Compare deals on a £5,000 loan

7 min Read Published: 03 Jul 2024

Compare deals on a £5,000 loanThis article features some of the best £5,000 loan rates in the UK for you to consider, plus additional information on how personal loans work. We have calculated the figures in the table in this article using the representative example of repaying a £5,000 loan over five years. Some applicants may be offered a different loan amount or a different rate, depending on their credit history, financial circumstances and how much time they want to repay the money. Keep in mind that applying for several loans over a short period of time can damage your credit score and make it harder to borrow money in the future.

What is the best loan for £5,000?

It is a good idea to try to compare as many different loan providers as possible to find the best personal loan. You can use the representative APR figure as an indication of the cost of the deal, but the exact rate you get may be different. Read our article ‘What is representative APR?’ for more information.

By looking through a range of lenders you can get a good understanding of what is available. One lender may offer a good interest rate, but not the term length you want. Another may have the right term length available, but not the full £5,000 you were hoping for. A good comparison should help you find a deal that covers the areas most important to you.

Try not to rush into an application once you find the best £5,000 loan deal for you. First, take a close look at the eligibility criteria – some lenders even have an online eligibility checker that can tell you how likely you are to be successful. Checking this before you apply will help you limit the number of rejections appearing on your credit file. Keep in mind that making too many credit applications in a short period can give the impression that you are not managing your finances well, which could mean it is harder to get credit in the future.

If you need more information on the basics of a personal loan, read our article ‘What is an unsecured loan?’.

The best rates on a £5,000 loan – July 2024

Loan provider Representative APR (from) Available loan term Available loan amount Monthly payment
Eligibility checker?
Tesco Bank 7.2%¹ 1 - 10 years £1,000 - £35,000 £98.94 Yes
Sainsbury’s Bank 7.4%² 1 - 7 years £1,000 - £40,000 £99.38 No
AIB (NI)³ 7.9% 1 - 5 years £1,000 - £25,000 £100.83 No
Santander 9.9% 1 - 5 years £1,000 - £25,000 £104.95 No
HSBC 9.9% 1 - 5 years £1,000 - £25,000 £104.95 No
M&S Bank 9.9% 1 - 7 years £1,000 - £25,000 £104.95 Yes
TSB 13.9% 1 - 7 years £300 - £50,000 £113.99 No
Lloyds 16.1% 1 - 7 years £1,000 - £50,000 £119.01 Yes (but you will need to be registered for online banking with Lloyds)
Halifax 17.9% 1 - 7 years £1,000 - £50,000 £123.14 Yes
Zopa 22.9% 1 - 5 years £1,000 - £25,000 £187.68 Yes

Representative APR is based on a 5-year loan term

¹Clubcard members receive a preferential rate, non-members will get from 7.9% and pay £100.49 a month

²Nectar members receive a preferential rate, non-members will get from 7.9% and pay £100.49 a month

³You must be an existing personal current account customer with AIB (NI) and registered for Online Services

How a £5,000 loan works

Taking out a £5,000 personal loan will involve you borrowing the money from a lender, and then repaying the debt through monthly repayments over a set period of time. You will need to pay interest in addition to what you borrow. A £5,000 personal loan is a form of unsecured borrowing because your home, car or another valuable asset does not need to be used as security. Read our article ‘Secured vs unsecured loans: Which is best for me?’ to learn which type of loan would suit you best.

Different lenders will have different eligibility requirements, but in most cases, you will need to prove that you are a UK resident and over the age of 18. You can apply for a £5,000 loan online, over the phone or in person at a high-street bank branch.

Once your loan application is approved, you will need to start paying the money back. What you owe will also start to grow with interest. During the application process, your lender will have told you how much you need to pay back each month. You can opt to pay more than the minimum amount in order to try and clear your debt more quickly, but some lenders will charge a fee. Any loan fees you have to pay should be made clear by the lender before you sign up.

Can I get a £5,000 loan with no credit check?

No, a lender will conduct a credit check and an affordability check. The lender needs to decide if you are a trustworthy borrower and if you can afford the monthly repayments. If an application is rejected, it is likely because the lender decides that the risk of repayments not being paid on time is too great. You can avoid unnecessary rejections by keeping track of your credit score and checking your eligibility for a loan online, without completing a full application. We explain how to check your score in our article ‘The best way to check your credit score for free’ and what you can do to improve it in our article ‘How to improve your credit score quickly’.

It is possible to get a loan with a low credit score, but the loan amount, interest rate and loan term you are offered may not be what you had hoped for. This means that overall, a bad credit loan will likely be more expensive than a standard loan. Read our article ‘How can I get a loan with poor credit?’ to learn more.

The key figures in a £5,000 loan

Here are the crucial numbers to think about when you compare £5,000 loans.

  • Loan amount - Even if you apply for a £5,000 loan, you may be able to borrow £25,000 or more.
  • Loan term - Most lenders offer up to seven years to repay the loan, but some will offer longer terms and others will limit the term depending on the amount borrowed.
  • Loan fees - These will vary and can depend on what you intend to use the money for and when you repay it.
  • APR (annual percentage rate) - This is the annual rate that is used to help you work out the cost of borrowing. It takes into account the interest you are being charged and any other fees that are applicable.
  • Representative APR (annual percentage rate) - A lender expects at least 51% of successful applicants to be offered this figure. You may be charged more or less, but it can be a useful way to compare providers.
  • Early repayment charge - This is a percentage figure that lenders may charge if you choose to clear your debt prior to the end of the loan term. The rules are slightly different if you took out a loan before February 2011, however, there should be no charge for paying off up to £8,000. For loans over £8,000, lenders can charge up to 1% of the amount that was repaid early, or 0.5% if you are in the final year of the repayment period.

You should also think about your credit score. This is an assessment of how trustworthy a borrower you are. A low credit score may mean your loan application will be rejected, while a high score suggests you could be offered the lender’s best rates.

How much will a £5,000 loan cost per month?

A £5,000 loan repaid over five years at a rate of 7.9% APR will mean a monthly repayment of £100.83 a month for 60 months, costing £6,049.80 in total. Stretching out the loan term will reduce the monthly payments, but it will make the overall cost greater. This is because there will be more time for the debt to grow with interest. Shortening the loan term will mean you pay less interest, but the monthly payments will go up. It is important to make sure you can afford to pay the monthly repayments in full and on time.

What can I use a £5,000 loan for?

You will usually need to tell the lender how you intend to spend the money as part of the loan application process. Here are a few common reasons to take out a personal loan:

  • Pay for a wedding
  • Buy a car
  • Make home improvements
  • Debt consolidation
  • Pay for a holiday

What can't I use a £5,000 loan for?

A personal loan can be used for almost any purpose, but there are a few important exceptions to keep in mind. A lender will likely reject your application if you intent to use for:

  • Gambling
  • Illegal activity
  • Buying shares
  • A deposit for a property

Borrowing for business purposes can also be grounds to reject your application, but you can explore specialist business loans in our article ‘What is a business loan?’.

Pros and cons of a £5,000 loan

Here is a summary of the most important advantages and disadvantages of a £5,000 personal loan to help you work out if it is the right option for you.

Pros of a £5,000 loan

  • Stability of fixed monthly repayments
  • Borrow at a lower long-term interest rate than most credit cards
  • Spread the cost of a purchase
  • Less risk to your assets compared to a secured loan
  • Widely available
  • Applications can be approved and money paid out relatively quickly
  • Can be repaid early in most cases (though sometimes for a cost)

Cons of a £5,000 loan

  • Missing repayments or failed applications can damage your credit score
  • No interest-free period
  • Difficult to get the best interest rate with bad credit
  • Can be difficult to borrow a small sum at an affordable rate

Alternatives to a £5,000 loan

Taking out a £5,000 loan will not be the best option for everyone, so it is important to think about the other ways you can borrow. Here are some alternatives you could consider.

  • Credit card - You can borrow money much more flexibly with a credit card compared to taking out a loan. For example, you will only have to repay what you have spent, plus interest – though you could use a 0% credit card. However, you may not be able to get a high enough credit limit to meet some larger expenses. We have more information in our article ‘Best credit cards in the UK’.
  • Secured loan - The main feature of a secured loan is that you will need to use your home, car or another valuable asset as security, which might need to be sold in the event that you fail to repay your debt. However, you may be able to access much higher loan amounts and better rates. Secured loans are generally used to borrow more than £5,000, so you may find your choice of lenders limited. Read our article ‘What is a secured loan?’ to learn more or go to our article 'The best secured loans' to see the best deals.
  • Remortgaging - This is an option that is commonly taken by homeowners wanting cash for home improvements. It involves adding to what you already owe on your mortgage in order to access the funds for a big expense. We explain further in our article ‘Remortgage to release equity from your home’.
  • Car finance - A £5,000 loan could be enough to pay for a new car, but you may find that specialist car finance is a better option. Read our article ‘Buying a car: what are the best finance options?’ for more information on the best way to fund a car purchase.