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 11 November 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 to repay an existing loan

If you're struggling to pay an existing loan due to coronavirus, lenders should provide support. What's available depends on whether you've already had help, and is set to change following another national lockdown in England:

If you've already had two three-month payment holidays since March, contact your lender to discuss your options. Help is still available and will be tailored to you depending on your circumstances. You could be offered a (further) payment holiday or period of reduced payments, reduced interest or a repayment plan – providers should take into account what you can afford and how your finances are likely to change in the near future.

Providers are expected to report any support they give you to credit reference agencies, which could affect your future creditworthiness. Yet don’t let that put you off from contacting your provider – missing payments or defaulting is likely to have a far worse impact.
If you've not received any help, or you're currently on your first three-month payment holiday, you'll likely be able to apply for a 3-6mth break from payments. Under new FCA proposals, you'd be able to apply for a payment holiday of up to six months If you've not had any help to date, or a further three-month payment holiday if you've already had payments paused. It is likely these won't be reported to credit reference agencies.

Until these measures are confirmed, you won't yet be able to ask for this help. However if you're struggling now, it's always worth contacting your lender to see what support it can offer.

For the latest updates and full information on the support available, see our coronavirus finance and bills help guide.

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

Here we'll take you through the three key steps to calculate how much you could save by effectively switching loans – using a new, cheaper loan to repay your existing, more costly one.

Step 1: Find out your settlement figure

Before checking if you can save, you'll need to know the following information:

How much it would cost to pay off your loan right now
What your exact monthly payments are
How long your loan has left to go

The first is how much you'd need to borrow on a new loan to clear the existing one. It's the full debt plus any early settlement penalty charge (the maximum fee is two months' interest). This is called the settlement figure – you'll usually need to call your lender to get this.

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.

Under £3,000: from 12.3% APR
£3,000 - £4,999: from 8.4% APR
£5,000 - £7,499: from 3.4% APR

£7,500 - £20,000: from 2.8% APR
£20,001 - £25,000: from 2.8% APR
Over £25,000: from 3.3% APR

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*
MBNA	8.9% rep APR	Check eligibility
MBNA	8.9% rep APR	Apply*
Post Office	8.9% rep APRTABLE_CELL_STYLE	Check eligibility
Post Office	8.9% rep APRTABLE_CELL_STYLE	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*
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
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*
MBNA	3% rep APR	Check eligibility
MBNA	3% rep APR	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*
MBNA	3% rep APR	Check eligibility
MBNA	3% rep APR	Apply*
Virgin Money	3.1% rep APR (1-7 years)	Check eligibility
Virgin Money	3.1% rep APR (1-7 years)	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.

Cheapest loans over £25,000

LENDER	REP APR (£25k-£35k, 1-5 years 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)
Sainsbury's Bank	£25k-£30k: 6.2% rep APR (2-5 years) - Must have had a Nectar card for 6mths+, sadly not open to anyone self-employed	Check eligibility
Sainsbury's Bank		Apply*
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.

MSE Forum

Have your say in our forum!

Cut Existing Loan Costs

Spotted out of date info/broken links? Email: brokenlink@moneysavingexpert.com

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In this guide

In this guide

HSBC and First Direct cut regular savings rates to 1%

Travellers arriving in England to be able to cut quarantine if they pay for coronavirus test

First mortgage prisoners FREED under new affordability rules after MSE campaign

Supermarket Christmas delivery dates revealed - when to book

'I'm self-employed but confused about whether I can claim the third grant' - Unsure? Here's what you need to know

FREE Weekly MoneySaving email For all the latest deals, guides and loopholes simply sign up today - it’s spam free!

Cut existing loan costs

Free calculator shows if you'll save by switching loans

Best-buy personal loans

Coronavirus help if you're struggling to repay an existing loan

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

Step 1: Find out your settlement figure

Step 2: Find YOUR new top loan rate

Cheapest loans under £3,000

Cheapest loans £3,000 - £4,999

Cheapest loans £3,000 - £4,999

Cheapest loans £5,000 - £7,499

Cheapest loans £5,000 - £7,499

Cheapest loans £7,500 - £15,000

Cheapest loans £7,500 - £15,000

Cheapest loans £15,001 - £20,000

Cheapest loans £15,001 - £20,000

Cheapest loans £20,001 - £25,000

Cheapest loans £20,001 - £25,000

Cheapest loans over £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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