A Practical Guide to Getting a Bank Loan

Understanding Bank Loans in the UK

Bank loans—often called personal loans or unsecured loans—remain a popular way to borrow money for specific needs. Whether you’re buying a car, improving your home, consolidating debts, or funding a special occasion, a bank loan could offer a straightforward solution.

What Can You Use a Bank Loan For?

Bank loans are versatile, usually available for:

• Car purchases (new or used)
• Home improvements (like renovations or extensions)
• Debt consolidation (combining existing debts into one payment)
• Weddings, holidays, or special events
• Major purchases or urgent expenses (excluding those on the banks’ prohibited lists)

Note: Personal loans are not suitable for business use, property purchases or deposits, paying household bills, investments, or gambling.

How Much Can You Borrow — and For How Long?

• Loan amounts generally range from £1,000 to £25,000.
  • Some banks offer as low as £300 or as high as £50,000 for existing customers.
• Loan terms typically last from 1 to 7 years.
  • Longer terms (up to 10 years) may be available for bigger loans, especially home improvements.

Rates & Costs Explained

Interest rates (APR) vary mainly by loan size and your credit profile:

• Representative APRs typically range from 5.9% to 6.6% for £7,500 to £15,000.
• Small loans (<£3,000) may attract higher rates—sometimes up to 14% or above.

Here’s a typical example:

Highlight: Use a loan calculator before applying to estimate your repayments and total interest. Small changes in loan amount or term can affect the APR offered.

Who Can Get a Bank Loan?

Eligibility criteria are standard across UK lenders:

• Be at least 18 years old (sometimes 21 for online applications)
• A permanent UK resident
• Employed, self-employed or with regular income (e.g., above £850/month)
• Good credit history and no recent bankruptcies or County Court Judgments
• For joint loans or larger amounts: You may need to be an existing customer with the bank.

Application Step-by-Step

1. Check Your Eligibility:
   • Most banks offer a quick ‘soft search’ tool to estimate your chances—no impact on credit score.
2. Calculate Costs:
   • Use the online loan calculator to model repayments.
3. Apply Online (or app, phone, or branch):
   • Provide your personal information, address history, income, and the purpose of your loan.
4. Approval:
   • Quick digital decisions are common. Existing current account holders may get funds the same day. Others typically within 1–3 days.
5. Receiving Your Funds:
   • If further checks are needed, the process might take up to 10 days.

“The quickest way to access your loan is to apply online as an existing current account customer. Decisions and fund transfers are often instant if you meet all criteria.”

Managing Your Bank Loan

• Fixed monthly repayments by Direct Debit
• Choose your preferred repayment date
• Make overpayments or early repayments (save on interest; maximum fee capped at 58 days’ interest)
• Top-up options (adding to an existing loan often means replacing it with a new one)
• Online and mobile app management for full transparency
• Payment holidays may be available—approval required, and it increases overall interest

Fees to Watch Out For

• No standard arrangement/setup fees on personal loans
• Early repayment/settlement fee: Up to 58 days’ interest (by law, may be less for loans ≤12 months)
• Missed payment fees: Can damage your credit score and incur charges—contact your bank promptly if you’re struggling

Responsible Borrowing & Credit Impact

• Soft searches let you check eligibility without affecting your credit score
• A full application leaves a hard search (visible to other lenders)
• Missing payments can harm your credit profile and attract fees
• Banks may decline loans for affordability reasons even with good credit

Remember to borrow only what you can afford to repay. Compare a loan with other forms of credit (overdraft, credit card, mortgage)

Joint Loans and Special Features

• Joint loans: Both applicants must meet eligibility and provide evidence of income/outgoings
• App management: Most major banks now offer total loan management via their digital platforms
• Top-up loans, overpayments, and settlement: Flexibility to adapt your borrowing as needs change

Frequently Asked Questions (FAQs)

• How much can I borrow? £1,000–£25,000 (up to £50,000 with some conditions)
• How quickly can I get the funds? Same day for existing customers; others within 1–3 days
• What are the interest rates? Usually from 5.9% to 6.6% APR for typical loans
• Can I repay early? Yes – with a statutory maximum fee
• Can I apply jointly? Yes—if both applicants are eligible
• Soft or hard credit check? Eligibility check is soft; full application is hard

Where to Get Advice or Help

If you’re struggling with debt, banks offer access to independent support organisations, payment holidays, and tailored assistance for special circumstances. Always ask your lender if you’re worried about repayments.

Don’t rush into a loan decision. Use eligibility checkers, compare products carefully, and ensure your borrowing suits your needs. For more tailored finance solutions, explore specialist retail finance brokers.

Take action:

• Use a loan calculator
• Check eligibility with a soft search
• Compare rates & terms – don’t take the first offer
• Only borrow what you can safely afford to repay