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If you are currently looking for a personal loan it is important that you find the right lender. Taking out a loan is a big financial commitment and you need to be sure you are getting the best deal.

But there are so many lenders out there that it can be difficult to know where to start. So on this page we explain five important things you should find out before taking out a loan. We also take a quick look at five lenders that you may be considering applying to for a loan.

Five important things to find out before taking out a loan

All loans are not the same. If you are not careful you can end up paying far more for your loan than you need to. Here are five important things to find out before taking out a loan:

How much is the interest rate?

It is essential that you know the interest rate on your loan before you sign up. Your loan repayments will consist of a small proportion of the original money loaned, plus interest on the whole amount of the loan. The higher the rate of interest, the higher your repayments will be.

Are there any set up fees or other charges?

Some lenders may charge you fees to set up the loan, so you need to check this right from the start. Also find out if there are any other charges, for example for late payments or if you decide to repay your loan early.

How long would you have to repay your loan?

Most loans have a fixed repayment term, and this is typically any time from 6 to 24 months. The shorter the repayment term, the higher your repayments will be. Your repayments will be lower if you spread them over a longer repayment term, but remember that interest will still be added to every repayment.

Can you repay your loan early?

However long your initially agreed repayment term, it makes sense to repay your loan as soon as possible. So you need to check whether you would be able to do this, and if the loan company would charge you for doing so. For example, if you took out a loan for 24 months but then were able to repay it after 9 months, you would save paying a lot of interest. But just make sure that your lender would not charge you a penalty for doing this.

Is your lender regulated by the FCA?

Taking out a loan is a big financial commitment and it is important to know that you are protected should anything go wrong. The key thing to look for is whether your lender is regulated by the FCA (Financial Conducts Authority). They can help if for any reason you are unhappy with your loan. And if your lender were to go out of business, the Financial Services Compensation Scheme can step in to pay compensation.

You can check whether your lender is regulated by the FCA on the Financial Services Register.

Five lenders you may be considering

There are many different lenders offering loans, so initially it appears that there are a lot to choose from. Unfortunately it is sometimes the case that a lender has to cease trading for a number of reasons, which is another reason to be careful who you apply to for a loan.

Below we list a few lenders that you may have heard of. Some are no longer trading but are still worth a mention in terms of comparing different kinds of features you may get with a loan.

Lending Stream

Lending Stream offers short term loans of up to £1,500 with 6 months to repay. Whilst they promise to “stream” your money to you within 90 seconds, their interest rates are much higher than other lenders such as Loans 2 Go. It may be better value to find a lender who offers a better rate of interest and a longer repayment term.

Myjar Loans

Myjar used to offer loans of up to £2000 but went into administration in 2020. However, there are still lenders currently offering loans of up to £2000, including Loans 2 Go, at better rates of interest than those offered by Myjar Loans.

Peachy Loans

Peachy Loans also went into administration in 2020. They offered loans between £100 – £1000, repayable over 1-12 months. If you prefer a shorter repayment term look for a lender with a flexible approach. For example Loans 2 Go offers an initial repayment term of 18 or 24 months, but you can repay your loan in full any time – with no charge – before then if you are able to do so.

Satsuma Loans

Satsuma Loans used to offer short term loans of between £100-£1000, repayable over a period of 3-12 months, but ceased trading in 2021. As with Peachy Loans alternatives, look for a lender such as Loans 2 Go with a flexible approach to repayments so that you get the triple benefits of a larger loan, better interest rates and the ability to repay the loan whenever you want to.

Sunny Loans

Sunny Loans ceased trading in 2020. They used to offer larger loans than many other lenders : up to £2500, with repayment periods between 6-14 months. If you are looking for a larger loan, the key thing is to be sure that you are able to afford the repayments and that the loan will not cause you further financial difficulties. Look for a responsible lender such as Loans 2 Go