What to look for when choosing a loan

If you’re considering getting a loan, there are a few things you need to keep an eye out for to make sure you’re getting the best possible deal for you.

To help you make the right choice, we’ve put together a short list of things you should pay attention to when shopping for a loan.

1.Unsecured vs secured

You need to make sure you know which sort of loan you’re after and then ensure you’re filtering these out. There’s a big difference between an unsecured and secured loan – namely that for the latter you have to put an asset, such as your house, up as collateral – so if you end up with the wrong one, you’ll definitely know about. To find out a bit more, read ‘what you should probably know about loans’.

You also need to note that the maximum you’d be able to borrow with an unsecured loan is £25,000. However, many loan providers won’t even offer this amount. With a secured loan, the amount you can borrow is slightly different, depending on the value of the asset you are borrowing against. However, if you can’t comfortably make repayments, you could lose your home or vehicle, depending on the type of loan you have.

2.Borrowing small amounts may be expensive

Some loans have higher rates of interest if you’re only borrowing a small amount and generally speaking, if you’re only looking for a small cash influx, you may be better off with a credit card. Many loans are geared up for larger-scale borrowing for things like home improvement or higher education, so you need to see how much it will cost you to borrow the amount you need vs using a credit card.


It’s important to get a loan with a good APR, especially if you’re looking for a longer repayment term, because the longer you take to pay back a loan, the more interest you’re going to have to pay. However, what’s a ‘good’ APR for you depends on your credit score, as well as other factors around affordability, because the best deals are often reserved for those with the best ratings. Consequently, if you’re score isn’t up-to-scratch, you’re unlikely to be accepted for loans with really low APR rates. The good news that if you sign up to Noddle, you can use our Loan Matcher, which will show you the loans you may be eligible for based on your score, allowing you to compare the APRs of the products most relevant to you.

4.Repayment holidays or flexible payment terms

While some loan providers will insist that you pay the same amount of money on the same day each month for the entire length of your loan, others will be a bit more flexible. There are two payment schedule variations you may encounter: repayment holidays and flexible payments. A repayment holiday is often offered at the start of your loan term, giving you a few months before payments kick-in, whereas flexible payment terms allow you to add additional lump-sums or ‘over-payments’ to your payment schedule. Neither of these arrangements are a standard for all loans, so you need to check what the loan you’re looking at is offering before you change your payment schedule.

5.Over-payment/early re-payment policies

If you don’t have a flexible payment option with your loan, monthly over-payments (or paying the loan off entirely before your loan term is up) will likely result in a charge/penalty. If you think over-payment is something you might want to do, you need to check what the terms of your loan are. However, if you can make larger payments, it may make more sense to simply reduce the term of your loan.

6.‘Hidden’ fees

The APR you see on your loan will tell you the cost of borrowing (interest), as well as the cost of any fees. However, you’re probably unable to tell from the APR itself what fees you’re going to have to pay. Loans can often come with ‘hidden’ fees, such as administration or arrangement fees, so you need to read the small print before taking out any form of credit.


If your loan ticks all of the boxes after you’ve checked for the above, then it may be the best credit option for you. Of course, as with any form of borrowing, it’s crucial that you can afford it and make the required repayments. It may also pay to spend some time growing your credit score before you apply in order to get the best rates.


Noddle is a credit broker, not a lender