When taking out a loan, a priority for many people is getting the lowest interest rate possible. Low interest personal loans have become available to far more people in recent years. This means that long-term borrowing is no longer the only way to get your hands on a low interest rate. Low interest short term loans and low interest direct lender pay day loans UK are also now available to many people.

However, the interest rate isn’t the only factor to consider when comparing the true cost of low interest loans from different providers. Some low interest bank loans come with significant fees that must be paid if you decide to settle the loan early, for instance. This is something that you should account for if this is something you plan to do.

This article will explore the low interest loan options that are available on the market. It will also explain what circumstances will help you to get the lowest possible rate. Finally, it will answer some of the most common questions about low interest loans.

How Can I Improve My Chances of Being Offered Low Interest Loans?

Banks and other financial institutions are far more likely to offer low interest personal loans and cheap short term loans to people who they feel sure will be able to repay the loan. Any blemishes on your credit history, such as missed payments or CCJs, will reduce the likelihood of being offered low interest loans. While low interest loans for bad credit do exist, the rates don’t tend to be quite as low as more mainstream products. If there are any issues with your credit history, time is the best healer. Lenders look at recent activity more than historical data, although significant problems such as bankruptcy remains on a credit file for a significant period of time.

Another key factor that lenders will consider is your household income and any other credit commitments (such as other loans or store or credit card repayments). They want to ensure that you won’t have any issues making the payment on a low interest loan. For this reason, they may ask to see payslips or other proof of the income that you state when completing the application.

What Are the Most Common Types of Low Interest Loans?

The types of low interest loans and interest rates that you will be offered depend on who you will be borrowing from and what you plan to do with the money you borrow. Here are some of the most common types of low interest loans.

  • Low Interest Car Loans

    While more and more banks are starting to offer low interest car loans, most new car buyers arrange their low interest loans with the dealer they are buying the car from. That said, it is worth taking a little time to compare different low interest loans that are available before accepting the dealer’s first offer. The bank will want some details about the car you plan to purchase with the loan when you apply. This is generally to check that the amount of money you are applying to borrow is in line with the car you plan to buy.

  • Low Interest Home Improvement Loans

    This is one of the most common types of low interest long term loans UK. It does vary from the others, as low interest home improvement loans are often secured on the property that you are improving. This can mean that they are available at even lower interest rates than their unsecured counterparts.

    The most important thing to consider when applying for low interest loans for home improvement is whether the budget that you have come to is sufficient. It could be worth looking for low interest loans with no early repayment fees and borrowing slightly more than you think is required for the project. This means that you would have a contingency in your budget in case any part of the project turns out to be more expensive than you initially expected. If the project goes to plan, you can simply repay this part of the loan early and reduce your payments.

  • Low Interest Debt Consolidation Loans

    If you have borrowed a significant amount of money on higher interest products such as store cards or credit cards, then this is for you. Low interest loans for debt consolidation could be exactly what you need to get your finances back on track. You may be able to significantly reduce the amount of interest that you are paying on the money that you have borrowed. This will allow you to put more of your monthly repayments towards the capital that you have borrowed. This will avoid the trap of only making the minimum repayments and failing to achieve a significant reduction in your debt.

    Low interest loans for debt consolidation also allow you to have a plan for paying off your debt. They generally come with a fixed term, at the end of which you will have repaid the entire debt.

    These are the main reasons people take out low interest loans, but there are many other circumstances for which specialised products may be available. Taking time to compare the options available before applying for low interest loans is very likely to save you money in the long run.


Do I need to be a homeowner to get a low interest loan?

The majority of low interest small personal loan products on the market are unsecured loans. This means being a homeowner is not a prerequisite to applying. That said, lenders will consider all of your personal circumstances before offering you a loan. Since rental payments tend to be higher than mortgage payments, this may impact the interest rate that they can offer you.

Will my job impact the type of low interest loans that are available?

Employment and income are the main things that lenders consider when deciding whether to offer low interest personal loans to a customer. While income is the primary consideration, they will also want to ensure that your employment is secure. This means checking that you are not at risk of redundancy or anything else that could make it difficult for you to keep up with your low interest loan repayments. This is why they will ask you for your job title and employer when you apply, as well as your income. It’s important to be honest when answering these questions; the bank is just trying to help you avoid getting into any financial difficulties after taking out your loan.

What can I use low interest loans for?

Most banks and other institutions offering low interest loans will want to know what you require the money for. Thankfully, the list of available reasons is extensive. Whether you’re looking to make home improvements or comparing low interest payday loans to cover an unexpected bill or repair, there is sure to be an option that’s right for you. The more information you can give about your circumstances when comparing low interest personal loans, the more accurate the offers you receive are likely to be.

Representative example

Total amount of credit: £700
Duration of the agreement: 6 months
Repayment total: £1,179.05
Interest is Fixed at rate of 185.39% per year | Representative 611.74% APR
Installment 1
Installments 2 — 5
Installment 6