A bank loan is a loan that you get from a company that holds a banking licence such as a bank or building society. There are also a number of supermarkets offering loans who hold banking licences but we have a separate comparison page for supermarket loans. Bank loans have always been very popular and they’re often the first stop when looking for a loan. Bank loans are an age old form of lending that traditionally required you to go into your local branch and have a chat with your bank advisor. Whilst you can still get a loan from your bank in this way, the majority of banks now also allow you to apply online.
Banks provide unsecured loans. This means that they rely on the promise that you’ll pay them back without asking for additional security, like a car or a guarantor. Banks establish your trustworthiness to pay back your loan based on whether you’ll be able to afford the repayments and your credit score. They only lend to those with good credit, so if you have poor credit visit our bad credit comparison table. The positive side to this? Bank loans offer some of the most competitive rates with representative APRs from 3.2% - 12.9%, borrowing £1000 to £25,000 for periods of up to 10 years.
What not to do
Do not apply for a bank loan if you do not meet all of their minimum acceptance criteria, as you will almost certainly be declined. By making multiple applications that are being declined you will only harm your credit file, making it increasingly difficult to get accepted for the best rates when applying for finance in the future. If you know you have bad credit, check out our comparison page for bad credit loans.
Pricing and things to watch out for
The rate listed in the table above is the Representative APR of the lender. Just beware that this is not necessarily the rate you will be offered as rates will range dependent on your personal circumstances and the amount you borrow.
It’s also worth bearing in mind that banks will normally charge an early repayment fee if you decide to pay your loan off before the term is up. Don’t let this deter you from paying your loan off early though, just make sure that you’re aware of the cost you could incur.
Before you apply for loan with a bank or building society make sure you meet their criteria. You’ll need to; be over 18, have a spotless credit history, receive regular income from employment; have lived in the UK for at least 3 years and have a bank account with direct debit facilities - it is quite normal that the bank will require that you hold this account with them.
Bank loans offer some of the most competitive rates available. If you have a perfect credit history and can afford the repayments then a bank loan is a suitable choice when looking for personal finance. However if your credit score isn’t great then applying for a bank loan will do more harm than good, instead, check out our comparison tables for bad credit loans.