Cut existing loan costs
Free calculator shows if you'll save by switching loans
While the lowest loan rates have doubled over the past few years, that doesn't mean that you can't cut the cost of existing loans, especially if your credit rating meant you had to take out a high-rate loan in the past. If you're paying more than 6%, it's worth checking if you can save by getting a new loan to pay it off. This guide shows you how to find the best new deal, and has a unique loan-switching calculator so you can see if you'll save.
Best-buy personal loans
Please note: This article is about unsecured loans, 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.
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. For a broader introduction to personal loans, try our general loans page.
Step 1: Find out your settlement figure
Before checking if you can save, you'll need to know the following information:
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How much it would cost to pay off your loan right now
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What your exact monthly payments are
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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.
Try our free Credit Club
Sign up to MSE's Credit Club to boost your credit power – access our free tools to see how the financial world views you, including:
An Eligibility Rating that combines your credit score, affordability, and market trends.
View your full credit report – your financial CV.
Get personalised acceptance odds for credit cards and loans.
Step 2: Find YOUR new top loan rate
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, many of the top loans compared below and in the eligibility checker are 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.
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 amount. Rates of loans under £3,000 are the most expensive, so always check if it's actually cheaper to borrow slightly more.
Important. For loans up to £3,000 you could be much better off using a money transfer credit card if you can repay the full balance over 12 months.
LENDER | RATE (1-5 years or stated) | CHECK ELIGIBILITY + APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
Zopa via John Lewis Finance | 9.9% rep APR (1-7 years) | |
Santander | 13.5% rep APR | |
M&S Bank | 14.9% rep APR (1-7 years) | |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
LENDER | RATE (1-5 years or stated) | CHECK ELIGIBILITY + APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
Zopa via John Lewis Finance | 9.9% rep APR (1-7 years) | |
Santander | 13.5% rep APR | |
M&S Bank | 14.9% rep APR (1-7 years) | |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £3,000 - £4,999
LENDER | RATE (1-5 years or stated) | CHECK ELIGIBILITY + APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
Novuna Personal Finance | £3,000-£3,999: 9.9% rep APR (2-5 years) £4,000-£4,999: 9.7% rep APR (2-5 years) | |
Tesco Bank | 9.8% rep APR (ii) | |
M&S Bank | 9.9% rep APR (1-7 years) | |
(i) This provider has asked us to link only to our eligibility calculator. (ii) Tesco Bank loans products are now run by Barclays, see more info here. | See all official APR examples.
Cheapest loans £5,000 - £7,499
LENDER | RATE (1-5 years or stated) | CHECK ELIGIBILITY + APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
M&S Bank | 6.9% rep APR (1-7 years) | |
Santander | 6.9% rep APR | |
Tesco Bank | 6.9% rep APR | |
People's Choice (owned by insurer Hastings) | £7,000-£7,499: 6.5% rep APR | |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £7,500 - £15,000
LENDER | RATE (1-5 years or stated) | CHECK ELIGIBILITY + APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
M&S Bank | 5.8% rep APR (1-7 years) | |
Tesco Bank | 5.8% rep APR | |
Santander | 5.9% rep APR | |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £15,001 - £20,000
LENDER | RATE (1-5 years or stated) | CHECK ELIGIBILITY + APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
M&S Bank | 5.8% rep APR (1-7 years) | |
People's Choice (owned by insurer Hastings) | 5.8% rep APR | |
Santander | 5.9% rep APR | |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £20,001 - £25,000
LENDER | CHECK ELIGIBILITY + APPLY | |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
M&S Bank | 5.8% rep APR (1-7 years) | |
Tesco Bank | 5.8% rep APR | |
Santander | 5.9% rep APR | |
(i) This provider has asked us to link only to our eligibility calculator. | 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 current account customers only. If your bank can't help, next look at the cheapest open market rates.
LENDER | RATE (1-5 years or stated) | APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
First Direct | £25k-£30k: 5.8% rep APR (1-8 years) £30k-£50k: 6.9% rep APR (1-8 years) | |
Nationwide | £25k-£35k: 6.9% rep APR £35k-£50k: 7.9% rep APR | Apply |
NatWest/RBS/Ulster Bank | £25k-£35k: 7.7% rep APR (1-8 years) £35k-£50k: 8.7% rep APR (1-8 years) |
|
Bank of Scotland/ Halifax/ Lloyds | £25k-£35k: 7.8% rep APR £35k-£50k: 8.8% rep APR | Apply to Bank of Scotland, Halifax or Lloyds |
Barclays | £25k-£35k: 8.3% rep APR £35k-£50k: 7.8% rep APR | Apply |
See all official APR examples. (i) This provider has asked us to link only to our eligibility calculator.
LENDER | RATE (1-5 years or stated) | APPLY |
|---|---|---|
Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
M&S Bank | £25k-£30k: 6.9% rep APR (1-7 years) | |
Tesco Bank | £25k-£35k: 7.3% rep APR (1-7 years) | |
HSBC | £25k-£30k: 7.4% rep APR (1-8 years) | Apply |
See all official APR examples. (i) This provider has asked us to link only to our eligibility calculator.
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 home.
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
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.
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.
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!
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.
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.
If I come into a windfall, should I pay the loan off?
Can I cut my loan costs even further?
What if I need to borrow more than they'll lend?
What will happen if UK interest rates change?
How quickly will I get the money?
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