What makes a cheap personal loan cheap?
Borrowers primarily compare loan offers based on the cost of borrowing and consider cheap personal loans when the total amount to repay is less. The representative APR (annual percentage rate) is widely used as the main measuring metric when comparing cost. Representative APR is the annual interest rate paid on a loan. Displayed as a percentage of the loan principal, a lower APR usually means the cost of borrowing is less.
There are a few considerations to make though when searching for a cheap personal loan. Firstly, the representative APR is just that, representative. The interest rate offered to you will depend on your personal situation and creditworthiness. Only around 51% of successful applicants receive the APR advertised, with the remaining applicants approved for a more expensive loan. Secondly, the interest rate may not be the only cost of borrowing. Lenders can charge additional fees, sometimes hidden in the terms of the loan, that increase the total cost. A few of these to look out for are establishment fees and monthly service fees. You can use our loan calculator to factor in all fees and charges to gauge the true cost of borrowing quickly.
How much should I borrow for a cheap personal loan?
A cheap personal loan rate will only be beneficial if you are wise about the amount you borrow. To keep the cost of a loan down, you should borrow the minimum amount needed, over the shortest repayment period possible. A short repayment period will increase the amount of each repayment but will reduce the total cost of the loan as you are paying interest for less time. To determine how quickly you can repay the loan you should do a budget analysis before applying.
Calculating your monthly budget will give you an idea of how much you can afford to repay each month on a loan. If money is tight, you may consider cost-cutting options to reduce your monthly outgoings. Borrowing too much can cause more debt if you struggle to afford the repayments.
Am I eligible for cheap personal loans?
When you apply for cheap personal loans, the lender will carry out a credit check with one of the credit bureaus to assess your creditworthiness. Each time you apply for a loan, another credit check is made and flagged on your credit score. Too many credit checks made in a short space of time can negatively impact your credit score, affecting your ability to obtain financial products.
To reduce this risk, only apply to lenders where you are confident of being approved. Lenders outline the minimum eligibility criteria to be approved for a loan, and we recommend only applying to those lenders where you meet these criteria. Although this won’t guarantee you approval, it will increase your chances of receiving the money you need. Friendly Finance lists the minimum criteria for each lender under their profile page, along with other facts about the product, to help you make quick assessments. All you need to do is click ‘more info’ next to the logo.
Comparing loan options
We offer clear and simple comparison tools to help consumers compare cheap personal loan products effectively. Our tables list the main features of the loan offer, including; loan amounts, loan terms and interest rates. Each lender has a profile page where you can learn more about the product. We spend time carefully researching our lenders to understand the loans they provide and relay the most important information back to our consumers. We only work with credible and licensed providers so you can be confident in the choice you make. Compare below to find the loan you need today.