Loans Guides

Cheap loans, don't believe the hype

Lots of lenders advertise 'cheap loans', but we show you why it's essential to compare loans before picking a deal (Updated 16/7/09).

Lots of UK lenders offer what they call cheap loans, but you should never choose a loan based on an advertising campaign or a claim that seems too good to be true.

If you do your homework and shop around, you should be able to find a cheap loan that suits your needs.

Alliance Leicester Unsecured Loan

Company	% Typical APR
	Borrow between £7,500 and £15,000 with Alliance & Leicester, 8.0% APR typical.

Why should I compare loans before picking a cheap loan?

Without knowing what the loans market looks like, you won’t know what’s a cheap loan and what isn’t – if you only consider one loan, you’ll never know whether you could have saved money with a different one.

Looking at the loans market is easier than it might seem. You can use our loan comparison tool to find out what loans might be available to you.

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Will I get the cheap loan rate advertised?

The rate that most lenders choose to advertise is called the ‘typical APR’. This isn’t the mean average – it’s the rate offered to more than 66 per cent of successful applicants. You may be offered a higher rate, or your application may even be declined, depending on the risk you represent to lenders (this is usually based on your credit history).

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What cheap loans are available at the moment?

How cheap a loan is doesn’t just depend on the APR. There may be other charges involved, and different lenders will charge different amounts for payment protection insurance.

However, the APR is certainly a good place to start if you’re looking for a cheap loan. You’ll need to look at the small print as well, and each lender should be able to help you out with any particular questions you have. You can also ask for a written quotation.

Read our guide to understanding loans, or use our loan calculator to find the best loan for you.

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Top tips for finding a cheap loan

If you are looking for a cheap loan, follow our top tips to get the best deal:

Compare cheap loans to get the best deal – When taking out a loan it is essential that you compare loans to find the best rate available. When comparing loans make sure you look carefully at the APR as well as checking for any additional fees.
Watch out for delivery charges – Some lenders will offer to send a cheque to you by courier or transfer you loan into your bank account the same day. These services will usually attract an extra fee so only pay for them if you really need them.
Watch out for payment holidays – Some lenders may offer to defer your repayments for a few months at the start of the loan. However, you will still be being charged during this time and your future repayments will be larger to compensate. Your total amount repayable will be larger too, so avoid this if possible.
Check your credit report before you apply for a loan – Not only will checking your credit report reveal to you how you look to prospective lenders, it also gives you the opportunity to correct any information that is wrong and give yourself the best chance of being approved.