How do loans work in Northern Ireland?
A loan is money borrowed from a bank, building society or direct lender that you pay back over an agreed period of time with interest. There are two main types of loans in Northern Ireland (NI) which work in slightly different ways.
Here's how secured and unsecured loans in NI work;
Secured loans are guaranteed against an asset, such as your home or a property you own. The value in your property is used as collateral, so if you cannot pay back what you’ve borrowed, the equity in your property will be used to recover what you owe.
Secured loans, also called homeowner loans, are usually used for borrowing large sums of money over a long term. Secured loan interest rates are often lower than personal loans in Northern Ireland, and they're sometimes easier to be approved for if you have bad credit.
You’ll need to carefully weigh up the pros and cons of a secured loan because your home is at risk if you cannot keep up with repayments. If you only want to borrow a small amount for a short time, you might want to consider an unsecured loan instead.
Unsecured loans are not secured against an asset such as your home, but you’ll need a reasonable credit history and proof of income to demonstrate to your lender that you can afford the repayments of a loan.
This type of loan in NI typically charges higher rates of interest than a secured loan. Interest rates are usually fixed, and you’ll make monthly repayments.
Like a secured loan, you can choose how long you’d like to repay your loan, but the longer you take to pay it back, the more interest you’ll pay.
What types of loans are available in Northern Ireland?
In Northern Ireland, there’s a loan to suit every circumstance. Some types of loans are cheaper than others, but you’ll get the best NI loan rates if you have a good credit score and use a comparison site like ours to find the best deals.
Here are the main types of loans available from banks, brokers and lenders;
- Personal loans
- Secured loans/homeowner loans
- Home improvement loans
- Car finance loans
- Bridging loans
- Guarantor loans
- Bad credit loans
- Debt consolidation loans
- Doorstep loans
- High-cost, short-term loans (payday loans)
How much do loans in Northern Ireland cost?
The cost of an NI loan depends on three factors, but your credit score and income will dictate the actual interest rate you’re offered.
The cost of your loan will depend on:
- how much you want to borrow
- the interest rate set by the lender
- the period of time you need to repay the loan
When comparing any type of loan, you’ll see the representative APR, which indicates the interest rate, but the actual rate you could be finally approved for may be higher depending on your credit rating and how much you need to borrow.
Typically, secured loans have lower interest rates than unsecured loans, but you'll likely need to pay fees and interest on the loan over a longer period. In contrast personal loans are usually fee-free, but you'll pay a high-interest rate over a shorter period of time.
Can I get a loan in Northern Ireland?
It depends on the type of loan you want and your personal and financial situation.
You can usually get a personal loan if you have a good credit score and can demonstrate you have the means to pay it back.
Different types of lenders will have various eligibility criteria, but generally, you must be:
- at least 18 years old
- a Northern Ireland/UK resident
- able to afford the monthly repayments
You'll have to provide proof of your identity, address and affordability. You'll also have to undergo a hard credit check to prove your creditworthiness, which will leave a mark on your credit file.
What are the pros and cons of NI loans?
A loan is a helpful way to spread the cost of large purchases, like a car, or finance home improvements and is often a cheaper alternative to credit cards or other types of borrowing.
However, there are some downsides so you should carefully consider the pros and cons before applying.
- Spreads the cost of large purchases, events or projects
- Monthly payments are fixed to help you budget
- Can cover short-term cashflow issues
- Can be used to help you manage any existing debts in a controlled way
- Can be used to fund home improvements to increase the value of your home
- You could damage your credit score if you default on payments
- Penalties for late or missed payments could leave you in bad debt
- Applying for lots of loans will leave records of your applications on your credit report which is visible to other lenders
- Early repayment fees may be applied if you want to pay off your loan early
- Your interest rate may be higher than advertised if you have a poor credit history
- Your home is at risk if you can't keep up repayments on a secured loan
Are there any alternatives to NI loans?
There are some other borrowing options to consider:
Buy Now Pay Later (BNPL)
This is an Interest-free, point of purchase credit option available from most online retailers. It can be used to spread the cost of online shopping or even holidays, but it's less flexible than a personal or secured loan.
The advantage of Buy Now Pay Later is that you’ll be charged 0% interest for a set period providing you pay off the full amount you owe, however, BNPL can only be arranged at the point of purchase and shouldn’t be relied on as a regular tool as the amount you owe can quickly mount up.
This is a type of payment card which allows you to use borrowed money to pay for goods and services. You'll need to pay off the amount you owe in full each month or make smaller repayments and pay interest.
If you get a 0% purchase card, It can be an ideal option for small and medium purchases if you ensure your balance is repaid within the interest-free period. The longer the 0% period, the better because you're essentially borrowing for free during the 0% deal. Once the interest free period is over however, interest rates tend to be higher on this type of card.
If you're looking for credit to buy a car, an alternative to a loan is car finance such as hire purchase (HP) or personal contract purchase (PCP).
With HP you'll hire the car and pay monthly with interest, and own the car when the final payment has been paid. PCP is similar, but at the end of the term, you choose whether to exchange the car, make a balloon payment or return the car.
This facility allows you to spend more money than you have in your current account, but you’ll pay interest on the amount 'borrowed'. Authorised overdrafts are a pre-arranged agreement with your bank, unauthorised overdrafts are not arranged in advance.
Overdrafts shouldn’t be seen as a long-term solution to debt problems because they are one of the most expensive ways to borrow money and should be seen as an emergency short-term solution only.
What do I need for a loan in Northern Ireland?
This will depend on where you get a loan and the type of loan you require.
Documents you may need to provide include:
- Proof of identity
- Proof of residence
- Proof of your right to live and work in the UK
- Proof of income
- Employer details or evidence of self-employment
A secured loan will require more documentation, like mortgage statements and a house valuation.
You will need a current account with the facility to set up a direct debit or standing order and fit other eligibility criteria the lender sets.
Why don't all lenders offer loans in Northern Ireland?
For lenders, it depends on the demand in a region or country, but many online loan providers offer loans in Northern Ireland. High street banks also offer loans to Northern Ireland residents as long as you meet the minimum loan requirements.
You may be turned down for a loan in Northern Ireland if you:
- have a poor credit score
- don't have an income
- don't meet the lender's eligibility criteria
Northern Ireland Loans FAQs
You can borrow from a range of loan providers in Northern Ireland, from high-street banks to online lenders.
Traditional high street banks and Building Societies are often the first port of call for personal loans because applying with the same bank you have a current account with is quick and easy, but their rates aren’t always the most competitive.
There's also a wide range of online direct lenders and unsecured and secured loan brokers that cater for every type of borrower. A quick internet search will provide you with a choice of NI loan providers to suit your financial circumstances.
Use a comparison website like ours or online loan broker to find the widest selection and cheapest loan NI rates.
If you're a credit union member or have savings with a credit union in your area or workplace, you may qualify for an affordable loan through them.
A lender or bank should state their eligibility or minimum loan requirements on their website. If you're in any doubt about whether you'll be approved for a loan, contact the provider directly before making your application or use an eligibility checker.
If you’re applying for a loan in Northern Ireland, a hard credit search will leave a mark on your credit record, so it’s important to avoid multiple applications in a short period of time.
If you're concerned about impacting your credit score, use an eligibility checker because they can help you find which of the cheapest loans in Northern Ireland you may be eligible for, without negatively impacting your credit report.
If you’ve been approved for a loan and make your repayments in full and on time, you can positively impact your credit score because you're providing evidence that you're a reliable borrower, which will build your credit score.
As long as you can afford the repayments yes, you can, but the loan will likely be more expensive. Banks don't tend to offer loans in Northern Ireland for bad credit, but there are specialist money lenders that do.
There are also loans designed for people in NI with bad credit but beware of lenders and products specifically for bad credit because they often come with high-interest rates and expensive fees.