If you’re looking to take out a £5,000 loan, you might of noticed that there’ a quite a wide range of funding options available to you. It can often be overwhelming sifting through different loans and trying to make sense of each option and finding the loan that’s right for you. Generally, the most popular loans amongst those taking out loans of £5,000 tend to be personal loans and homeowner loans.
How much does a £5,000 loan cost
This will depend on your circumstances, but assuming you have an excellent credit score then you should qualify for a top of the market personal loan rate.
5 year term
Interest rate: 3.8%
Monthly repayments: £91.63
Total cost of credit: £497.92
Total loan repayment: £5,497.92
Calculations are based on the interest rate being fixed over the term and no repayments are missed. Please note that many lenders typically will apply their best loan rates for loans between £7,500 and £25,000 and for lower amounts you will pay a higher rate of interest.
A personal loan tends to be more straightforward than other forms of finance. As the loan is unsecured, it does not require you to put an asset (such as your home) down as collateral against the loan. Personal loans are offered by the majority of banks and other lenders, and you can typically expect to borrow between £1,000 and £25,000 over a relatively short period of time (in comparison to a secured loan).
Personal loans can be taken out for a variety of different reasons, and lenders tend to specialise packages depending on whether you wish to use the loan for home improvements, car purchase, debt consolidation etc.
A secured loan (also known as a second charge loan) is a loan that you take out with a particular asset of yours (usually your home) put up as security. As a result, legally speaking, the creditor from whom you are borrowing the money will retain legal ownership of the asset in question, until you repay the loan.
Secured loans can be used for almost all legal purposes. As secured loans tend to have larger borrowing amounts and longer repayment terms, secured loans are commonly used to carry out home improvements, home extensions and debt consolidation.
There are other types of borrowing than personal and home owner loans such as authorised overdrafts and credit cards you might also wish to consider.
Considerations before taking out a loan
Generally speaking, there is no right or wrong loan option to choose from when looking to take out a £5,000 loan. However, depending on your personal circumstances some options are likely to be more suitable for your needs than others. Before committing to a loan we strongly recommend that you contact a loan broker who can evaluate your situation and provide you with unbiased, expert advice to make the right decision for you.