Compare 4-year fixed-rate personal loans
If you’re hoping to borrow a large amount of money, spreading your repayments over four years can make it easier to manage your loan.
When you’re anticipating a sizeable expenditure – perhaps home renovations, a wedding or a dream holiday – which you’re planning to finance with a personal loan, spreading repayments over a longer period like four years is a smart way to bring down the cost of monthly repayments.
Borrowing over a longer period pushes up the overall cost of a loan, however, so it’s more important than ever to shop around for the best rates.
Comparison of 4-year fixed-rate loans
With no guarantor
With a guarantor
With a guarantor who is a homeowner
Warning: late repayments can cause you serious money problems. See our debt help guides.
What types of 4-year loans are available?
There are many different types of four-year loans available from traditional personal loan companies. The best deal for you will depend on your individual circumstances and reasons for taking out a loan. If you haven’t already, it’s a good idea to check your credit record using one of the numerous free services available.
Below are some of the the options available for a four-year loan, and the types of borrower they’re most likely to be suitable for.
- Unsecured, fixed-rate personal loans. For borrowers with good credit, these loans will typically be the starting point. They’re widely available from a good selection of traditional, high-street banks and new, online-only direct lenders.
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- Bad credit loans. There are many specialist lenders that focus on lending money to people with a poor credit history. Realistically, these products come with higher interest rates, but they can allow borrowers to demonstrate a responsible approach and to build their credit score.
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- Business loans. It’s common for business owners to seek short- or long-term finance in order to take their company to the next level. It’s most likely that they will need to approach a specialist business lender, though, because most traditional personal loans stipulate that the money can’t be spent on funding a business.
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- Secured loans. With these products, the lenders require personal assets to be used as collateral to protect them against unpaid debts. This eases a lender’s fears about whether the borrower can repay the money. You might be approved for terms that were otherwise unavailable on an unsecured basis.
How does a 4-year personal loan work?
If your loan is approved, you’ll receive the money, usually within a day or so, then begin making 48 monthly repayments soon afterwards. Each of these repayments will be a combination of the interest accrued so far and a small part of the capital owed. In the first few months, the repayments will contain a lot of interest, and by contrast the final few payments will consist mainly of the capital.
If repayments are missed, you could be penalised with fines, damage your credit record and ultimately be subject to legal action.
How to compare and choose the best 4-year personal loan
Here are some of the key factors to consider when comparing and choosing the best four-year personal loans.
- Loan amounts available. It’s only worth considering the companies that’ll lend the amount of money needed to complete your project (however, it’s not a good idea to borrow more money than you actually need).
- Total payable. If you only compare one factor, it should probably be this one. The total payable will take into account all the interest you’ll incur over the four years plus any product fees. Aim to keep the total payable as low as possible while ensuring your monthly repayments are affordable.
- Interest rate. The rate, expressed as a percentage, tells you how much interest you’ll pay annually on the capital owed. The lower the percentage, the cheaper the overall cost of your loan. Just bear in mind that the rate advertised by the lender, known as the representative APR, may not be offered to you. In fact, this only has to be offered to 51% of applicants. Those judged as less creditworthy may be offered a higher rate. Most lenders now offer a “soft-search” facility, where they’ll use your answers to a few basic questions in order to give you your likelihood of being accepted for the loan plus an idea of the rate you’d likely be offered.
- Eligibility. Don’t waste your time researching and applying for a loan if you don’t meet the eligibility criteria. Multiple loan applications in a short space of time has the potential to damage your credit score.
- Early repayment terms. Some deals will allow you to pay less interest when you settle the loan early. If early repayment might be an option for you, keep a look out for these deals.
- Fees. Nowadays, it’s rare for personal loans to carry an “admin” or “product” fee, but there are still a few knocking around. Make sure you consider this, as well as the interest, when comparing loans.
If you’re in a hurry, you may wish to add turnaround time to this list. Some lenders claim to be able to transfer funds to your nominated account in a matter of minutes, but we’d always advise that this is a short-term benefit and ideally shouldn’t be a deciding factor.
How to get a 4-year loan
- Once you’ve worked out how much money you need for your project, use our comparison tables to find a competitive deal, then choose the “Go to site” option. Make sure you choose a deal with monthly repayments you can comfortably afford. Remember, lenders will also assess whether the repayments would be comfortably affordable and there’s a good chance you’ll both reach the same conclusion.
- You can get a good idea of whether you’ll be approved for the loan by checking the lender’s eligibility criteria. If you don’t meet the lender’s minimum criteria, don’t apply for the loan. Additionally, if the lender has one, use the “soft search” facility to get an idea of your likelihood of acceptance and the rate that you might be offered, without your credit score being affected.
- Once you’ve settled on the best deal for your needs, you’ll need to go through the application process. This typically takes 10-20 minutes and requires you to submit your personal details, some financial details and to be put through a credit check. Once you application is submitted, it will typically either be approved or declined within seconds.
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Should I just take out a credit card?
Credit cards could be a better option for you depending on your circumstances.
If you have a great credit record, and a large income, you may be eligible to borrow large amounts on a credit card, perhaps while taking advantage of a 0% interest introductory deal. While there are no deals like these in the UK that last four years, you could potentially switch to a second 0% card when the introductory offer on the first card expires. After any low-rate introductory periods are over, credit cards generally charge a significantly higher rate than personal loans.
Self-discipline is also a factor. With a credit card you’re only obliged to make a minimum repayment each month, and you’re able to borrow more whenever you like, subject to the card’s credit limit. This means that if you take out a credit card, and you’re not organised about clearing the balance, your debt could continue indefinitely, and cost you significantly more.
Pros and cons of four-year fixed-rate loans
- Spread the cost of large purchases
- Structured borrowing with fixed repayment amounts and a clear end-date
- Better rates available than many other credit products
- Wide range of lenders catering to a variety of circumstances
- Goods and services cost significantly more when you spread the payment over four years using a personal loan.
- You’ll be in debt for a long time – it’s hard to know how your circumstances could change over a period of four years.
The bottom line
A four-year loan could be just the trick to afford the purchase that transforms your life. By spreading that large outlay into 48 monthly payments, it becomes far more affordable for the average consumer. The lengthy term of this product does mean you’ll pay out a lot of money in interest, though, so it really is worth shopping around for the best possible deal.
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