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Taking out a loan is often the most cost-effective way of borrowing money for larger purchases over a long period of time.
Should I take out a loan?
If you have a small or nil balance on your credit card it could be worth using that rather than a loan if you are able to repay in a short period of time and if a discount credit card rate is available. This is especially true for amounts less than £5,000. See our credit card section for the best deals. With a personal loan repayments are loaded so that when you start the repayments most of the amount is meeting interest rather than paying off the capital. This makes them an expensive option if you are think you will be in a position to pay it off early. If credit cards are not an option or too expensive ask your bank about a loan with flexible repayments.
If you do have an outstanding balance on credit cards, need to borrow a larger amount, or want to repay over a longer period it is worth shopping around for the best deal. The main banks offer special deals for graduates which can be found on our graduate bank accounts page, it's always worth checking what your bank has to offer.
What does it mean if the loan is unsecured?
Most personal loans are unsecured. This means that the bank does not take any of your assets as security in case you do not meet the repayments. If a loan is secured the bank gets you to assign an asset over to them, entitling them to sell that asset if you default on the repayments. An example of a secured loan is a mortgage.
What if I don't qualify for a graduate loan. Who is the best lender?
If you do not qualify for a discounted graduate loan ypu can take out a standard personal loan. Banks offer different rates of interest for different amounts, and the cheapest for one amount is not necessarily the cheapest for another. Use the Best Loans table below to see who is best for £5,000. If you want any other amount phone all of them. It's worth the extra 5 minutes. Remember the APR is the best way to compare the true cost of a loan and a lender should always tell you what this is.
| Rank | Bank | APR | Contact Details |
| 1 | Lombard Direct Online (£5k+) | 7.8% | www.lombarddirect.com |
| 2 | Cahoot | 8.0% | www.cahoot.com |
| 3 | Northern Rock | 8.1% | www.northernrock.co.uk |
| 4 | The AA | 8.2% | www.theaa.com |
The following graph allows an easy comparison of interest rates:
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