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What to Consider When Looking at 10 000 Loans

Many people consider getting a loan or two at some stage of their lives. There could be many reasons for choosing personal loans of any size. We're going to cover some of those reasons in this article, but there is much more you can find out about them too.

If you are thinking about getting a £10 000 loan, we hope our guide helps you work out what's best for you. By the time you finish reading, you'll know more about a personal loan, essential facts you should know about the different types of bank or building society loans, and where to find a competitive deal. Yes, we suggest you read our guide to help you understand it all.

What are your options when looking at a £10 000 loan?

When you look at 10 000 loans, you should understand there are two types. There are unsecured loans, which also go by the name personal loans. The alternative is secured loans. We're going to help you understand the difference between them.

You can make a loan application for an unsecured loan without offering any collateral to support your application. That's why it is called a personal loan. Alternatively, secured loans do require collateral, which would usually be your home. Obviously, your personal circumstances may mean that you can only apply for a personal loan, so keep this in mind at this stage.

However, in each case, you can adjust the amount you would pay each month for borrowing 10 000 just by changing the term of the loan. You could also borrow less than 10 000. You can usually borrow more via a secured option spread over more years, but if you're after £10k, you may find you have both types of loan available to think about.

If you want to know more about how to work out the figures involved, regardless of which type you go for, keep reading. We can help you figure out how much you might be able to borrow from a bank or other source.

How long might your loan last?

All loans are granted over months or years. Twelve months would be the shortest period to think about, although many loans are issued over 5 years or longer. The amount you could borrow may influence the time you borrow it for. The larger the sum, the more likely it is you'll need to pay it back over a longer period.

You can see why a loan calculator is useful in helping you get some details on potential personal loan options. A calculator also allows you to work out loan repayments, how high or low your monthly repayments would be over shorter or longer periods, and the effect of different interest rates.

If you are looking to get credit, a calculator is a great tool to use to work out your sums. It could be useful if you have poor credit and might pay more in interest, or if you have good credit and simply want to adjust the term or the amount borrowed to be more or less than 10 000. Just to help you learn more about your situation.

What are the most common reasons for getting a £10 000 loan?

Would you recognise any of these reasons why you might need or want a loan?

  1. Consolidating credit card debt
  2. Buying a new car
  3. Paying for a wedding
  4. Getting money to help with home improvements

You might take out a loan over several years for many other reasons too. Of course, it is sensible to think about whether you should apply for a loan or whether it would be better to save for whatever you want to buy. If it won't take long to save, that would be a reasonable avenue to take. However, it may take several years to save 10 000 - and you may need the cash sooner than that.

In some cases, though, a loan could help you save money. If you are currently making a regular repayment on several credit cards, for example, clearing those credit card debts with one secure loan or unsecured personal loan could prove far cheaper in the long run. Many loans have a far lower interest rate when compared to a typical credit or store card.

Can you borrow more or less than £10,000?

This isn't the only loan value you might consider getting. You may find you don't need to borrow this much. Alternatively, you might be in a situation where you need a little more than this.

However much you borrow, if you struggle to pay it back it could affect your credit score for the future. It doesn't matter whether you borrow 10 000, a grand, or somewhere between the two (or even more, in some cases). You are agreeing to repay that money, so you must make sure you can afford to repay it.

Lenders will look at your credit rating, your income, and your outgoings, along with any debt you already have. They will use this information to decide whether to loan you the money you need. This applies whether you go to a bank, building society, or another lender. Some lenders may look at your details and decide to offer you a lower amount instead, or the amount you are looking for but over more years than you asked for to make sure your monthly repayments are affordable to you.

Points to consider before making your loan application

Before we get to the various points on our checklist, we need to mention how important it is to understand your financial situation before you apply for any loan. Yes, if you want to apply, you will eventually need to fill in that form and get a decision. However, lenders will only check your credit rating once you make a formal application. Since you don't want your record to hold evidence of multiplier checks (this could harm your credit rating), it's best to find out everything you want and need to know ahead of your application.

What interest rate will you pay?

This depends on several factors:

  1. The rate offered by the lender
  2. Whether you are considered a good credit risk
  3. Whether you opt for a secured loan or unsecured personal loan
  4. The size of the loan
  5. How long you're going to have the loan for

That gives you plenty to think about. Fortunately, the Financial Conduct Authority requires that lenders give you a representative example for each product. This tells you what the true cost of any loan (or indeed any other financial product) would be. For instance, you can compare a 10 000 loan with a loan for £5,000 or any other sum, receiving a workable comparison between them.

Lenders will advertise the representative APR (annual percentage rate) for each loan. This means you can look at various loans and compare the representative APR for each one to help you find the best offer. However, comparing Rep. APR is not going to be as accurate as comparing real rates offered to you.

What will your monthly repayment be?

You need to know your repayment before applying, as it could be too much for you to afford. If that looks likely, you know that you need to look elsewhere or reconsider your secured loan or unsecured loan options.

What is the APR?

Apr refers to annual percentage rate. It's vital to make sure you understand the difference between apr and the interest applied to that deal. They're not the same.

The apr applied to a loan tells you how much you'll pay for it over the space of a year. Unlike interest, it includes any fees you might be charged to get that loan. The interest you see in any quote (also expressed as a percentage) is applied to the loan - it doesn't include any other charges or fees involved.

Obviously, these figures vary from one loan to another. It's also why the APR has become so important as a tool to help you, the person taking out the loan, compare one deal to another. The interest percentage is still important because you want to get the best deal you can. However, it is only part of the information you should look at before you consider making a formal application.

Of course, loans worth around £10k are likely to be repaid over several years rather than one year. However, comparing the APRs for several potential sources may help you get a better idea of how the payment may vary over the years too.

Since different offers come with different rates, fees, and charges, the APR allows you to put them all on a level playing field. Lenders must be clear with their information. They are authorised and regulated by the Financial Conduct Authority and so must follow their rules. While one deal may look better than another on the surface, the APR might reveal otherwise. Make sure you know the difference between them, especially when you're doing your research in the early stages.

Understanding this element may potentially save you money.

What will the total loan amount be?

You can find out what the total repayable amount would be for a secured or unsecured loan. You may have a fixed or variable interest rate, but you can still get a rough idea of your overall loan amount in each case. This would calculate the amount over however many years you borrow for.

For example, if you want to borrow 10 000 you can look at the APR and find out how that would affect your repayments, as we described above. Obviously, if you apply for and receive a variable rate loan, it will be subject to variations in the percentage rate applied to the loan. A fixed rate is just that - fixed, reliable, and unchanging.

Will you borrow from a bank or other financial institution?

All reputable lenders are authorised and regulated by the Financial Conduct Authority. This means they must adhere to certain rules and regulations in order to continue to operate. Make sure any loans you find are offered by companies registered in England and Wales, Scotland and Northern Ireland (the UK). You can check the credentials of any lender with the FCA.

It doesn't matter whether you want unsecured loans or secured loans to compare. In each case, it is best to compare interest rates and products from a range of lenders. Look at using brokers to access more lenders too, since there are some out there that you may be unfamiliar with.

How many years will you spread the loan over?

Will it be five years, 10 years, or another period? Regardless of the money that you would like to borrow, your monthly repayments will vary depending on the interest rate and term. It's wise to think about the amount of money you could pay back each month, along with the amount you can afford to repay.

This latter point is important because it may not make good financial sense to borrow the maximum amount of money you can. The slightest change to your personal circumstances could leave you struggling to make your monthly repayment.

One of the best ways to work out some figures is to use a loan calculator. There are plenty of free ones you can use. The idea is to enter your loan amount, i.e., £10,000, and then to enter the period of time over which it could be paid back. You can adjust these figures along with entering different interest rates to see the effect on the monthly repayment and on the total amount repaid over the lifetime of the loan. You can also compare different loans like this, whether they are unsecured loans or secured loans.

Can you repay your loan faster?

The total repayable on any loan will change depending on the term. For example, a 10 000 loan repaid over 10 years rather than five years would incur a lower monthly repayment. However, you would pay back more over 10 years than you would over five as you are borrowing for longer. Hence why you should always carefully compare loans before you make a loan application.

Your total amount will always be lower if you can pay it back faster. However, you should check whether you can repay a loan early, just to be sure of where you stand. Furthermore, the small print should reveal whether you may be charged for repaying the loan early.

What is your credit score like?

Lenders will review your credit score when deciding whether to let you borrow what you are asking for. Your credit history plays a significant role when you want to borrow money.

If you haven't reviewed your credit history for a while, you can get a copy and look through it to make sure it looks right. If you know your credit history isn't as strong as it could be, think about whether you can boost your score as of now. Make sure you are prompt with payments, setting up direct debits as necessary to make sure bills are paid early or on time.

If you've had trouble repaying a loan before, it can affect your credit score. Even if you do receive approval for a personal loan, you may end up getting a higher interest rate to reflect the bigger risk you may pose in repaying what you borrow.

Do you have poor credit?

Before you apply to get a loan, find out what your credit report looks like. This should give you a better idea of whether lenders might help you get secured or personal loans with better rates. The higher the risk you pose, the higher the interest is likely to be. This is reflected in the APR you see on each offer.

It will help you get a better picture of your situation when you view your credit report. If you've had financial difficulties in the past, it can potentially take years to clear them up and improve your report. However, even with a poor record, you may still be able to apply for and receive a loan. Just make sure you carefully consider this before you apply. You will be paying for it for years, and you may have a much higher APR to look at.

What happens if your personal circumstances change?

This can happen at any time, of course. Yet a 10 000 loan borrowed over, say, 5 years is a big financial commitment. You can never plan for everything that may happen in your life, but you should make sure you don't overstretch yourself now. Ask yourself how you might repay loans like this if you lost your job or some of your income. This will apply to unsecured loans and to a secured loan as both are payable over several years.

Here at Loanza, we may be able to help you find the loan you need. We have a network of over 50 direct lenders, any one of which might give you the 'yes' you are hoping for. We hope our guide for £10k loans - and other amounts - has been of help.