Best Cheap Loan Providers in 2021

What do you look for in a cheap loan? More importantly, how do you increase your chances of qualifying for a cheap loan? If you asked this question to any loans officer out there, they would probably start by advising to keep watch of your credit rating. Granted, however, the financial sector isn’t short of cheap loans and other highly affordable credit services. For instance, certain types of loans like secured personal loans and homeowner loans, typically come with the lowest APR rate. It is important to note that most of these are either secured loan products or unsecured but exclusive to borrowers with excellent credit scores and solid sources of income.

Simply put, the healthier your financial standing is in the eyes of the lender, the lower your interest rate. In this guide, we will be helping you understand how to identify cheap loan providers and what you need to qualify for the loans.  We also look at how cheap loans work as well as the advantages and possible disadvantages of applying for such loans. In addition to this, we will give you a list of what we consider the Best Cheap Loans UK in 2021.

How do Cheap Loans work? Read our step-by-step guide

The loan application process and the loan requirements will in most cases vary from lender to another or based on the type of loan. For instance, the process of obtaining a cheap homeowner loan will  likely to differ significantly from a car financing loan. If you are looking to get the very best rates without putting your assets up as collateral, then you will be best off applying for an unsecured personal loan. You, however, need to ensure you have a stellar credit score and low debt to income ratio when applying if you hope to boost your chances of qualifying for the loan.

That said, here is the process of applying for a cheap loan.

Step 1: Find a cheap loan provider

Wen looking for a cheap loan service provider, you are simply looking for the lender with not just the lowest APR rate but also the most favorable loan terms.  And the industry isn’t short of lenders with highly competitive interest rates for creditworthy citizens. To get you started, we share with you a list of the best cheap loan providers in the UK below.

Step 2: Start the application

After identifying a cheap loan provider and verifying that they are adequately registered, regulated, and insured, head over to the institutions website and start the loan application process. Most of these will have online calculators where you can enter the size of the loan you require and your preferred loan term. For example, if you seek to borrow £10,000 over the course of 3 years, this is what you need to enter. Take note, although the loan provider might approve your application, they could still offer you less than what you initially applied for.

Step 3: Enter your personal and financial information

During the application process, you will be asked a plethora of questions aimed at verifying your identity and assessing your current financial standing. The lender will require you to furnish them with such personal information as your name, address, date of birth, driver’s license number, and contact details. When it comes to your financial standing, you will initially need to provide information about your income.

On top of your annual salary, you will also need to enter the name and address of your employer, your employment status (full-time, part-time, etc.), and the frequency at which you receive your salary. The cheap loan provider will also need to be made aware of any other debt obligations that you currently have outstanding. This includes the name of the debt provider, as well as an estimation of the amount currently owed.

Step 4: View your pre-approval rates

If your cheap loan application was successful, you should receive a loan pre-approval application response within a few minutes. As such, you should now be able to view your loan terms. This will include the APR rate that the lender is happy to offer you, and when you will be required to make your repayments. The loan agreement will also list possible additional charges – if applicable, such as an origination fee and penalties and fines for late/missed payments.

If you’re satisfied with the loan terms, simply sign the loan agreement and proceed to the next step. If you however fail to qualify for an unsecured personal loan, you can always apply for a secured personal line with your car or home as collateral. Be cautious however with the number of applications you make within a specific time as multiple hard credit report checks by different lenders have the effect of pushing down your credit score – albeit temporarily .

Step 5: Enter your bank account details & set-up a direct debit agreement

Once you have signed your digital loan agreement, there is one more stage to the application process that needs to be completed before the lender transfers the funds. Firstly, you will need to enter your bank account details. This is the account that you wish the lender to transfer the loan funds into. You also have to decide whether you the lender to automatically deduct the monthly installments from your bank account or not. Keep in mind that you stand to benefit from an even lower interest rate if you agree to the automated installment payment.

Best 3 cheap loan providers

If you’re looking for a loan with the lowest rate of interest possible, then you will need to meet some minimum eligibility requirements. These include a good to excellent credit score, a history of always repaying your debts back on time, and a reasonably good annual income. Other factors determining the loan interest rate include whether you are a homeowner or have a vehicle registered in your name and both work towards boosting the competitiveness of the APR rates.

Here is the list of what we consider the best cheap loan providers in the UK and the criteria used to rank them.

Criteria used to rank the best cheap loan providers

• Lenders with the most competitive interest rates
• How much the lender is able to offer
• What credit score you need to obtain the personal loan
• What loan terms are available
• What the late payment and missed payment process is

Am I eligible for a Cheap Loan?

What happens if I fall behind on my cheap loan repayments?

In most cases, you will only succeed in qualifying for a cheap loan at the most competitive APR rate with your preferred lender if you have an untainted loan repayment history, a good to excellent credit score and a reliable source of income. However, life has its unpredictable twists and turns, implying that there is always the chance that you could fall behind on your repayments. If you do, then there is likely to be a number of consequences that you need to give a serious thought to:

Late Payment

If you are late on a single loan repayment, most lenders maintain the monthly installment grace period of between one and two weeks. For example, let’s say that your cheap loan agreement comes with a monthly repayment date of the 7th, at a fixed amount of £278. If there was a problem taking the payment from your bank account on the 7th, but you made a manual payment within a week or two, the late pay will have no impact on your credit score and neither will you incur ate payment penalties.

Missed Payment

If you fail to cover the late payment and the grace period lapses, your late payment is now considered a missed payment. And this has two main ramifications. First, the lender will likely report the missed payment to one, or all of the main three credit bureaus – a move that effectively hurts your credit score and chances of qualifying for an affordable loan in future. Secondly, you will likely be hit with a missed payment penalty that pushes up the cost of loan.

Default 

If your missed payment turns into multiple missed payments, then you face the very serious risk of seeing your account go into default. In layman terms, this means that the lender will likely initiate legal actions aimed at recovering their funds. If the loan is secured, the lender has a right to auction the security asset to cover the loan amounts. The default will also greatly affect your credibility in the face of lenders in the future and dim your chances of qualifying for affordable loans.

Glossary of loan terms

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