Household Bills
Personal Loans: What to Check Before You Apply
The advertised rate is a representative APR, offered to at least 51% of accepted applicants. Your actual rate depends on your credit history and income. Use an eligibility checker (a soft search) before applying to see a likely rate without affecting your credit record.
- Representative APR: offered to 51% of applicants
- Soft search: no effect on your credit record
- Total repayment matters more than monthly payment
Wisemium's Credit Readiness section gives preparation guidance for loan applicants. Track your bills and outgoings to understand your monthly budget.
Personal loan
- Soft search first
- No credit impact
- Total repayment
- Checked
- Monthly budget
- Allows repayment
Example. Your own details appear once you add them.
APR and total repayment
APR
- What it is
- Annual Percentage Rate: the yearly cost of borrowing, including mandatory fees
- Representative
- The rate offered to at least 51% of accepted applicants
- Your rate
- Confirmed at application, depending on your credit history and income
Total repayment
- What it is
- The full amount you repay: original borrowing plus all interest
- Why it matters
- A lower monthly payment from a longer term costs more in total
- Compare on this
- Total repayment over the full term, not just the monthly amount
General information, not financial advice.
The full guide
A personal loan is a sum of money borrowed at a fixed interest rate and repaid in fixed monthly instalments over an agreed term. The interest rate is set when you take out the loan and does not change. What matters most is not the monthly payment alone, but the total amount you will repay.
APR: what it is and why it matters
APR stands for Annual Percentage Rate. It expresses the cost of the loan as a yearly rate and includes any mandatory fees, so it is the figure that lets you compare loans on the same basis. Lenders are required to advertise their representative APR, which is the rate they must offer to at least 51% of accepted applicants. The rate you are actually offered may be different, depending on your credit history and the loan amount.
Total repayment: the number that matters
A lower monthly payment is not always cheaper. A lower monthly payment achieved by lengthening the term means you pay interest for longer and the total you repay is higher. Always check the total repayment amount — the full amount borrowed plus all interest — before deciding.
| Loan amount | Term | Rate | Monthly payment | Total repaid |
|---|---|---|---|---|
| £5,000 | 3 years | 7% APR | £154 | £5,556 |
| £5,000 | 5 years | 7% APR | £99 | £5,940 |
These figures are illustrative only and are not a quote. The total repaid at the longer term is higher, even though the monthly payment is lower.
Affordability: what the lender checks
A lender runs an affordability check alongside a credit check. They look at your income, your existing commitments and your credit history to decide whether the repayment is affordable. It is useful to work out the monthly payment before applying, and to check whether you can genuinely meet it if your circumstances change.
Soft searches before you apply
Many loan providers offer an eligibility check that uses a soft search — it shows you a likely rate without leaving a mark on your credit report that other lenders can see. Use a soft check first, rather than applying to several lenders at once. Multiple hard searches in a short period can affect the rate you are offered. See How to get credit-ready before you apply for the steps.
Early repayment
You are legally entitled to repay a personal loan early. Lenders can charge an early repayment charge (ERC), usually limited by regulation. If you think you might repay early, ask about the ERC before you sign.
What a loan is not suitable for
A personal loan is not designed for short-term borrowing. If you need money for a week or a month, a loan is likely to be more expensive than alternatives. It is also not the right tool for ongoing credit needs: a credit card may cost less if you pay the balance in full each month. Wisemium does not provide credit or financial advice. Personal loan quotes require a direct application to a lender or a regulated broker.
Wisemium's Credit Readiness check gives goal-specific preparation steps for personal loan applicants.
Common questions
Is the representative APR always the rate I will get?
No. The representative APR is the rate offered to at least 51% of accepted applicants. Your actual rate depends on your credit history, income and the loan amount. The rate is confirmed at application.
Does applying for a loan affect my credit score?
A full application uses a hard search, which stays on your report for around a year and is visible to other lenders. An eligibility checker uses a soft search, which does not appear on your credit report. Use a soft check first.
Can I repay a personal loan early?
Yes. You have the legal right to repay early. An early repayment charge (ERC) may apply, usually equal to one to two months' interest, regulated by the Consumer Credit Act.
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