Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.
Late repayments can cause you serious money problems. See our debt help guides.
When you take out a two-year fixed-rate personal loan, you are agreeing to pay back your loan in monthly repayments over two years. Because the interest rate is “fixed”, your monthly repayments will remain at the same amount (the final instalment may be a few pence more or less than the others), and you’ll know in advance exactly how much the loan is going to cost you. So long as you keep up to date with repayments, once the two year period is up, your debt will be paid off.
It takes around 15-20 minutes to apply online for a personal loan. Most lenders have a calculator on their website which gives borrowers an estimate of the monthly repayment amount and the overall cost of the loan. This calculation is based on the product’s “Representative APR”, but what many people don’t realise is that lenders are only obliged to award this rate to 51% of those who take out the loan – the other 49% could be given a higher rate. Lenders will normally give you a more accurate quote, plus your likelihood of approval, when you give them a few more details about yourself, including your address, bank account details and salary. This process can involve a credit check, but should not affect your credit rating.
If you’re happy with the rate you’re offered, and the quoted monthly repayment and overall cost figures, you can accept the lender’s offer and funds will normally be “drawn down” (transferred to your nominated account) a day or two later.
| Interest rate of 3.0% fixed p.a. | Interest rate of 5.0% fixed p.a. | Interest rate of 10.0% fixed p.a. | |
|---|---|---|---|
| £2,000 | £85.96 monthly, £2,063.10 overall. | £87.74 monthly, £2,105.83 overall. | £92.29 monthly, £2,214.96 overall. |
| £5,000 | £214.91 monthly, £5,157.75 overall. | £219.36 monthly, £5,264.57 overall. | £230.72 monthly, £5,537.39 overall. |
| £10,000 | £429.81 monthly, £10,315.49 overall. | £438.71 monthly, £10,529.13 overall. | £461.45 monthly, £11,074.78 overall. |
| £20,000 | £859.62 monthly, £20,630.98 overall. | £877.43 monthly, £21,058.27 overall. | £922.90 monthly, £22,149.56 overall. |
It’s also worth noting that while “set-up”, “product” or “administration” fees are very rare these days for personal loans, you should still check whether or not the product you are considering comes with a fee.
Once your loan has begun, there are a few ways that lenders may let you borrow more, or borrow for longer. These will invariably have implications for the overall cost of the loan.
Personal loans come in a lump sum – you have a predetermined amount of time to pay them off. By contrast, credit cards are a revolving form of borrowing, so they can theoretically last a lifetime. You borrow what you need, when you need it (subject to a card’s monthly limit) and you have to make at least a minimum monthly payment on your balance. This can tempt borrowers into only paying the minimum and making additional purchases later on, resulting in indefinite debt. Credit card interest rates are generally variable, but cards often come with a promotional fixed rate introductory period.
Using the wrong credit card could cost you more, because credit cards tend to have higher rates than personal loans. However, a card with a promotional rate of 0% on purchases could be a smart option, depending on your circumstances.
Finally consider any other fees (application, monthly or annual fees), any offers/rewards and the length of the application/approval process before settling on a credit card, personal loan or other form of credit. Don’t forget that you’ll pay a charge each time you withdraw cash on a credit card.
Eligibility requirements will vary by lender, and you should always check this before you apply. Lenders will typically require you to meet the following criteria in order to be considered:
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