A Comprehensive Analysis of Personal Loans in the UK

Personal loans are the most preferred subcategory in the overall retail loans category in the flourishing banking space of the UK. Many working professionals and even students and freelancers apply for personal loans to finance their new Smartphone, home renovation or a holiday, purchasing any consumer durables equipment etc.

There are many lenders in the UK in established commercial banks, retail banks, peer-to-peer lenders, and direct lenders etc. offering personal loans to these working professionals.

Now, many misconceptions are floating around these loans, which are cleared through this blog.

Many direct lenders present online in offering easy loans in the UK to even bad credit retail borrowers having a substandard credit profile. Even if your personal credit score is below 400, you are also eligible for these loans while applying with a direct lender.

These are usually no guarantor unsecured loans which are sanctioned even without taking any asset as collateral from the borrower or asking for any guarantor to be produced to represent him. Also, there is an instant approval decision on these loans with quick sanctioning and disbursal.

A Detailed Review of Easy Personal Loans

Let’s get to know more about the scene of personal loans in the UK to settle the dust around it to understand everyone better. Here it goes:

  • Interest Rates: One of the most important factors while taking any loan or comparing different loans online. This interest rate determines how much extra amount over and above the loan amount a borrower would have to pay during repayment.

The current interest rates on personal loans in the UK are on an all-time low due to the pandemic and economic activity on a standstill.

The usual personal loan rates offered by many banks are somewhere between 5-7% APR in the UK for a maximum loan amount of £15,000-20,000. However, these are short-term loans with tenor ranging from 1 to 3 years with flexible repayment conditions.

Also, ensure that this is a fixed-rate loan or a floating interest rate loan before signing the loan agreement and availability of any instalment holiday (moratorium period).

  • Larger Loan Amount: There might be situations demanding sudden cash outflow and the required amount is more. In such situations, you need to be ready to pledge any of your assets as collateral since it is a big-ticket loan or the lender would approve a percentage of the loan amount you applied for.

You have to borrow the remaining amount from some other source. If you have existing debt, you need to apply for a debt consolidation loan to get rid of all the existing debt.

There are many reputed banks and alternative financing options in the UK who are providing debt consolidation loans.

  • Smaller Loan Amount: To take a loan for a smaller value, don’t think as if the interest rates will be comparatively less on these loans, it would be competitive even for a small amount.

The good part is that these small-ticket loans are the absence of detailed scrutiny of loan applications and no restricted covenants on these easy loans in the UK.

Do thorough online research about different lenders and ask for their quotes for an in-depth comparison of the interest rates and repayment terms and conditions they are offering.

  • Important Points in a Loan Agreement: There are several fine prints in a loan agreement or on lenders’ website, usually not given due attention. Make sure to read and understand them to avoid surprises later and if you have any doubts regarding any clause, then get it resolved by the lender.


Some of the fine prints which are not mentioned exclusively are additional charges and hidden fees.  

There could be a redemption fee, or pre-payment fee levied on pre-closure of a loan by making a lumpsum payment. This fee could be equivalent to 2-3 months of interest on the outstanding amount before the lumpsum payment.

Likewise, there could be arrangement fees or late payment penalty or application processing charges etc., beware of them and know that they exist in your loan.

  • Bad Credit Loans: Many banks do not entertain borrowers with a poor credit score as a credit risk in lending to this segment is high. However, there are many direct lenders and alternative financers in the UK whose business model predominantly revolves around catering to bad credit borrowers.

The catch here is that the interest rates on these loans are significantly higher and are somewhere in the range of 30-70% depending on the borrower’s profile and the loan amount. But, there are still some lenders who will charge somewhat lower interest rates from you, the key is to find them.

Thus, even if you have a substandard credit history, you are also eligible for a loan that is too lucrative interest rates, provided you have done your online research.

  • Basic Eligibility Criteria: To be eligible for easy loans in the UK, every borrower must fulfil certain basic conditions.

These are: borrower should be an adult over 18 years of age, he/she should be a UK citizen with an active bank account in any bank of the UK in which loan amount will be credited, and repayment will occur a permanent residence in the UK.

Some of the basic conditions and other optional conditions could be the availability of collateral or guarantor etc.