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Use our table below to compare £40,000 unsecured loans from a range of popular lenders. However, it’s worth keeping in mind that you’re unlikely to borrow £40,000 on an unsecured loan unless you’re an existing customer with good credit history. Instead, it may be worth considering a secured loan.
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Unsecured personal loans are commonly capped at £25,000. However, in many cases, high-street banks are willing to offer unsecured personal loans of up to £40,000, but will have extremely strict approval criteria.
If you’re a homeowner, then another option would be to leverage the equity that you’ve built up in your property – either by freeing it up through remortgaging, or by using it as security against a loan. Secured “homeowner” loans reduce the risk for the lender, meaning you’ll usually be able to borrow more and/or get a lower interest rate.
Borrowing against your home is obviously a big step though. If you don’t repay the loan, the lender can sell your home to recoup its losses, so it’s important to weigh up your options first, and to be sure you understand what you’re getting into.
Yes, it may be possible to get an unsecured loan for up to £40,000, but your choice of lenders may be limited, and you’ll have to meet specific requirements. You’ll usually need to be an existing customer with a few years’ history with your bank, for example. You’ll also need to have excellent credit and, most important of all, you’ll need to be able to afford the loan.
This will depend on the interest rate and duration of the loan. For example, a 4% rate over ten years would cost a relatively low £405 each month, while a 12% loan over five years would cost around £890.
|Interest rate of 5% fixed p.a.||Interest rate of 10% fixed p.a.||Interest rate of 20% fixed p.a.|
Again, this will depend on the interest rate and duration of the loan. For example, a 4% rate over five years would cost around a relatively low £44,200 (that’s £4,200 in interest), while a 12% loan over ten years would cost around £68,866 (that’s £28,866 in interest).
|5% p.a. interest||10% p.a. interest||15% p.a. interest|
The loan estimates above use approximate, rounded figures, that are calculated using a flat interest rate. Many secured loans offer variable interest rates, which means your rate can change during the course of your loan, and you may end up paying more, or less, in interest.
This will depend on the type of loan you take out, as well as your specific lender or broker. If you’re applying for a secured £40,000 loan, then yes – you will need to pay some fees as part of your application, such as a lender’s fee or application fee, as well as a valuation fee to determine the value of your property. Typically, the fees are bundled in with the loan and paid off over the same timeframe.
You can get a £40,000 loan for any legitimate purpose, and loans are often used for the following purposes:
To qualify for a £40,000 homeowner loan, you’ll first need to own some or all of the equity in your house, which can then be used as security against the cost of the loan. Like any other loan, you’ll also need to provide personal information and documents including:
Some lenders may also require you to meet certain other criteria to be eligible for a loan, such as a minimum income or credit rating. While you might not need an excellent credit score to qualify for a secured homeowner loan, the better your credit rating, the more likely you are to be approved, and the better loan terms you’re likely to get.
An unsecured loan can – in theory – be in your account the same day, but when you’re asking for £40,000, it’s likely to get a little more scrutiny from underwriters and as such will usually take a couple of working days.
A secured loan realistically takes a little longer, as there are a few extra steps involved. A valuation of the property is required, although this is unlikely to involve a valuer actually entering the property. The bank that’s currently providing your mortgage (the “first charge” on the property) will also need to be asked to give its consent.
Factors such as these mean that arranging a secured loan can take weeks rather than days, but for many, access to lower rates and/or larger sums make this a worthwhile trade-off.
If you’re applying for an unsecured personal loan of £40,000, it’s very likely you’ll need to have an excellent credit score. Different credit reference agencies use different scoring systems, but for Experian an Excellent score is 961 or higher.
However your credit score is just one factor on which your application will be assessed – the affordability of repayments is just as (if not more) important.
If your credit rating isn’t excellent and you’re leveraging the equity in your home as security, your credit score can become a less crucial factor (however it does remain a factor). The importance given to your credit score will vary from lender to lender and some lenders specifically aim to help borrowers who don’t have great credit.
The loan term can be adjusted to make the monthly repayments more affordable – a longer loan normally means lower monthly repayments (but a higher overall cost). So it really depends on what you can afford to repay each month.
At a fixed annual rate of 6%, a £40,000 loan would take around eight and a half years to repay if your monthly repayment was £500. If you wanted to keep the monthly cost down however, and paid £400 each month, it would take around 11 and a half years.
Yes, most lenders will let you pay off your £40,000 loan early, but many will charge you an early settlement fee to do so. This amount will vary based on both the size of your loan, and how much you still need to pay off, but will normally be an amount equal to up to 58 days of interest.
It could also be worth exploring whether you have to borrow 100% of the capital needed for your purchase, or if there are other ways to raise a percentage of the funds. The less money you borrow, the less interest costs you’ll face over the term of the loan. You might even be able to access a better rate too.
There are lenders out there who specialise in offering both unsecured and secured loans to people with bad credit. These loans realistically come with higher interest rates, unfortunately, to offset the extra risk the lender is taking on. However, without the reassurance of home equity to secure the loan against, it’s extremely unlikely that any lender will stretch to £40,000.
Given the potentially high interest rates involved with loans for bad credit, if you are deemed eligible by these lenders, it’s important to be sure that you’ll be able to afford the monthly repayments. Fall behind on them ,and the lender could take legal action against you or repossess your assets.
The process and eligibility criteria are different for business loans. You’ll almost definitely have to apply through a specialist business lender, as most personal loan companies won’t allow you to spend their money on funding a business.
It’s tougher for self-employed people to get their hands on a £40,000 loan than it is for someone in a stable job. Nevertheless, there are lenders who specialise in personal loans for self-employed people. As with ‘bad credit loans’ these companies usually offer higher rates to compensate for the higher risk that self-employed borrowers are seen as.
You’ll also likely need to provide additional documentation that demonstrates your self-employed status and income. This can include things like your bank statements and personal or business tax returns.
The coronavirus pandemic led to a lot of uncertainty in the lending market and many lenders battened down the hatches. Most banks drastically reduced the number of loans being issued and tightened-up criteria for eligible applicants. Thankfully this has eased but it’s important to be realistic about what would be affordable for you. If you’ve done your homework and are confident a loan would be affordable for you, then there’s a better chance that the lender will agree with you.
Unfortunately, you’re unlikely to be able to get a regular unsecured loan for amounts as large as £40,000. If you’re a homeowner, you may want to consider remortgaging and borrowing against the equity of their house. This might prove more cost-effective than a personal loan at a time when mortgage rates are low. Ultimately, you need to compare the total payable of both options.
By exploring all of your options for a £40,000 loan in depth, you’ll be likely to find the most suitable lender for your needs and potentially save thousands of pounds compared to the next best deal.
Use our free secured loan calculator to find out how much you could borrow and check your eligibility with multiple UK lenders in minutes.
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