Whether you’re borrowing to consolidate debt, fund a big purchase, or cover an emergency, securing a low interest rate can make a huge difference to how much you end up repaying.
Even a few percentage points can mean hundreds, or even thousands, of pounds over the life of the loan.
But how do you make sure you’re getting the best possible rate?
It’s not just about shopping around. Your credit profile, loan type, term length, and even how you apply can all influence the offer you receive.
In this guide, I’ll break down six smart, achievable ways to improve your chances of getting the best rate on a personal loan.
1. Check your credit score before you apply
Your credit score is one of the biggest factors lenders use to decide what rate to offer you.
The higher your score, the lower the risk you pose to the lender and the more likely you are to be offered a competitive rate.
In the UK, credit scores are calculated by agencies like Experian, Equifax, and TransUnion.
Each uses its own scoring system, but the principles are similar.
How to check your score for free:
- Visit MoneySavingExpert’s Credit Club (uses Experian data)
- Try ClearScore (uses Equifax data)
- Use Credit Karma (uses TransUnion data)
Check your score with more than one agency as errors in your file can differ between them.
Practical example: Say you want to borrow £10,000 over 5 years. With an excellent credit score, you might get a rate of 5.5% APR, paying around £190/month.
With a fair credit score, you could be offered 15% APR or higher, bumping your monthly payment to £237, costing you £2,820 more overall.
2. Improve your credit profile if you have time
If your credit score isn’t where it could be, even a few small changes can boost it, often within a few months.
This could open the door to much better loan offers.
Quick wins to consider:
- Register to vote at your current address via the gov.uk website as this helps verify your identity.
- Pay bills on time, especially credit cards, mobile contracts, and utilities.
- Lower your credit utilisation and aim to use less than 30% of your available credit.
- Avoid new credit applications in the 3–6 months before applying for a loan.
Check your credit file for mistakes (like an old address or an account that doesn’t belong to you) and dispute them with the credit reference agency.
Example scenario: If you’re using 80% of your available credit, lenders may see you as overextended.
Reducing that to below 30% can significantly improve your chances of being approved at a lower rate.
3. Use an eligibility checker before you apply
When you apply for a loan, lenders run a hard credit check, which can impact your credit score.
Too many hard checks in a short time can make you look desperate for credit and potentially reduce your chances of approval.
Instead, use eligibility tools to see which loans you’re likely to be approved for and what rate you might get, before you apply.
These checks won’t impact your credit score.
Where to check eligibility:
Run a soft check on two or three comparison sites to compare personalised offers side by side.
Some lenders offer ‘guaranteed rates’ while others show a representative APR, which only has to be offered to 51% of applicants. Always read the small print.
4. Consider the loan term carefully
A longer loan term usually means lower monthly payments, but can result in a higher interest rate and more interest paid overall.
Example:
- £10,000 loan at 6% over 3 years: £304/month, £945 total interest
- £10,000 loan at 6% over 5 years: £193/month, £1,584 total interest
So while the monthly repayments are easier with a longer term, the loan costs more in total.
Tips for choosing the right term:
- Go for the shortest term you can afford monthly as it usually gives the best overall value.
- Avoid stretching the term just to make repayments feel more comfortable unless absolutely necessary.
- Use a loan repayment calculator to test different scenarios.
5. Don’t automatically choose your current bank
Many people assume their bank will offer them the best deal, but loyalty rarely pays in lending.
Your own bank might not be competitive at all so shop around.
Even if you like the convenience of borrowing from your bank, check comparison sites first to see how their offer stacks up.
Consider these options:
- Online banks and fintechs often offer better rates (e.g. Zopa, Tesco Bank, Monzo)
- Credit unions or community lenders may have fairer terms if you’ve had credit issues
- Peer-to-peer lenders sometimes offer low rates if your credit is strong
6. Consider a joint application (but only if it makes sense)
If you’re struggling to get a good rate on your own, applying with a co-borrower (usually a spouse or partner) can help improve your chances.
It can also help secure a lower rate provided they have a strong credit score and income.
Important notes:
- Both borrowers are jointly responsible for the full loan amount. If one of you can’t pay, the other must.
- The loan appears on both of your credit files.
Never apply jointly unless you completely trust the other person and you both understand the financial commitment.
Example scenario: If your income is modest and your partner has a better score and higher income, combining your profiles can help you qualify for a lower rate or a larger loan.
Bonus tip: Compare personal loans to other types of credit
Depending on your goal, a personal loan might not always be the best or cheapest way to borrow.
Here are some alternatives to consider:
| Option | Best for | Pros | Cons |
| 0% balance transfer credit card | Paying off existing credit card debt | No interest for 12–24 months | Need good credit, fees may apply |
| Overdraft | Short-term, small borrowing | Easy to access | High interest, often above 35% APR |
| Buy Now Pay Later (BNPL) | Spreading the cost of purchases | Often interest-free | Can encourage overspending, affects credit if missed |
| Homeowner loan / secured loan | Borrowing larger amounts | Lower rates | Your home is at risk if you default |
Always weigh up the total cost of borrowing and not just the monthly payments.
Getting the best loan rate isn’t just about luck
Securing a good rate on a loan takes a bit of homework, but the savings can be significant.
Focus on improving your credit score, using eligibility tools wisely, comparing your options and choosing the right loan term for your budget.
A few hours spent preparing and comparing can save you hundreds (or more) over the life of a loan. That’s time well spent!
