Are you in need of a personal loan but unsure where to start? With so many lenders and options available, it can be overwhelming to find the right loan for your needs. That’s why we’ve compiled a list of the 10 best personal loans for January 2024.
Our list includes lenders such as Tesco, Sainsbury, TSB, and many others, who offer competitive rates, flexible repayment terms, and fast funding. Whether you need funds for home improvement, debt consolidation, or other financial needs, our list has got you covered.
So, sit back, relax, and let us guide you through the best personal loans available in January 2024.
What is a Personal Loan?
A personal loan is a financial amount that can be borrowed for various purposes, accessible through banks, credit unions, and online lenders.
Borrowed funds are typically expected to be repaid gradually, often accompanied by interest. Additionally, some lenders may impose fees on personal loans.
The Best Personal Loans for 2024
| Loan provider | Representative APR (from) | Available loan term | Available loan amount |
|---|---|---|---|
| Tesco Bank | 6.1%¹ | 1 – 10 years | £1,000 – £35,000 |
| Sainsbury’s Bank | 6.2%² | 1 – 7 years | £1,000 – £40,000 |
| Santander | 6.3% | 1 – 5 years | £1,000 – £25,000 |
| M&S Bank | 6.6% | 1 – 7 years | £1,000 – £25,000 |
| Halifax | 6.6% | 1 – 7 years | £1,000 – £50,000 |
| Lloyds | 6.7% | 1 – 7 years | £1,000 – £50,000 |
| TSB | 6.9% | 1 – 7 years | £300 – £50,000 |
| HSBC | 6.9% | 1 – 5 years | £1,000 – £25,000 |
| AIB (NI) | 7.1% | 1 – 5 years | £1,000 – £25,000 |
| Zopa | 22.9% | 1 – 5 years | £1,000 – £25,000 |
How Does a Personal Loan Work?
In most cases, you start by filling out a form to ask for a loan. The people lending the money review your request and decide if they’ll give you the loan or not. If they say yes, they tell you the rules for paying back the money, and you can decide if you agree. If you’re okay with it, you move forward with the loan.
After that, they give you the money, either by putting it directly into your bank or giving you a check. Once you have the money, you can use it for whatever you need. But remember, you have to give the money back based on the rules they explained in the agreement.
What Documents Do I Need to Get a Personal Loan?
To get a personal loan, you’ll likely need the following documents:
- Proof of identity:
- Passport
- Driving license
- Birth certificate
- Blue Badge
- Evidence of address:
- Unpaid electric bills (no more than three months old)
- Up-to-date bank statement
- Rental contract
- Banking records:
- Bank statements to show your consistent income, expenses, and address. This confirms you have an account for the loan and payments.
- Payslips:
- Paystubs or salary statements covering at least three months to prove your regular income.
- Benefit records:
- Award letters or supporting evidence if you receive any tax advantages or credits. This helps lenders understand your overall income better.
Factors to Consider Before Choosing a Personal Loan
Before deciding on a specific personal loan, it’s essential to conduct thorough research. Here are the key factors to consider before choosing a personal loan:
Loan Amount
Determine the amount you want to borrow. Calculate the monthly payments (EMI) based on the loan amount and repayment period.
Loan Repayment Period
It’s advisable to pay back the loan as quickly as possible. Shorter repayment periods often mean higher monthly payments. Assess your ability to repay and choose a term that suits you to avoid damaging your credit score.
Financial Institutions
Banks and financial organizations commonly offer personal loans. Be cautious of numerous loan offers with attractive terms. Conduct thorough research to avoid scams and unfavorable conditions.
Credit Score
Check your credit or CIBIL score before applying for a personal loan. A higher credit score improves your chances of approval and affects loan terms such as interest rates and EMIs.
Interest Rates
Be cautious of lenders offering very low interest rates. While it may seem appealing, such loans may have unfavorable conditions that result in higher overall payments. Consider the entire loan package before making a decision.
Advantages of Personal Loan
Personal loans offer advantages compared to other borrowing methods. Here are some of the benefits of choosing this type of financing over other options:
Single lump sum
When you get a loan, you get all the money in one go. This makes it easy to buy big things, pay off debts, or use the money however you need. You also know exactly how much you’ll pay each month because the interest rate stays the same.
Quick money
Personal loans are approved and paid out fast. This is great for emergencies when you need money right away. Some lenders can even put the money in your bank account by the next day.
No collateral requirements
Some loans need you to give something valuable, like your car or house, to get approved. But not personal loans.
You don’t have to risk losing your things if you can’t pay back the loan. Still, it’s important to stick to the agreed-upon terms to avoid money and credit problems.
Reduced interest rates
Personal loans usually have cheaper interest rates than credit cards. In July 2024, the average personal loan rate was 10.28%, while credit cards charged around 16.80%.
If you have good credit, you might even qualify for rates between 10.3% and 12.5%. This could mean you get a bigger loan than what your credit card allows.
Disadvantages of Personal Loans
Personal loans can be a useful choice for some individuals, but they may not always be the optimal option. Before deciding to take out a personal loan, it’s essential to consider some drawbacks:
Higher interest rates
Sometimes, personal loans don’t have the best interest rates, especially if your credit score isn’t great. If you don’t have a good credit history, you might end up with higher interest rates compared to using credit cards or loans that ask for something valuable as a guarantee.
Additional qualifying criteria
Getting a personal loan might be harder because they have strict rules. If your credit history is short or not good, fewer places might be willing to give you a loan. Also, some lenders won’t let someone else (like a co-signer) help you get approved.
Extra charges can be a problem
Taking a personal loan can cost more because of extra charges. Some loans have fees, like origination fees (1% to 6% of the loan amount) or fees for processing the loan.
If you pay back the loan before the agreed time, some lenders might charge you extra. Before getting a loan, make sure you know about all the costs involved.
Extra monthly payout
When you get a personal loan, you have to pay extra money every month. If you’re not careful, this extra payment can cause problems with your budget.
If you don’t plan for it, paying this extra amount each month might make you spend more than you have, causing problems with your money. It’s important to think about these things before getting a personal loan.
