Everything You Need to Know About Applying for £5,000 Loans in the UK
Taking out a £5,000 loan through any kind of lender can be an intimidating process because it’s obvious that you could be putting your credit score at risk if you were to default or make late payments on a loan that large. On the other hand, if you can’t pay for your current set of expenses out-of-pocket, you really don’t have the luxury of ignoring any of the £5,000 loan options available to you.
How much would you like to borrow?
Representative Example: Rates from 49.9% APR to max 1333% APR. Minimum Loan Length is 1 month. Maximum Loan Length is 36 months. Representative Example: £250 borrowed for 30 days. Total amount repayable is £310.00. Interest charged is £60.00, annual interest rate of 292% (fixed). Representative 669.35% APR (variable).
While a loan of this size is usually going to come with a moderate monthly repayment obligation, it might not be as expensive as you’d assume. In fact, some UK lenders will provide lengthy repayment periods for as long as two years or more. The amount you’ll have to repay each month will vary based on how much you earn. In this guide, we’ll cover everything you need to know about getting £5,000 loans in the UK:
Do You Need Good Credit to Get a £5,000 Loan?
Many borrowers also worry about whether their credit is good enough to facilitate approval for a £5,000 loan. That’s certainly a valid concern, but it’s also one that you don’t really have to worry about if you can prove that you have a steady and sufficient source of income. Many lenders look at your income, expense, and credit history rather than basing their approval solely on your credit score.
As a result, someone who has a low credit score but doesn’t have an extensive history of defaulting on loans might still have shot at approval if other factors check out during deliberation. In fact, the score itself can sometimes carry the least impact on your chances of approval.
Although the majority of banks and conventional lenders won’t even glance at the “other factors” if your score is below the 600s, there are many alternative lenders who will grant you a £5,000 loan without even factoring your score into the equation. Ultimately, you don’t absolutely need good or great credit to be approved for this amount, but it certainly would help your chances of having more payday lenders take your applications seriously.
What Kind of £5,000 Loans are Available to People With Poor Credit?
Now that you know it’s actually possible to borrow £5,000 even if you have a low credit score, you’re probably wondering what kind of loans you can be approved for with poor credit. Here’s a quick list of your best options:
1. Payday Loans
If you want to guarantee that the lender will not hold your credit as a top priority, your best bet would be to apply for a payday loan. As the name implies, the approval for a payday loan is based on how much you’ve been earning, which the lender will determine by looking at the proof of income you provide. As such, your income is by far the most important factor when applying for £5,000 loans because the lender only wants to see that you’ll have enough money in your account to make your repayments after each of your upcoming paydays.
Now, it’s important to note that £5,000 typically represents the largest possible payday loan that you can apply for, and some lenders will even set their maximum loan amount at £2,500. Thus, it stands to reason that the approval process would be more stringent, even with the most lenient of payday lenders. Mainly, they’ll need to confirm that your source of income has been consistent for a long time and that you make enough to justify the loan amount. The exact amount that you’ll need to be earning and the length of income proof you’ll need to provide will vary with each lender.
Generally, you should expect to show at least 2-6 months of bank statements or payslips. You should also be making at least £700 per week at your job to show lenders that you can handle the repayments for such a large loan. Most payday lenders will be flexible about the length of the loan period, letting you choose a period you’re most comfortable with.
2. Personal Instalment Loans
Personal instalment loans are similar to payday loans and are sometimes offered by the same lenders who also offer same day loans with no credit check. However, the main distinguishing factor here is that your credit score might play more of a role in approval. Still, some alternative lenders offer instalment loans to people who have less-than-perfect credit. So, if your score is in the mid-600s or above, this kind of loan might be worth a shot.
Personal loans also come with their own set of pros and cons. Namely, applying for a personal loan will usually put a hard check on your credit, whereas payday lenders sometimes run a soft check, which doesn’t show as an item on your report.
Second, an instalment loan will probably show up on your credit report quickly and will have an impact on your score, whereas some payday loan will not immediately affect your credit score. This is both a good and bad thing for personal loans because it means that they can be used to increase your credit score if you make payments in a timely manner, but then they can also quickly damage your score if you’re denied, make late payments, or wind up defaulting on the loan.
3. P2P Business & Personal Loans
Peer-to-peer (P2P) lending networks provide a crowdsourced approach to borrowing money because you can receive contributions from many different direct lenders simultaneously in order to reach your desired loan amount. Alternatively, you could find one P2P lender who is interested in funding your entire loan.
The main premise of these platforms is that anyone can anyone borrow money. Therefore, anyone can become an investor, and anyone has a shot at finding an investor to back their idea or cause. These sites were originally geared towards entrepreneurs with poor credit who needed seed capital to fund their startups. However, now some P2P lending networks will also let you apply for personal loans as well.
P2P loans are listed third on this list because you’ll need decent-but-not-necessarily-good credit to be approved by most P2P lenders. Still, it’s a noteworthy option because there are some generous P2P lenders who will almost completely disregard your credit based on the merit of your business idea of personal funding need. As always, be sure to ask a P2P lender if they’re going to perform a hard check on your credit before applying, as its best to only deal with those who run soft checks to avoid additional damage to your credit score.
4. Borrowing from Friends & Family, Or Using Them a Guarantor
Borrowing money from friends or family might seem like it’s not an option, but you have to remember we’re talking about borrowing £5,000 as an individual with bad credit. We’ve already given you three solid options, with the top one offering almost-guaranteed approval for anyone with a decent job, so if none of those work out then you may just have no choice but to reach out to your family members or friends.
If you can think of any of your relatives who are sufficiently wealthy to have the luxury of handing out £5,000 at a moment’s notice, it’s worth a last-ditch effort to approach them with a generous loan agreement that promises them a high return. You might be able to sweeten the deal by letting them hold onto some of your belongings as collateral.
If you can’t think of anyone in your family who can let you borrow £5,000 outright, try to make a list of your family members and friends who might have decent credit and approach each of them with the idea of guarantoring for you on a loan application. That’s a long shot because it’s rare that you’ll find anyone who will put their credit score on the line for you, but it’s a legitimate possibility nonetheless.
5. Secured Loans
Finally, one bonus option that you should try to avoid by all means but which is certainly applicable in some emergency situations is a secured, collateral-based loan. The reason why this method is not only ill-advised but also an absurd long shot for most people is because you would need to sign over or pawn at least £10,000 – £15,000 worth of property as collateral just to get a £5,000 loan.
Can You Get the Money From a £5,000 Loan on the Same Day?
Now that you’re aware of your options for finding £5,000 loans without having excellent credit, you might be wondering how fast you can actually access the money after you’ve been approved. Of course, if you had great credit then you wouldn’t need anyone to tell you where to borrow money because you could walk into your bank on any given day and be approved on the spot.
Likewise, if you’re trying to borrow £5,000, there’s a good chance that you need the money ASAP. Fortunately, many payday lenders can facilitate same-day funds transfers directly to your bank account, which is another reason why payday loans are the statistically most-favoured option for UK borrowers with poor credit.