Variable rate personal loans

Personal loans can vary depending on what you’re looking to get out of them. Whether it’s for that holiday you’ve been dreaming of or simply to help with household expenses like bills, there’s something for you. Read on to find out more about variable rate personal loans in this comprehensive guide.

What is a variable rate personal loan and how does it work?

A variable rate personal loan is a type of personal loan which, as the name suggests, is not pinned down to the same interest rate throughout its lifespan. Rates are likely to fluctuate over the course of a loan term as the market ebbs and flows, but term durations will remain fixed. This type of loan is different to fixed rate personal loans, which maintain a consistent interest rate during their term. Variable rate personal loans may come as either secured or unsecured loans, meaning that it may or may not be connected to a piece of collateral such as a car or caravan. These may be used to pay for debt should the loanee become unable to do so themselves.

What can I use a personal loan for?

Personal loans provide financial relief for a purpose specific to you. They are broad in nature, hence the word “personal”, and that is by design in order to remain versatile across a variety of uses. Personal loans are most often used to supplement or pay for holidays, help complete household renovations or purchase a vehicle, but its uses are certainly not limited to these examples. You’ll be able to find out more information regarding what loan is right for you reading further on and speaking to potential lenders about their individual policies.

How do I make sure I choose the right variable rate personal loan?

It is important to assess your own personal situation before deciding upon a certain type of loan. Questions such as “how much can I afford?” and “what am I using it for?” should both factor heavily into your decision making. Those seeking out a variable rate loan must be well aware of its mechanisms and understand the way it works, which have been laid out here.

The most essential step in the loan process is to find a lender that suits you. There are countless lenders in the market, so you’re bound to come across some that suit you better than others. As such, it is imperative that you take time to think through your financial decisions and assess a wide variety of options to find the perfect one for you. Contacting different lenders and researching their websites to compare their policies on aspects of a loan you consider important, such as rates, maximum and minimum amount and term duration, are both good places to start. The right loan will ultimately differ from person to person depending on their own financial circumstances, so you may not end up with the same lender as your friends or family. To compare your options you can use our rate table.

Pros and cons of choosing a variable rate personal loan

Weighing up the advantages and disadvantages of a loan is a smart way to assess whether it is going to suit you.

Pros Cons
Lack of a fixed interest rate: as interest rates fluctuate, recipients of a variable rate personal loan can benefit from lowered rates throughout the life of the loan Lack of a fixed interest rate: this is a two-sided issue, as rates are also vulnerable to increasing during a loan term which means the starting rate will not remain the same throughout its lifespan
Increased flexibility: variable rates can provide greater freedom for loanees. Some lenders will offer no fees related to early or additional repayments, which can result in less interest paid over the life of the loan Less financial security: budgeting for each month may become more difficult to do accurately, given that interest rates may shift over the term of the loan, so repayments may change.
More affordable rates: variable rate loans generally start at a lower rate than their fixed counterparts and lenders are more motivated to offer appealing rates due to its competitive nature. Greater repayment variance: lenders will calculate your capacity to repay the loan at a greater rate than advertised to ensure you’ll be able to pay in the event that your interest rate may increase.


Top tips for getting approval for your personal loan

Here are some of our recommendations for maximising the likelihood of getting your personal loan approved.

Apply for the right amount

The key to securing your variable rate personal loan is to only apply for the money that you need. A lender will see greater risk in handing out larger sums of money than smaller, so ensure that your chosen figure is realistic. It’s also good to lay out how you plan to spend the amount given so a lender knows exactly where it’s going.

  • The loan amount
  • The interest rate as well as other fees charged e.g. starting, late payment, redraw, account keeping, early exit, and administrative
  • The terms of the loan
  • The repayment period granted for the loan you’re borrowing

Check the loan criteria

Each lender will have a different set of criteria for customers to meet before supplying funds. These may be associated with employment and residential statuses, overall income, age and credit rating. These criteria could make or break your loan bid, so it’s crucial to hit each mark.

Maintain a good credit score

Lenders will always look more favourably upon those who are good at managing their finances, particularly their credit score. It serves as a litmus test for your ability to receive loans and pay them back. Things like paying credit bills on time, holding as little debt as possible and lowering the limit on cards will all contribute to an improved score, which in turn improves your chances of having your loan accepted. Generally, credit scores of 800 or more are considered excellent and will significantly boost your chances of getting approved.

Honesty is the best policy

As well as only applying for what you need, which we mentioned earlier, it is also important to be true to yourself in the loan process. Self-assessment is a useful tool in advance of asking for a loan, as you can have a look at yourself and determine how you would look to a lender. If you’re still struggling to complete your paperwork and have outstanding debt, it’s good to acknowledge that so it can be addressed before approaching a lender.