

Need more help? Take a look at our expert guides

Secured vs unsecured loans

A look at unsecured vs secured loans.

How do I improve my credit score?

What you need to know to improve your score.

Guarantor loans explained

Everything you need to know about guarantor loans.

Bridging loans explained

Confused about bridging loans? We're here to help.

Wedding loans explained

Everything you need to know about wedding loans.

Holiday loans explained

The pros and cons of wedding loans.

Confused.com’s Personal Loan solution is offered by Monevo Limited. Monevo Limited (Monevo) acts as a credit broker not a lender. Monevo which is an Appointed Representative of Quint Group Limited (Quint), and is entered on the Financial Services Register under reference number: 723672. Quint is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference number: 669450. Monevo is registered in the UK with its registered office at Oxford House, Oxford Road, Macclesfield, Cheshire, SK11 8HS.