Best personal loans for 2020

Looking for the best personal loan available? The truth is that the “best” loan will entirely depend on your personal circumstances, your credit rating and how much you want to borrow. To help you with this part, we’ve curated a list of the best personal loans by credit status and size of the loan so you’ll get a better idea of which lenders are more suitable for you. We’ve also added a wealth of tips and advice to ensure that you’re able to confidently decide which is the best personal loan for you.

Best personal loan for excellent credit

While the best personal loans will depend on how much you want to borrow, in general you’ll find that the better your credit score and history, the better the rate you’ll receive. For personal loans over £7,500, you are likely to be offered a rate around 3% if you have a fair credit rating.

Finder's pick: M&S Bank

• Borrow £1,000.00 to £25,000.00 over 1 Year to 7 Years
• Option to defer repayments for 3 months
• No arrangement or set-up fees

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.

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Best homeowner loan

Secured loans are a specific type of personal loan that requires you to use the equity you have in your property as collateral against the loan. In return, you’ll generally receive more favourable loan terms than you would with an unsecured loan, including much more competitive rates, loan amounts and terms.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.

Best smaller loan

A small personal loan could be classified as any loan between £500 and £2,000, whether it’s a regular unsecured loan or short-term loan. However, you’re likely to receive a better rate with a regular personal loan than you would a payday or short-term loan.

While the best small loan will vary based on things like your credit history and financial situation, you are likely to pay anywhere from 13-15% for the best loans under £2,000.

Finder's pick: Zopa peer-to-peer personal loans

• Borrow from £1,000 to £25,000
• Rates often lower than the banks
• Checking your personalised rate won't affect your credit score

Representative example: Borrow £10,000.00 over 5 years at a rate of 8.8% p.a. (fixed) with an application fee of £240.00. Representative APR 9.9% and total payable £12,602.87 in monthly repayments of £210.05.

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Best larger loan

Most UK lenders offer personal loans up to £25,000, or even £30,000, but a large personal loan would commonly be considered any loan over £10,000. Lenders will generally offer much more competitive rates to customers looking to borrow larger amounts, but the best rate and lender will vary based on the precise size of your loan.

Finder's pick: Post Office Money personal loan

• Borrow from £1,000 to £25,000
• Instant decision in most cases
• Fixed rate and fixed monthly payments over the whole term
• Applications from self-employed considered

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.

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Best personal loan for bad credit

If you have bad credit or a limited credit history, you may find it hard to be approved for a personal loan. However, you still have loan options, but are unlikely to be offered the best rates. Instead, you may want to consider a guarantor loan or secured loan, especially if you find you’re only being offered unfavourable loan terms on a regular personal loan.

Finder's pick: TFS guarantor loans

• Bad credit, CCJs & defaults
• Quick approval
• No setup fees

Representative example: Borrow £5,000.00 over 3 years at a rate of 20.33% p.a. (fixed). Representative APR 39.9% and total payable £8,049.60 in monthly repayments of £223.60.

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What “best” means: How we chose our top loans

While there is no personal loan that is universally the best for everyone, we’ve put together a list of the loans we consider the “best” based on the following criteria:

• Our partners.As the UK’s fastest-growing comparison site, we have partnerships with a number of leading banks and lenders. We’re transparent about this, and it often means we can offer exclusive loan products you won’t be able to get anywhere else. The personal loans we have chosen as the best are with lenders we know to be competitive and trustworthy.
• Best for certain situations.While most loans function in much the same way, the loan that’s best for you will vary based on a number of factors, such as your credit history and borrowing requirements. We’ve therefore selected the best loans to cover the most common types of borrowers.
• Additional features.Some loans offer options like the ability to repay the loan early without penalty, or take a break from your repayments for a certain period, and we’ve taken these into account in our selections.
• Interest rate.In simple terms, the best personal loan is the one that will let you borrow the amount you need with the lowest interest rate. When it came to picking the best loans, we focused heavily on those offering the most competitive rate.

Features to compare to find the best loan

This is a non-exhaustive list of the features of personal loans that you can use to differentiate lenders in the UK, and to start to home in on the right products for your needs.

• Loan amounts. A good place to start is asking “Does this lender offer the amount that I need?”
• Eligibility. There’s no point applying for a loan if you’re not eligible, and remember that declined applications are likely to be visible on your credit record.
• Loan terms. More often than not, the loan term will simply be dictated by the affordability of monthly repayments. In other words, if you need to reduce your monthly repayment to make it affordable, then you may decide to spread repayment over a longer period. If you’ve already used a loan calculator and have a reasonable idea how long a loan term you’ll need, check that the lender you’re considering can accommodate this.
• Fees. There aren’t too many set-up fees in the world of personal loans, but they certainly aren’t unheard of. Where some lenders that you’re considering charge a fee, the total amount payable (the overall cost of the loan) might become your best benchmark for comparison.
• Total amount payable. This is the big one – if you only compare one factor, this should probably be it. You’ll want to keep the total cost as low as possible, while making sure your monthly repayments are affordable.
• Interest rate. A loan’s APR (Annual Percentage Rate – an annual summary of the cost of borrowing that all lenders must calculate in the same way) is normally the main “hook” that a lender will use to market the loan. Just remember that lenders are only obliged to award the advertised APR to 51% of these who take out the loan. Others may end up paying more, subject to the lender’s assessment of their circumstances. You can normally get a more accurate idea of the cheapest loan a lender can offer you when you tell them a bit more about yourself and the loan that you’re after.
• Turnaround time. If you’re in a hurry, you might want to look at the time each lender states it takes to actually draw down your funds (transfer the money to your nominated account). If you get a loan with a bank you’re already a customer at, chances are it’ll be pretty quick, however it almost always pays to shop around.
• Restrictions. Personal loans can be used for almost anything, but lenders are highly likely to ask you the purpose of the loan, and they may have prohibited loan purposes. Typically these can include gambling, business purposes and using the loan as a down payment to get an even bigger loan (like a deposit on a property with a mortgage, for example).
• Repayment holidays. Some lenders offer an optional month or two where you don’t make repayments. That can be handy if you need a break to get back on your feet financially. The downside of repayment holidays is that they increase the term of the loan, and the overall cost. It’s a holiday from repayments, not from accruing interest, after all.
• Early repayment. Most lenders will make a song and dance out of the fact that they don’t charge a penalty for making overpayments and/or repaying your loan early. That’s great, but it’s not the same as charging you less interest. A common policy is to charge a further two months’ interest on any amounts repaid early. So, if you’re hoping to try to make over-payments here and there, or if you have a lump sum coming in but you’re not sure exactly when, then factor the lenders’ early repayment terms into your comparison. Favourable terms could even be more important to you than a fractionally better rate.

3 steps to help you find the best personal loan

• 1. Find the right loan type for your purposes

  The are a range of different products that sit under the umbrella of “loans”. If you need £100 to tide you over until your next payday, then you’re not looking for a second charge mortgage! Similarly, if you’re looking to kick start your new business, a standard unsecured personal loan from a bank might actually be off the table (there are however government-backed loans for start-ups that are well worth a look). Some of the main types of loan are listed below.

• 2. Compare loans to establish the features that are important to you

  Some of the key features of personal loans are listed below. Which of these are important to you? Perhaps you want to be sure that the loan you take out will reward you for making overpayments and clearing the debt ahead of time. Or perhaps you’re looking for a loan that offers a repayment holiday option to give you a month or so to get back on your feet financially. Ask yourself which of these features are essential, and which ones simply “would be nice to have”.

• 3. Get the most affordable loan that meets your needs

  OK, so you know what you’re after, now it’s time to find the most competitive product available to you. Rates are obviously important, but it’s not ALL about the APR. Focus on keeping the total amount repayable as low as possible, while ensuring the monthly instalments are affordable.

What to keep in mind when applying

• Don’t apply for, let alone take on, a loan you can’t afford.
  When borrowing money it is always important to find out what your monthly repayments will be. If you don’t know for certain that you can afford that amount out of your regular income, then there’s a good chance a lender will have doubts too. Rejected applications don’t show on your credit file, but applications for credit do – too many of these in a short space of time and prospective lenders could be put off. If you end up taking on a loan you can’t afford, you’re setting yourself up for problems down the line – late repayments come with fees plus additional interest, and are highly likely to damage your credit record too.
• Don’t apply for lots of loans in a short space of time. Take the time to make one sensible application, and if you’re rejected, try to find out why.
• Read the fine print. When a lender approves your application, they’ll send you a loan offer. This is an opportunity to check that you’re actually being offered what you applied for (rate, amount, term etc.), and to check you’re happy with the terms of the agreement. OK, it’s not the most exciting document in the world, but read the terms and conditions from start to finish and ensure you are aware of all fees and restrictions.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though 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, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.