Start with affordability and purpose
Before comparing rates or monthly payments, decide what the loan is for and how much you can repay each month without borrowing again or missing essential bills. A loan comparison is only useful if the repayments fit your budget.
Under the Consumer Credit Act 1974 and FCA Consumer Credit sourcebook (CONC), lenders must assess affordability before agreeing credit. They look at income, outgoings, existing debts and how the new repayment would affect your finances. A cheap-looking offer that stretches your budget is not a good comparison result.
Use our affordability calculator and learn how lenders assess affordability before you judge any loan offer.
Compare the loan amount with the amount you actually need. Borrowing more than necessary increases the total cost even if the monthly payment still looks manageable.
Understand APR and representative APR
The advertised rate is not always the rate you will be offered. Lenders show a representative APR to illustrate the cost of credit for a typical borrower, but the actual APR depends on the lender's assessment of your circumstances. The FCA explains the role of APR in its consumer information.
APR includes the interest rate and most compulsory fees, so it is a useful starting point for comparing similar products over the same term. It does not capture every feature. Two loans with the same APR can have different total costs if the terms, fees or repayment schedules differ.
Read how APR works and what representative APR means, then use the representative APR calculator to test scenarios.
APR is most useful when you compare products of the same type and term. If one loan is secured and another is unsecured, or one has a much longer term, the APR alone may not tell the full story.
Compare total cost, not just monthly payments
A lower monthly payment can look attractive, but a longer term may mean you pay more interest overall. Compare the total amount repayable, including interest and compulsory fees, across the whole term. The Consumer Credit Act 1974 sets out key credit agreement rights, including the information you should receive.
Use a table to line up offers side by side. The example below is illustrative only; replace it with the figures from your own offers.
| Comparison point | What to check | Why it matters |
|---|---|---|
| Total cost of credit | Interest plus compulsory fees | Shows the overall price, not just the instalment |
| Term | Number of repayments | A longer term can reduce monthly cost but increase total interest |
| APR | Representative and personalised rate | Helps compare similar credit products |
| Early repayment | Rules and settlement figure | Affects flexibility if you clear the loan early |
| Payment date | Day each repayment leaves your account | Helps avoid missed payments and charges |
A longer term may make an offer seem cheaper each month, but the extra interest can add up. Compare the total amount repayable for the same loan amount and same term wherever possible.
Use the total cost of credit calculator to compare the full picture rather than the headline instalment.
Check term, repayment schedule and flexibility
The term is the length of time you have to repay. A short term usually means higher monthly repayments but less interest overall; a long term usually lowers the monthly payment but increases the total interest. Neither is automatically better. The right term is the one you can afford while keeping total borrowing sensible.
Check whether repayments are monthly, weekly or fortnightly, and whether the amount changes. Fixed repayments make budgeting easier. Variable payments linked to a rate can rise or fall, so compare them with care.
Under section 94 of the Consumer Credit Act 1974 and the Consumer Credit (Early Settlement) Regulations 2004, you may have a right to settle early and receive a rebate of interest. Ask for an early settlement figure before assuming the benefit. Our guide to early repayment of a loan and the overpayment calculator can help you test the effect.
Check whether the lender allows overpayments without a charge and how those payments affect the term or the monthly instalment.
Fees, charges and what the APR excludes
Look beyond the APR for charges that may or may not be included. Common examples include arrangement fees, broker fees, late payment charges and additional interest if you miss a payment. Compulsory fees are generally included in the APR, but optional products and some charges may not be.
Ask for a clear breakdown of what you must pay and when. Under section 77 of the Consumer Credit Act 1974, you can request a statement of account for a regulated agreement. The statement helps you check the balance and payments.
The FCA Consumer Credit sourcebook contains rules on pre-contract information and fair treatment. Our FCA regulation and your rights guide explains how these protections work in practice.
Optional payment protection insurance or other add-ons can increase what you pay, so decide whether you need them separately. A lender should not make an optional product a condition of the loan.
Verify the lender and understand complaints
Before you apply, check that the firm is authorised by the FCA. You can search the FCA register for the firm's permissions and status. An unauthorised lender may not give you the protections that come with regulated credit.
Also read how the lender handles complaints. If you cannot resolve a complaint directly, you may be able to take it to the Financial Ombudsman Service for regulated firms. Keep copies of the agreement, statements and messages.
Be alert to scam tactics such as upfront fees, pressure to act quickly, or requests for remote access to your banking app. Our guides on how to spot a loan scam and complaints explain warning signs and next steps.
A practical comparison method
Use the same method for every offer so you compare like with like.
- Check affordability first using your income, essential spending and existing debts.
- Confirm the lender is on the FCA register and has permission to offer credit.
- Write down the representative APR and the personalised APR if provided.
- Calculate the total amount repayable, including interest and compulsory fees.
- Compare the term, payment frequency and whether repayments are fixed or variable.
- Check early repayment rules, late payment charges and other fees.
- Read the pre-contract information and agreement before signing.
- Use the loan comparison calculator to test the overall cost.
- Apply only after you have compared at least a few offers and are confident you can repay.
This process does not remove the need to read the agreement. It does help you avoid comparing only the monthly payment or the headline rate.
Common comparison mistakes to avoid
One common mistake is comparing monthly repayments only. A smaller instalment over a longer term can cost more overall. Another is assuming the advertised APR is guaranteed; lenders may offer a different rate after assessing your application.
Do not ignore fees, payment dates or early repayment rules. Do not apply to many lenders in a short period without understanding how applications can appear on your credit file. Check your credit file first so you can correct errors and understand what lenders may see; see our guide on how to check your credit file.
Finally, avoid pressure to sign immediately. A regulated lender should give you the information you need to make an informed decision. If an offer feels unclear, pause and compare it with another option.
Keep a simple record of each offer, including the source, date checked and the questions you still need to ask. That record makes it easier to see which offer is genuinely better for your circumstances.