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Finding the best £40,000 loan for you

By Matt Fernell, Editor-in-Chief at Finance.co.uk.

Matt Fernell

You could use a £40,000 loan to make home improvements, clear expensive debts or help you start a new business. Here’s everything you need to know about getting the right £40,000 loan.

Why compare £40,000 loans with Finance.co.uk

We’ve partnered with Loans Warehouse to help you find a £40,000 loan that’s right for you.

  • Poor credit history accepted

  • Eligibility check with no impact on your credit score

  • Get a decision within an hour

  • Quotes tailored to your situation

  • Compare quotes from a range of trusted lenders

How to get a £40k loan

To find quotes that meet your requirements, we just need some information about:

  • The loan term you want

  • Your financial situation

  • Your personal details 

We’ll be in touch within an hour with quotes for loans you’re eligible for. We’ll also discuss your options and help you find the right £40,000 loan for you. 

Am I eligible for a £40,000 loan?

You will probably need to use a secured loan to borrow £40,000. This means using your home as security, so you will need to be a homeowner to be eligible. Find out more about how secured loans work here.

To get a loan from most lenders, you will also need to be:

  • A UK resident

  • 18 or older

  • Be able to prove you can afford the repayments

We check your eligibility for £40,000 loans by performing a ‘soft check’ on your credit report, which doesn’t leave a mark. This means we’ll only ever show you quotes that you meet the eligibility criteria for.

Can I get an unsecured £40,000 personal loan?

Some lenders might offer you £40,000 as an unsecured loan, but it’s not common. Typically, you can only borrow between £1,000 and £25,000 with a personal loan

To get an unsecured £40k loan, you will need to have an excellent credit record and a strong income to prove you can comfortably afford the repayments. 

Lenders consider unsecured loans more risky because they don’t have the safety net of having your property as collateral. For this reason, they aren’t usually available for large amounts and will come with higher interest rates than secured loans.

How can I use a £40,000 loan?

When you apply for a £40,000 loan, you may be asked what you want to use the funds for. Most lenders won’t specify that the funds need to be used for a specific reason, but some might. Common reasons for getting a £40k loan include:

Borrowing £40,000 is a big commitment and can cost you a lot in interest over the loan term, so only take out a large loan if you’re sure you need the funds. 

How much will a £40k loan cost to repay?

You will be charged interest on what you borrow when you get a £40,000 loan. The interest rate (APR) and the loan term will determine how much your loan will cost overall.

For example, if you wanted to borrow £40,000 over 5 years at an APR of 9%, your monthly repayment would be £823.53, with a total repayable amount of £49,411.96. This means the loan would cost you £9,411.96 in interest over the 5 years.

If you want to pay less each month, you can borrow the money over a longer term. However, this will mean you will pay more interest overall. 

For example, the same loan over 10 years would only be £499.13 a month, but the total repayable amount would be £59,895.77. That means the overall cost in interest would be more than double at £19,895.77. 

Things like your property's value and credit score can influence the APR the lender charges. If you have a strong credit record and a property with a high value, you could be offered a lower APR.

Do I need a good credit score to get a £40k loan?

If you don’t have a good credit score getting a £40k loan is still possible, but you’re unlikely to be able to access the lowest rates and best deals. A good credit score means you will have more choices and a better chance of getting a lower rate.

Lenders see you as a higher risk if you have a poor credit score, so they may not be willing to offer you a big loan like £40k. If you can get a loan with poor credit, you will probably be offered a higher interest rate to offset the risk for the lender.

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.

Frequently asked questions

What is APR?

APR is short for Annual Percentage Rate. It's a calculation of the overall cost of your loan and takes into account all the costs during the term of the loan, including set up charges and the interest rate. Any extra fees are added to the loan amount before interest is calculated.

Can I pay off a £40k loan early?

If you want to repay your loan before the end of the term, you will probably need to pay an early repayment charge (ERC).

ERCs are often based on one or two months’ worth of interest, which means the closer you are to the end of the term and the smaller the remaining balance, the lower the charge will be.

Check the terms and conditions of the loan when you take it out to see what you could be charged to repay the loan early.

How long can I borrow £40k for?

It can vary from lender to lender, but you can generally borrow a £40,000 loan over a term of between one year and 25 years or more.

A shorter term means you can pay less interest overall, but your monthly repayments will be high. A longer term will mean lower monthly payments but more interest in total over the loan term.

To work out what term to borrow over, try to work out the shortest period with a monthly repayment you can comfortably afford.

Can I get a £40,000 loan if I have bad credit?

It is possible to get a £40k loan if you have a poor credit history, but you may find your options are more limited, and you will be charged higher interest rates.

Getting a secured loan can be easier when you have poor credit than an unsecured loan. Using your home as security means there is less risk to the lender if you cannot keep up with your repayments, so they can be more willing to offer you a loan.

However, if you have poor credit, you will need to pay a higher interest rate. Find out more about getting a loan with bad credit here.

You could consider getting a loan to consolidate your debt if you’re struggling to manage your borrowing and improve your credit rating.

How long does it take to get a £40,000 loan?

Once approved, it should only take a few days for you to receive the money. However, the application process for a secured loan can take longer as the lender may request extra documentation, including proof of property ownership and an up-to-date valuation.