Everyone needs a cash boost from time to time. However, finding the best personal loan product is not as easy as it may seem.
With many different choices available, a low-interest £1,000 loan could be a viable option to tide you over in the short term. However, finding low interest rates in today’s economic climate and the current bank rate of 5.25% could prove a challenge.
In this article, we will do the hard work for you to find the best low-interest loans on the market.
| Provider | Score | Details |
|---|---|---|
| 1. Tesco Bank | ★★★★★ | Learn more |
| 2. Novuna Personal Finance | ★★★★★ | Learn more |
| 3. Finio Loans | ★★★★★ | Learn more |
| 4. iwoca | ★★★★★ | Learn more |
| 5. Omacl | ★★★★★ | Learn more |
| 6. Drafty | ★★★★★ | Learn more |
What Is a Low Interest Loan?
A low interest loan is a personal loan with low interest rates attached to it. So, you can borrow a sum of money and pay a reasonably low amount of interest back to the lender, in addition to the original amount borrowed.
Low interest personal loans make borrowing more affordable due to lower monthly repayments.
Typically, a low interest rate loan is a loan with a rate lower than the national average. At the moment, the current national average interest rate on a personal loan is 10.16%. Therefore, a loan offering a lower interest rate than 10.16% would be considered a low interest loan.
Higher interest rates mean that you will face higher repayments, with the amount repaid on a £1,000 loan increasing rapidly with each percentage point increase.
How Do Low Interest Loans Work?
Low interest rate loans work to provide a cheaper loan product to borrowers. However, these unsecured personal loan products are typically kept safe for individuals with great credit scores who are perceived by the lender to offer a low risk.
Apply for a low interest rate loan directly with the lender or through their online website.
Choose the loan amount and loan term and you should be able to view the personal loan monthly payments. The lender will then assess your credit report and your credit rating, deciding whether to agree to offer you that loan amount.
If the lender agrees to offer you the unsecured personal loan, thoroughly read the credit agreement and decide whether you want to proceed.
If you do want to agree to the loan, sign the agreement and send it back to the lender. The money is typically transferred within a few minutes to a couple of days.
Can I Apply for a Low Interest Loan With Bad Credit?
Nothing is stopping you from applying for low interest personal loans with a bad credit file. However, you may face a low risk of actually being accepted.
A bad credit score is not the end of the world, however, as credit ratings can be changed over time. Improve your credit score by making sure you never miss monthly payments for an existing loan.
Are There Any Alternatives to a Low Interest Loan?
There are many alternatives to a low interest loan so do not despair.
One of the following finance products could be the best choice for you:
Credit Cards
There are numerous credit card products to consider, many of which can help you to secure £1,000 in credit. You could apply for an interest-free credit card, allowing you to only pay back the money you have originally borrowed.
Secured Loans
A secured loan is a loan secured on an asset. Homeowner loans are secured loans on an individual’s home, so if you default on the loan, the lender can seize your property.
You can raise a large amount of cash with a secured loan and save money with lower interest rates, although the risk of losing your home is significant. Think carefully before applying for this loan type.
Guarantor Loans
A guarantor loan is a loan that is secured by a guarantor. This means that a friend or family member will act as a guarantor for you and you will receive the loan cash. However, if you default on the loan payments, the lender can seek the loan repayment from the guarantor.
Payday Loans
A payday loan is a high-interest-rate loan that is typically targeted at individuals with a bad credit score. The lender is authorised to take a monthly payment from your bank account on a specific date, instead of waiting for you to pay.
You can pay high amounts of interest with payday loans, however, and risk falling into a cycle of debt.
Debt Consolidation
A debt consolidation loan pays off all existing debt so you only have one management monthly payment to pay. This effectively lowers the amount of interest you pay to save you money overall.
At a Glance, Pros and Cons
If you need a quick list of the pros and cons of low interest loans, look no further than this section.
Here is a succinct list of the main pros and cons for you to consider before applying for a loan:
| Pros | Cons |
|---|---|
| ✔️ Fast cash — Many loans promise that you will receive your money fast if approved for a loan. Secured loans typically take a few weeks to meet completion. | ❌️ Interest — All loans will require you to pay interest so you pay back more than you originally borrowed. Factor this into your decision before deciding to apply for a loan. |
| ✔️ Varied loan terms — Whether you want to pay off the loan in 6 months or 3 years, most loans will offer varied loan terms to suit you. | ❌️ Credit score impact — Applying for a loan will be recorded on your credit history unless a soft search is completed. Making numerous applications will damage your credit score. |
| ✔️ Easy applications — Loan applications are easy to complete, particularly if you need to apply for the loan online and without any paperwork. | ❌️ Debt cycle — If you cannot envisage paying off the loan soon, you may end up in a debt cycle, borrowing from one lender to pay back another. |
| ✔️ Managing your loan — Many lenders use apps or online portals so you can manage your loan, view upcoming payments and outstanding balances, and make a payment. | ❌️ Default payments — Defaulting on a repayment may result in fees and charges being added to your account. Your credit history may also be negatively impacted. |
Best Low Interest £1,000 Loans — Reviews
Here are the top 6 low interest £1,000 loans currently available.
1. Tesco Bank Unsecured Loan — Best for the Lowest Interest Rate
- Borrow from £1,000 to £35,000
- Interest rates from 5.9% to 34.5% APR Representative
- Loan terms from 1 year to 10 years
- Gain a lower interest rate for Clubcard members
- Take a 2-month payment break
Representative example — when borrowing £1,000 across 2 years, you will pay £48.20 per month with an APR of 15.4%, paying £1,156.80 back in total. Clubcard members will receive a lower APR of 15% and will pay £48.04 each month for 2 years, paying back £1,152.96. This results in a savings of £79.20 just for being a Clubcard member.
The Tesco Bank Unsecured Loan is a good choice if you are looking for the lowest interest rate. As a Clubcard member, you can enjoy an interest rate of 5.9% when borrowing an amount above £7,500, with non-Clubcard members facing a rate of 6.3%.
The maximum you can borrow with the Tesco Bank Unsecured Loan is £35,000, whilst loan terms can be established between 1 year and 10 years. However, Tesco Bank reserves the best possible deals for Clubcard members.
In addition, you could enjoy a 2 month payment break with Tesco Bank at the beginning of your loan agreement. You will not save any money from interest in the long term, however, although a payment break can help you to breathe a little easier before you start to make loan repayments.
You can also pay back your loan early whenever you want to, although you will need to pay a 2 month interest charge to do this.
To apply for a loan with Tesco Bank, apply online and follow the steps. You will be notified of your eligibility so you can receive the funds quickly.
2. Novuna Personal Finance Small Loans — Best for Good Credit Scores
- Borrow from £1,000 to £7,500
- Interest rate from 7.9% to 19.9% APR Representative
- No upfront fees
- Loan terms from 2 years to 5 years
Representative example — when borrowing £1,000 across 2 years, you will pay as little as £50.07 per month with an APR of 19.9%. The total you will pay back after 2 years is £1,201.68.
The Novuna Small Loan is the perfect choice if you have a good credit score. When borrowing £1,000, you will receive an interest rate of 19/9% APR. However, much lower rates are available if you borrow a higher amount of £7,500, from as little as 7.9%.
You can spread the cost of your loan from between 2 years to 5 years, depending on your preferences. However, there are no upfront fees to pay and you can be assured that there are zero hidden charges.
To apply for the Novuna loan, choose how much you would like to borrow and how long you want your loan term to be. Then, complete an application form on the Novuna website and receive an instant decision in a few minutes.
If you are successful in securing your Novuna loan, you will need to read the credit agreement and sign it accordingly. You should then receive the loan funds within 2 working days.
Your first monthly repayment will be due exactly one month after you have signed the credit agreement. Manage your account online or through an App.
3. Finio Loans — Best Loan for Bad Credit
- Borrow from £1,000 to £5,000
- Typically 39.9% APR Representative
- Loan terms from 1 year to 3 years
- Bad credit histories accepted
Representative example — when borrowing £1,000 across 2 years, you will pay £58.03 per month with an APR of 39.9%. The total you will pay back after 2 years is £1,392.72.
Finio Loans specialises in offering loans to individuals with bad credit ratings. Your current situation is assessed by Finio Loans when applying for one of their deals.
You could borrow from £1,000 to £5,000 with an interest rate of 39.9%. The higher interest rate is charged in consideration of poor credit scores and perceived higher risk by the lender.
Request loan terms from as little as 1 year through to 3 years, tailoring your loan to meet your personal circumstances and preferences.
To apply for a Finio Loan, apply online and follow the steps. If you are successful, you could receive your cash fast.
4. iwoca Flexi Loans — Best for Raising Business Funds
- Borrow from £1,000 to £500,000
- Interest rate from 3.33% per 30 days
- No early repayment fees
- Loan terms from 1 day to 2 years
Representative example — when borrowing £1,000 across 2 years, you will pay £61 per month with an interest rate of 3.3% per 30 days. The total you will pay back after 2 years is £1,468.
The iwoca Flexi Loan is the perfect financial choice if you need to raise money to fund business startup costs. The Flexi Loan is tailored to businesses that need to raise money now but can pay it back after a short loan term.
The circumstances of your iwoca Flexi Loan will vary, depending on your circumstances. However, you could borrow £1,000 across 2 years, paying £61 per month.
With this type of loan, however, it is best to pay back what you owe as soon as possible. You are charged interest across a 30 day period, so the longer you owe the money, the more interest you will pay back to the lender.
You will need a personal guarantee to secure an iwoca Flexi Loan, however. To apply, simply complete the online form and enter your details. If you are successful, link your bank account details and you could receive your fast cash within minutes.
There is no paperwork to complete and you can pay the loan back early without any further fees. Furthermore, you could be eligible to increase your credit limit over time.
5. Omacl Loans — Best for No Credit Check Loans
- Borrow from £100 to £5,000
- Varied 43.1% to 1333% APR Representative
- No credit check
- Receive money fast
- Loan terms from 1 month to 3 years
Representative example — when borrowing £1,200 across 75 days, you will pay back £1506 in total with interest charged at 0.34% per day.
The Omacl Loan is a good choice for a loan with no credit check. Utilising a Payday loan ethos, you are charged interest daily, paying more interest the longer it takes for you to pay back the loan.
You could borrow any amount from £100 to £5,000, although the interest rate is high due to the promise of zero credit checks in use. Choose loan terms from 1 month to 3 years, and if successful. Receive your cash fast.
To apply for a loan with Omacl Loans, visit their website and make an application. You will receive an instant decision, receiving your funds quickly.
6. Drafty — Best for Overdraft Credit
- Borrow from £1,000 to £3,000
- Representative 96.2% APR (variable)
- Receive funds in 90 seconds
- Line of credit method so no need to reapply
Representative example — when borrowing £1,000 across 1 month, you will pay £57 in interest each month when interest is charged at 0.19% per day.
Drafty offers a line of credit that acts like an overdraft. It is there for you when you need extra funds and can be used again in the future without needing to reapply.
On average, Drafty will cost you 0.19% (variable) per day in interest. So, if you borrow £1,000, you will be charged £1.90 each day in interest, totalling £57 across a month.
Whilst this is a lot of interest in comparison to unsecured loans, you are receiving an easier process and a higher chance of securing a successful application.
However, a huge benefit of a Draft line of credit is that any payments made that are higher than the interest amount will go towards the amount owed.
So, you will know that a £250 payment to Drafty will result in a £193 deduction from the total you owe. There are zero additional fees so you know exactly where you stand.
To apply for a Drafty loan, you will need to apply online and enter your details. Your application will be completed within minutes and you will receive an instant decision. Should you be successful, your cash will be transferred to your bank immediately.
Furthermore, credit limit increases can be secured once you are a proven responsible lender.
Leading Low Interest £1,000 Loans: The Verdict
With so many loan products out there, what type of loan is right for you?
If you are looking for a loan over a longer term, paying as little interest as possible, then Tesco Bank is the best option for you.
As long as you have a good credit history and are a Tesco Clubcard member, you can receive an interest rate of as little as 5.9%, depending on the loan value.
If you have a poor credit history, however, you may need to look at options such as Drafty, Finio Loans and Omacl Loans. All options offer loans with daily interest rates that can add up to a higher amount if the loan is not paid off relatively quickly.
However, if you are looking for a short-term loan, these lenders are a positive choice where you can access cash quickly with an easy application.
