Fixed rate Personal loans explained: what it is and how it works

Get a steady deal on your next personal loan

A quick word before you start

Look, no one likes faffing about with repayments that jump about. A fixed rate personal loan keeps your monthly payment the same from day one to the last. That makes budgeting simple and removes the will-it-won’t-it worry if interest rates rise.

Fixed rate means fixed monthly repayments - simple as that.

Who will find this useful

If you’re a UK borrower planning a big purchase, tidying up expensive credit cards, or funding a project and want certainty over what you pay each month, this is for you. It suits people who prefer predictable costs and want to avoid surprises linked to the Bank of England’s base rate.

Jargon-free basics you actually need

Fixed rate personal loan - Your interest rate and monthly repayment never change during the term. Great for budgeting and peace of mind.

Variable rate loan - The rate can move up or down with the base rate or lender decisions. It might start cheaper but can rise later.

APR - The annual percentage rate shows the cost of borrowing including interest and most fees. The representative APR must be given to at least 51% of accepted applicants.

Representative APR - The advertised rate that a majority of successful applicants get. Your own rate can be higher if your profile is weaker.

Unsecured loan - No collateral like your home is used. Most UK fixed personal loans are unsecured, which keeps your assets out of the firing line.

Typical amounts and terms - Common borrowing ranges are £1,000 to £25,000, sometimes up to £50,000, over 1 to 7 years. Bigger loans and longer terms need stronger affordability.

Rate thresholds - In the UK market, rates often improve at bands like £3,000, £5,000, and £7,500. Crossing a threshold can unlock a lower APR.

Your choices at a glance

Fixed vs variable - what changes for you

Typical UK loan ranges

Many lenders sharpen rates from £7,500. If you are at £7,200, running the numbers at £7,500 might reduce your APR and overall cost.

What it could cost - and why it matters

• Current UK deal snapshot - As of October 2025, some leading lenders show representative APRs around 5.8% - 5.9% for £7,500 to £25,000 over 1 to 5 years. Examples include Tesco Bank at 5.8% and M&S Bank, Santander, and TSB at 5.9% for £25,000 over five years.
• Total interest vs monthly comfort - A longer term cuts your monthly payment but increases total interest paid. Strike a balance you can afford without stretching the term unnecessarily.
• Fees - Personal loans are usually fee-light, with costs reflected in APR. Always check for any early repayment charges or minimum settlement interest.
• Variable risk avoided - With fixed, you sidestep base rate rises during your term. That stability can save headaches if the economy wobbles.

Short standout: Lower monthly does not always mean cheaper overall.

Can you qualify - and at what rate

Lenders weigh several points:

• Credit score - Higher scores unlock lower APRs and better terms.
• Income and stability - A steady income, time in job, and clean bank statements help.
• Existing commitments - Lower debt-to-income ratios improve affordability.
• Loan amount and term - Larger amounts and longer terms change the risk and therefore the rate.
• Purpose - Debt consolidation or home improvement is common. Some uses are excluded, so check the small print.

Practical tips:

• Check your credit file across UK bureaux before applying.
• Clear or reduce credit card balances to improve affordability.
• Avoid multiple hard searches - use eligibility checkers with soft searches first.
• If close to a rate threshold, model both amounts to see which is cheaper overall.

How to sort it - simple step-by-step

1. Work out the amount and a realistic term.
2. Check credit files and fix errors first.
3. Use soft-search eligibility checkers across lenders.
4. Compare representative APRs, monthly costs, total repayable.
5. Decide fixed vs variable - choose predictability or flexibility.
6. Apply online with accurate details and documents.
7. Read the agreement, APR, and any early repayment terms.
8. Accept, receive funds, and set up your repayment date.

Upsides and trade-offs

Pros:

• Predictable monthly payments for easier budgeting.
• Protection from base rate increases during your term.
• Usually unsecured - no home or car on the line.
• Competitive rates from £7,500 bands for strong profiles.

Cons:

• Smaller loans often have higher APRs.
• Longer terms can cost much more overall.
• If rates fall later, your fixed deal will not drop.
• Early settlement may include a charge or interest cap.

Before you commit - look out for these

• Representative APR vs your APR - Only 51% of accepted applicants get the headline rate. Yours could be higher.
• Early repayment rules - Some lenders cap interest charged on early settlement. Check how they calculate it.
• Payment date alignment - Set the date just after payday to reduce missed payments.
• Consolidation traps - Do not re-spend on cleared cards. Cut limits or close rarely used ones if that suits you.
• Affordability buffer - Leave room in your budget for price rises elsewhere.

If the monthly payment only just fits, shorten the term or borrow less.

Not sure fixed is right - alternatives to consider

• Variable rate personal loan - Could start cheaper, but may rise later.
• 0% purchase or balance transfer credit cards - Useful for disciplined, short-term borrowing if you clear before the promo ends.
• Secured homeowner loan - Lower rate potential for larger sums, but your property is at risk if you miss payments.
• Overdraft or flexible credit line - Handy for short-term cash flow, usually pricier if used long-term.
• Savings instead of borrowing - If your emergency fund survives, using cash might avoid interest entirely.

Quick FAQs

Q: What makes a loan “.fixed rate”? A: The interest rate and monthly payment stay the same for the whole term.

Q: What amounts and terms are typical in the UK? A: Around £1,000 to £25,000, sometimes up to £50,000, over 1 to 7 years.

Q: Why do rates improve at £7,500? A: UK lenders often set pricing bands. Crossing a threshold can unlock a lower APR.

Q: Will I get the advertised representative APR? A: Not guaranteed. At least 51% of accepted applicants get it. Your rate depends on your profile.

Q: Do I need collateral? A: Usually no. Most fixed personal loans are unsecured in the UK.

Q: Fixed or variable - which is cheaper? A: Variable can start lower but can rise later. Fixed protects your budget from future hikes.

Q: Can I repay early? A: Often yes, though a small early settlement charge or interest cap may apply.

What to do now

• Check your credit files and tidy any issues.
• Use a soft-search eligibility checker to gauge likely rates.
• Compare fixed deals across £5,000 and £7,500 thresholds.
• Pick the term that balances monthly comfort with total cost.
• Apply with accurate details and set a sensible repayment date.

Small tweak, big win - modelling £7,500 vs £7,200 could lower your APR.

Important info

This guide is general information, not financial advice. Rates and eligibility change and lenders assess your circumstances. Always read the credit agreement and key information before you sign, and consider speaking to a qualified adviser if unsure.