How to get a £40,000 loan with the best rate

Thinking of applying for a £40,000 loan, but want to make sure you get the best rate? You’re in the right place. Here’s all the information you need to secure a great deal.

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Loans in the region of £40,000 are typically used for substantial home improvements, although they could be used for various other purposes, like debt consolidation, a wedding or a car.

Whatever your reason for applying for a loan of this size, it’s important to ensure you get a deal with the best terms for your financial situation.

Below, we explore your potential options and explain how to find the best deal.

Want to see which lenders can offer you a secured loan?

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Warning: late repayments can cause you serious money problems. See our debt help guides.

Warning: your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.

Should you get a secured or unsecured loan?

The first decision to make is whether you’re willing to use an asset such as a property as collateral on your loan. A loan which requires collateral is called a “secured loan” and it’s likely this will be your only option when borrowing a sum as large as £40,000. Most lenders cap their unsecured loans at £25,000.

How to get a £40,000 loan

  • Calculate how much money you actually need. 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, so it’s 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.
  • Use a credit-checking service. Credit-checking services, such as those provided by the likes of TransUnion (formerly Callcredit), Experian and Equifax, will give you a score based on your credit rating. You’ll need a good credit score to be accepted for a £40,000 loan. If you don’t have this, it’s a good idea to either build your score before applying, or approach a specialist lender for borrowers with bad credit. After all, a failed credit application will harm your credit score even further.
  • Compare lenders online. Make sure you shop around and look for the best price for the amount you need.
  • Apply. Applying for a £40,000 loan online only takes a few minutes and the money could be in your bank account within hours if you’re deemed eligible for it. You’ll need your personal and financial details to hand, and to be willing to go through an online credit check.

£40,000 loans for specific circumstances

  • £40,000 loans for bad credit. There are lenders out there who specialise in offering personal loans to people with bad credit. However, even these specialists will be cautious handing out sums as large as £40,000. Even if you are deemed eligible by these lenders, it’s important to check 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.
  • £40,000 loans for businesses. 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.
  • £40,000 loans for the self-employed. 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.

How to compare £40,000 loans

  • Eligibility. Most lenders will have basic criteria that borrowers have to meet to even be considered for a £40,000 loans. It’s important to check this before applying, so not to waste your time and unnecessarily harm your credit score.
  • Rate. This is initially expressed as a ’representative APR’, which has to be offered to at least 51% of customers. If you’re deemed less creditworthy than the average customer, you may well be offered a higher rate than this after you’ve shared your detailers with the lender.
  • Total payable. This is the amount of money you’ll pay to the lender over the term of the loan. Ultimately, it’s the most important factor to consider.
  • Term length. The amount of months that your loans repayment will be spread across. The longer your term, the lower your repayments will be, although you’ll pay more overall in interest charges.
  • Fees. Look out for one-off ‘set-up’ fees charged by personal loan companies. They’re exceptionally rare nowadays, but some are still knocking about.

Loan illustrations

Interest rate of 5% fixed p.a.Interest rate of 10% fixed p.a.Interest rate of 25% fixed p.a.
1 year loanMonthly: £3,424.30
Overall: £41,091.59
Monthly: £3,516.64
Overall: £42,199.63
Monthly: £3,801.77
Overall: £45,621.22
3 year loanMonthly: £1,198.34
Overall: £43,158.09
Monthly: £1,290.69
Overall: £46,464.75
Monthly: £1,590.39
Overall: £57,254.15
5 year loanMonthly: £754.85
Overall: £45,290.96
Monthly: £849.88
Overall: £50,992.91
Monthly: £1,174.05
Overall: £70,443.18

Comparison of £40,000 unsecured loans

Table: sorted by representative APR, promoted deals first
Name Product Total Payable Monthly Repayment Representative APR
Representative example: Borrow £10,000.00 over 3 years at a rate of 5.5% p.a. (fixed). Representative APR 5.5% and total payable £10,848.60 in monthly repayments of £301.35.
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.4% p.a. (fixed). Representative APR 3.4% and total payable £10,524.24 in monthly repayments of £292.34.
Representative example: Borrow £15,001.00 over 3 years at a rate of 3.1% p.a. (fixed). Representative APR 3.1% and total payable £15,718.32 in monthly repayments of £436.62.
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.4% p.a. (fixed). Representative APR 3.4% and total payable £10,524.24 in monthly repayments of £292.34.
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.9% p.a. (fixed). Representative APR 3.9% and total payable £10,601.64 in monthly repayments of £294.49.
Representative example: Borrow £10,000.00 over 3 years at a rate of 2.9% p.a. (fixed). Representative APR 2.9% and total payable £10,447.20 in monthly repayments of £290.20.

Compare up to 4 providers

Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.

Should I just remortgage?

Homeowners can get hold of a large lump sum, by 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.

Full guide to remortgaging

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.

We exist to help you find better. The offers we've compared on this page are from a range of products whose details we can track; we don't cover every product on the market...yet. Unless we've indicated otherwise, products are shown in no particular order or ranking. The terms "best", "top", "cheap" (and variations of these) aren't product ratings, although we always explain what's great about a product when we highlight it; this is subject to our terms of use. When you make major financial decisions, it's wise to consider getting independent financial advice. Always consider your own financial circumstances when you compare products so you get what's right for you.

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