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Whether you’re buying a car or planning an amazing holiday, a £5,000 fixed-rate loan could open up a range of possibilities. With interest rates tailored to the individual and ranging from around 3% up to 50% (or potentially even higher), it pays to pin down the best deal available to you.
The array of banks and specialist lenders out there cater to borrowers in a wide range of circumstances, including those with less-than-perfect credit. Let’s look at how to compare £5,000 personal loans to get the most competitive product for your particular circumstances and how to avoid some common pitfalls.
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Bad or good credit, there are options available to you. Loans of £5,000 are available from both traditional and more specialised lenders and come in a variety of forms.
You’ll most probably have more options available to you if you’re looking at borrowing £5,000 and you have a good credit rating. You’re likely to be able to apply to the majority of lenders and enjoy the most competitive rates. Your current bank may offer same-day funding to existing customers, but it usually pays to shop around.
There are plenty of specialist lenders who offer loans to people whose credit history isn’t perfect. These lenders put more of a focus on affordability than credit history, but the frustrating reality is that they still tend to charge higher rates.
Before you apply, you want to be confident that your application has a strong likelihood of approval. The majority of lenders offer an eligibility checker, so that by providing a few basic details you can learn your chances of success. A good loan matching service can run this check with a whole panel of lenders in one fell swoop however – making this a sensible starting point for those with limited or less-than-perfect credit records.Check your eligibility with multiple lenders
This is an expanding market which needs to be served by lenders, and as a result, more and more lenders are offer loans to self-employed applicants. Whatever stage you’re at, if you know your options and how best to go about applying, you’ll have a better chance of having your loan approved.
A £5,000 loan taken out for business purposes is different to one taken out for personal use. Lenders often state that their personal loans are not to be used for business purposes. There are a variety of business loans available, and some are even government-backed – which can mean better rates for borrowers.
Some lenders may want you to apply with a guarantor – that’s a friend or relative (with good credit) who promises to repay the loan if you don’t. Depending on your situation, this could help you to access better rates than you might alone. Guarantor loans don’t come cheap, however – with rates typically over 35% – so it’s crucial to check your eligibility for other, cheaper products first.
Here are some of the key factors you’ll want to consider when shopping around for the right personal loan:
Borrowing for longer usually brings the monthly repayments down to more affordable levels. But it also pushes up the total cost of borrowing, making it especially important to secure a competitive rate. Here are some examples of £5,000 loans at varying rates and loan durations.
|Interest rate of 5.0% fixed p.a.||Interest rate of 10.0% fixed p.a.||Interest rate of 25.0% fixed p.a.|
|1 year term||£428.04 monthly,|
|2 year term||£219.36 monthly,|
|3 year term||£149.85 monthly,|
Potentially, yes. The answer depends on whether you can get approved for a 0% purchase card with a £5,000 limit (limits are tailored to the applicant) and also on how you intend to use the money and how you plan to pay it back.
Personal loans come in a lump sum with an agreed timeframe for repayment. By contrast, credit cards are a “revolving” form of borrowing… they can theoretically last a lifetime. You borrow what you need, when you need it (subject to your credit limit) and pay back what you want, when you want (subject to a minimum monthly payment). This can tempt borrowers into only paying the minimum and making additional purchases later on, resulting in indefinite debt. In fact this is something the Financial Conduct Authority (FCA) has been cracking down on recently.
Other considerations include fees (application fees, monthly or annual account fees, cash withdrawal fees etc.), offers/rewards/perks and the length of the application/approval process. Using the wrong credit card could cost you more, because credit cards can often have higher rates and fees than personal loans, but using the right card correctly could allow you to cut interest payments out of the equation altogether.
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