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Personal loan guide

A beginner’s guide to understanding personal loans

What is a personal loan?

A personal loan is simply money borrowed from a bank or other lender. These loans come in handy to help cover the costs of things that come with a hefty price tag. Personal loans are also known as unsecured loans, as they aren't secured against any of your assets, such as your home.

With a personal loan, you'll be given a lump sum of money from your lender. You'll repay it over an agreed time, at a fixed interest rate. The lender charges you interest on the outstanding balance until the loan is paid back in full, which is different from other forms of unsecured borrowing, such as credit cards or overdrafts.

How can a personal loan be used?

People often use a loan to cover the costs of large purchases. These could include buying a car, paying for a wedding or to undertaking home improvements.

If you take out a Sainsbury’s Bank Loan, there are some things you can’t use a personal loan for, including:

  • To buy or finance timeshares
  • To buy a property or pay any associated costs (e.g. stamp duty)
  • To finance a limited company
  • For business purposes
  • To invest in the stock market
  • For gambling
  • For illegal purposes
  • As a deposit to support a mortgage application with any lender
  • To repay negative equity or to pay off any part of a mortgage
  • To refinance a loan arranged through the student loan company

If you were asked to apply for this loan by someone else, maybe to make an investment or to pay fees related to cryptocurrency, this could be a scam. We do not lend for investments, including in crypto, and you should not take out a loan on another person’s request.

Is a personal loan right for me?


  • Allows you to borrow a large sum of money for the agreed time
  • Your monthly repayments will be fixed allowing you to budget better
  • You’ll be able to choose your payment period
  • You have the option to consolidate debt into one loan


  • The interest rate can be higher than other forms of borrowing, such as secured loans
  • If your financial situation changes it can make repayments difficult and missed, or delayed payments can incur late fees and lower your credit score
  • You may be charged if you pay off your loan early, to make up for the lender’s loss in interest

Choosing a personal loan

Finding the best personal loan rates and offers can take time. You’ll want to do some digging. Here are some things to look out for:

APR and Interest rate

The APR (annual percentage rate) represents the total cost of borrowing that’s fixed for the year, including interest. So, the lower the APR, the less interest you’ll pay.

You’ll only be charged interest on your outstanding balance. For example, a £10,000 loan with a 5% APR and a 1 year payback term will accrue £266.84 in total interest, not £500 like you may initially think. Each monthly repayment reduces the outstanding balance and therefore the total interest you pay.

Each lender will provide a representative APR that will allow you to compare rates to help find a loan that’s suitable for you. Keep in mind, the actual APR you may get will depend on your personal circumstances and may differ from the advertised rate. But at least 51% of accepted loan applicants will be offered our advertised Representative APR for that particular loan amount and term. All other accepted applications will be offered a higher rate.

How to calculate APR on a personal loan

You can use our loan calculator to find out the rates and estimate the total amount of interest you’d pay back in total.


Length of loan

You’ll need to think about how long you want to take the loan out for. It can be appealing to apply for a longer payback period as this usually comes with a lower interest rate. You’ll also pay back smaller amounts each month as you’ll be spreading out the repayments.

But, the longer you have a loan, the more interest you’ll have to pay. So, depending on how much you need from a loan, you should consider a shorter term to reduce the payback amount.

How much can I borrow?

With our personal loans you can borrow between £1,000 and £40,000 for nectar members, over one to seven years - and pay it back in monthly payments.

When deciding how much you’d like to borrow, you’ll also want to think about how you plan to use the loan. If you’re buying a new car, have you thought about extra costs such as insurance, tax or maintenance costs? They can all add up.

Once you’ve worked out how much you’ll need, you’ll need to figure out if you can afford the monthly repayments. You can use our loan calculator to estimate how much the payments could be.

Can I increase my personal loan amount?

If you already have a loan with us, and need a bit extra you can apply to top up your loan. Your new loan must not exceed £40,000 if you are a Nectar member, or £25,000 if you are not, and the total of your borrowings cannot exceed £40,000.


How repayments work

You’ll agree to a monthly amount with your lender. You could be charged extra if you’re late or miss a payment.

All loan payments should be made by Direct Debit.

If you can’t pay the agreed monthly amount, you should contact your lender immediately.

Early repayment

You can repay your loan at any time with Sainsbury’s Bank, as long as it’s in line with the Consumer Credit regulations. You can request an early settlement figure through your online banking account, click on ‘Account details’ then ‘Ask for a settlement figure’. Alternatively, you can contact us by phone, and we’ll be happy to help. 

If you applied before December 2017, you can view your account online but need to contact us by phone for any servicing requests (including early repayment), or write to us at Sainsbury’s Bank, PO Box 4955, Worthing, BN11 9ZA.

Ready to apply?

You can apply for a personal loan online in just a few clicks. Before you apply, take a look at our checklist for applying for a loan to find out how you should prepare.

More handy guides


Feeling confused by all the loan terminology? Our glossary will help straighten things out.

Loan application checklist

This guide offers a detailed list of things to consider before you take out a loan.

Browse all guides

From reasons to borrow, to helping you manage a loan, check out our library of guides for more tips.

Any questions?

Please check out FAQs where we’ve answered our customers’ most commonly asked questions.

Our personal loans

Thinking about giving your finances a boost with a personal loan? Nectar members can borrow from £1,000 - £40,000, Non-Nectar members can borrow £1,000 - £25,000. Credit is subject to status.  T&Cs apply.