If I come into a windfall, should I pay the loan off?

A standard MoneySaving rule of thumb is always pay off any debts before stashing any money in savings (read Pay off Debts with Savings ). In general, this is true with loans too, though due to the repayment penalties you may be financially better off by sticking it in a high interest account and drip-feeding loan payments out of there. So if the 'total repayment' figure of your loan is £5,000, yet to keep repaying it each month costs £5,100 in total, you only gain £100 by paying it off now. Stashing the loan repayments in a top savings account could earn you more (see Top Savings for the top picks). However, if in doubt of the calculations, always err on the side of clearing your debts.

Can I cut my loan costs even further?

You may be able to if you have a relatively small loan. Credit cards are a much cheaper way to borrow than loans; short-ish term borrowing at an equivalent 2%ish APR is possible. Yet if you already have a loan, shifting it to a credit card isn't an easy operation. It is possible, although tricky, to do it though. Only attempt it if you've got a good credit score and, more importantly, are very money-savvy. You can find full details in the Money Transfers guide.

What if I need to borrow more than they'll lend?

Once you've applied for the loan, it's already marked as a 'hard search' on your credit report. So assuming you applied for the cheapest loan for you, then there's no point in not accepting that cash because it's not the money you need. The answer's relatively simple – just apply for another loan to fill the gap. If you haven't been turned down due to a credit score issue, this isn't likely to be too difficult. Just ensure both loans are still saving you money. If not, use the first to partially pay off the second – every little helps!

What will happen if UK interest rates change?

Almost every personal loan is at a fixed rate, so the rate and repayments you are given at the outset are fixed over the life of the loan, regardless of what happens to the base rate. Thus there's no impact whatsoever, whether rates rise or fall. But a change in the base rate will affect those looking to get a new loan, although it's not an exact relationship. As loans are borrowed over the long term, the rates lenders set depend more on the City's predictions of long-term interest rates rather than the actual UK base rate.

How quickly will I get the money?

That depends on the lender. There are some which will give you the cash instantly (or at least on the same day) if they accept you.

Cut existing loan costs

Free calculator shows if you'll save by switching loans

Helen Saxon

Updated 27 August 2020

Coronavirus financial worries have caused some lenders to stop allowing new loan applications or increase rates, and almost all have tightened acceptance criteria. Yet there are still low rates available, so cutting the cost of your existing loan is still possible. This guide will show you how to find the best new deal, and features a unique loan-switching calculator so you can see if you can cut your costs.

Please note: This article is about unsecured loans, ie, the type sold by most high-street lenders. The issues surrounding secured loans (where your home may be at risk) are even more complex. So this article is a secured loan-free zone.

Coronavirus help if you're struggling

If you're struggling to pay an existing loan due to coronavirus, your provider should give you a payment holiday of up to three months, or offer an alternative way to help.

DON'T just stop paying – you must arrange a break with your lender first (you've until 31 October to request it). Provided you've agreed it with your lender, these payment holidays then can't hurt your creditworthiness and won't come with any penalties or charges.

You'll still be charged interest during the payment holiday though, so will likely pay more overall. It's therefore best to only do this if you need to – if you can afford to pay, it's better to keep doing so.

If you have a loan from a peer-to-peer lender, such as Zopa or Ratesetter, the measures above don't currently apply, so it's down to each company to determine the help it offers. See our lender-by-lender loans help for the latest updates, full information and how to apply.

How to cut existing loan costs, step-by-step

Step 1: Call your current lender for a settlement figure

Before finding out if you can save, you'll need to call your existing lender to ask it a couple of questions. This is the big one:

How much would it cost me to pay off my loan right now?

This is what you need to borrow on your new loan. It's the full debt plus early settlement charge (if any); the maximum fee is two months' interest. This is called the settlement figure.

Unless you already know, it's also worth asking what your exact monthly repayments are, and how long the loan has to go (you'll need both pieces of info for the calculator below).

Step 2: Find YOUR new top loan rate

Loans Eligibility Calculator

See which loans you've the best chance of getting, in your own personal best-buy table.

Usually, applying is the only way to know if you'll be accepted for a loan. Yet that marks your credit file, affecting your ability to get future credit. To help, our tool uses a 'soft search' to find your chances of acceptance before applying.

Check your chance of acceptance

If you're looking for a loan, check out the best-buy rates below. We list loans by 'bands' as the rate you could get differs depending on how much you want to borrow.

Though, beware, all the top loans compared below and most in the eligibility checker are representative rates (some providers show guaranteed rates - we're working on adding more). This means only 51% of those accepted actually need to be given these rates. Depending on your credit score, you may pay a lot more.

For full information about the current best deals, read the full Cheap Personal Loans guide.

Cheapest loans under £3,000

As we warn above, while you should only borrow what you NEED, a peculiar quirk means you can sometimes pay less by getting a slightly bigger loan. Rates of loans under £3,000 are the most expensive, so always check if it's actually cheaper to borrow slightly more.

Specialist Money Transfer credit cards are also far cheaper than the loans below, if you can repay the full balance over 12-18mths.

Cheapest loans £1,000 - £1,999: from 12.3%

LENDER	REP APR (1-5 years)	CHECK ELIGIBILITY + APPLY
Important. Specialist Money Transfer credit cards are far cheaper than the loans below.
AIB (NI)	12.3% rep APR	Newbies must apply by phone (not in eligibility calc)
Cahoot	13.5% rep APR	Check eligibility
Cahoot	13.5% rep APR	Apply*
Santander	13.5% rep APR	Check eligibility
Santander	13.5% rep APR	Apply*

See all official APR examples.

Cheapest loans £2,000 - £2,999: from 12.3%

LENDER	REP APR (1-5 years)	CHECK ELIGIBILITY + APPLY
Important. Specialist Money Transfer credit cards are far cheaper than the loans below.
AIB (NI)	12.3% rep APR	Newbies must apply by phone (not in eligibility calc)
Hitachi	13.4% rep APR (£2,500-£2,999 only, 2-5 years)	Check eligibility
Hitachi	13.4% rep APR (£2,500-£2,999 only, 2-5 years)	Apply*
Cahoot	13.5% rep APR	Check eligibility
Cahoot	13.5% rep APR	Apply*

See all official APR examples.

Cheapest loans £3,000 - £4,999

LENDER	REP APR (1-5 years or stated)	CHECK ELIGIBILITY + APPLY
Important. Specialist Money Transfer credit cards are far cheaper than the loans below, provided you can get a credit limit big enough.
Hitachi	8.4% rep APR (2-5 years)	Check eligibility
Hitachi	8.4% rep APR (2-5 years)	Apply*
Tesco Bank	8.5% rep APR	Check eligibility
Tesco Bank	8.5% rep APR	Apply*
Hastings Direct	8.7% rep APR	Check eligibility
Hastings Direct	8.7% rep APR	Apply*
AA	8.8% rep APR (AA members) 8.9% rep APR (Non-members)	Check eligibility
AA	8.8% rep APR (AA members) 8.9% rep APR (Non-members)	Apply*
Post Office	8.9% rep APR	Check eligibility
Post Office	8.9% rep APR	Apply*

See all official APR examples.

Cheapest loans £5,000 - £7,499

LENDER	REP APR (1-5 years or stated)	CHECK ELIGIBILITY + APPLY
Tesco Bank	3.4% rep APR (1-3 years)	Check eligibility
Tesco Bank	3.4% rep APR (1-3 years)	Apply*
MBNA	3.5% rep APR	Check eligibility
MBNA	3.5% rep APR	Apply*
Hitachi	3.5% rep APR (2-5 years)	Check eligibility
Hitachi	3.5% rep APR (2-5 years)	Apply*
John Lewis	3.6% rep APR	Apply (not in eligibility calc)
Sainsbury's Bank	3.6% rep APR - Must have had a Nectar card for 6mths+, sadly not open to anyone self-employed	Check eligibility
Sainsbury's Bank		Apply*

See all official APR examples.

Cheapest loans £7,500 - £15,000

LENDER	REP APR (1-5 years or stated)	CHECK ELIGIBILITY + APPLY
Cahoot	2.8% rep APR	Check eligibility
Cahoot	2.8% rep APR	Apply*
TSB	2.8% rep APR	Check eligibility
TSB	2.8% rep APR	Apply*
M&S Bank (i)	2.9% rep APR (1-7 years)	Check eligibility
Virgin Money	2.9% rep APR (1-7 years)	Check eligibility
Virgin Money	2.9% rep APR (1-7 years)	Apply*
Tesco Bank	2.9% rep APR	Check eligibility
Tesco Bank	2.9% rep APR	Apply*
MBNA	2.9% rep APR	Check eligibility
MBNA	2.9% rep APR	Apply*

See all official APR examples. (i) Important: M&S Bank has asked we direct people to our eligibility calculator, so only those more likely to be accepted will actually apply, reducing demand and enquiry calls, as it's already over capacity and needs to prioritise coronavirus help for vulnerable people.

Cheapest loans £15,001 - £20,000

LENDER	REP APR (1-5 years or stated)	CHECK ELIGIBILITY + APPLY
Cahoot	2.8% rep APR	Check eligibility
Cahoot	2.8% rep APR	Apply*
TSB	2.8% rep APR	Check eligibility
TSB	2.8% rep APR	Apply*
Tesco Bank	2.9% rep APR (1-3 years)	Check eligibility
Tesco Bank	2.9% rep APR (1-3 years)	Apply*
Sainsbury's Bank	2.9% rep APR - Must have had a Nectar card for 6mths+, sadly not open to anyone self-employed	Check eligibility
Sainsbury's Bank		Apply*
Virgin Money	3% rep APR (1-7 years)	Check eligibility
Virgin Money	3% rep APR (1-7 years)	Apply*

See all official APR examples.

Cheapest loans £20,001 - £25,000

LENDER	REP APR (1-5 years or stated)	CHECK ELIGIBILITY + APPLY
TSB	2.8% rep APR	Check eligibility
TSB	2.8% rep APR	Apply*
Tesco Bank	2.9% rep APR (1-3 years)	Check eligibility
Tesco Bank	2.9% rep APR (1-3 years)	Apply*
Sainsbury's Bank	2.9% rep APR - Must have had a Nectar card for 6mths+, sadly not open to anyone self-employed	Check eligibility
Sainsbury's Bank		Apply*
Virgin Money	3% rep APR (1-7 years)	Check eligibility
Virgin Money	3% rep APR (1-7 years)	Apply*
MBNA	3% rep APR	Check eligibility
MBNA	3% rep APR	Apply*

See all official APR examples.

Cheapest loans over £25,000

Important. Certain lenders offer personal loans up to £50,000, though it's a huge commitment, so think very carefully before getting such a large amount. Be VERY sure you can repay it.

If you do plan to borrow, first check with your own bank, as cheap rates for such large borrowing are often for existing customers only. If your bank can't help, next look at the cheapest open market rates.

LENDER	REP APR (£25k-£35k, 1-5 yrs or stated)	APPLY
First Direct	£25k-£30k: 3.3% rep APR (1-7 years)	Existing Customers only Apply (not in eligibility calc)
First Direct	£30k-£50k: 6.7% rep APR (1-7 years)	Existing Customers only Apply (not in eligibility calc)
Halifax	5.8% rep APR	Existing Customers only Apply (not in eligibility calc)
Virgin Money	6.9% rep APR (1-7 years)	Apply (not in eligibility calc)

See all official APR examples.

If the above doesn't work, you could combine smaller personal loans or remortgage, though that usually means extending the term, more interest and securing the debt on your house.

Step 3: The BIG reveal – check if you can save

Plug the old and new loan details into our nifty loan-switching calculator. If you can save, apply. If accepted, use the new loan to pay off the old one (note the calculator assumes you will borrow the new amount over the same remaining number of months).

Q&A: Cutting loan costs

If I come into a windfall, should I pay the loan off?

A standard MoneySaving rule of thumb is always pay off any debts before stashing any money in savings (read Pay off Debts with Savings). In general, this is true with loans too, though due to the repayment penalties you may be financially better off by sticking it in a high interest account and drip-feeding loan payments out of there.

So if the 'total repayment' figure of your loan is £5,000, yet to keep repaying it each month costs £5,100 in total, you only gain £100 by paying it off now. Stashing the loan repayments in a top savings account could earn you more (see Top Savings for the top picks). However, if in doubt of the calculations, always err on the side of clearing your debts.
Can I cut my loan costs even further?

You may be able to if you have a relatively small loan.

Credit cards are a much cheaper way to borrow than loans; short-ish term borrowing at an equivalent 2%ish APR is possible. Yet if you already have a loan, shifting it to a credit card isn't an easy operation. It is possible, although tricky, to do it though.

Only attempt it if you've got a good credit score and, more importantly, are very money-savvy. You can find full details in the Money Transfers guide.
What if I need to borrow more than they'll lend?

Once you've applied for the loan, it's already marked as a 'hard search' on your credit report. So assuming you applied for the cheapest loan for you, then there's no point in not accepting that cash because it's not the money you need. The answer's relatively simple – just apply for another loan to fill the gap. If you haven't been turned down due to a credit score issue, this isn't likely to be too difficult.

Just ensure both loans are still saving you money. If not, use the first to partially pay off the second – every little helps!
What will happen if UK interest rates change?

Almost every personal loan is at a fixed rate, so the rate and repayments you are given at the outset are fixed over the life of the loan, regardless of what happens to the base rate. Thus there's no impact whatsoever, whether rates rise or fall.

But a change in the base rate will affect those looking to get a new loan, although it's not an exact relationship. As loans are borrowed over the long term, the rates lenders set depend more on the City's predictions of long-term interest rates rather than the actual UK base rate.
How quickly will I get the money?

That depends on the lender. There are some which will give you the cash instantly (or at least on the same day) if they accept you.

Join the MSE Forum Discussion

Cut Existing Loan Costs

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In this guide

Loveholidays and On the Beach quit trade body ABTA – what it means for you

Tesco teams up with food-sharing app Olio to give away surplus food

Premium Bond paper prize cheques to be scrapped

Nectar customers can now collect points at Argos

Top 15+ holiday destinations from the UK – where can you still travel to?

Cut existing loan costs

Free calculator shows if you'll save by switching loans

Best-buy personal loans

Coronavirus help if you're struggling

How to cut existing loan costs, step-by-step

Step 1: Call your current lender for a settlement figure

Step 2: Find YOUR new top loan rate

Cheapest loans under £3,000

Cheapest loans £3,000 - £4,999

Cheapest loans £5,000 - £7,499

Cheapest loans £7,500 - £15,000

Cheapest loans £15,001 - £20,000

Cheapest loans £20,001 - £25,000

Cheapest loans over £25,000

Step 3: The BIG reveal – check if you can save

Q&A: Cutting loan costs

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