Tesco Loans – Read this BEFORE applying! Loan Criteria & FAQ’s

Tesco offer loans from £1,000 – £35,000, although famous as a supermarket, read on to find out why they shouldn’t be overlooked when it comes to their loans.

 a supermarket bank…Who Actually Owns Tesco Bank?

The answer is Tesco Bank was set up in partnership with RBS. Tesco was the brand people had heard of but it was actually Royal Bank of Scotland that provided the money. That was until 2008 when Tesco bought out RBS and now Tesco Bank is wholly owned by themselves.

Are Tesco loans good?

Define good, what people are really asking here, is do they have low interest rates. Plus do they have all the other features you’d expect from a high street bank? Then the answer is yes.

The benefits of Tesco’s fixed rate unsecured loans are:

  • Choose a loan between £1,000 – £35,000, over a variety of repayment terms
  • Instant decision when you apply
  • Customers maybe able to apply for a 2 month payment break
  • Pay more of the loan off when you want, meaning you will pay off the loan quicker (early repayment charges will apply)
  • You can even repay your loan early if you choose too (but you will be charged 2 months interest)
  • Tesco have an mobile banking app, to help you keep track of the loan and the repayments

Will I be accepted for a Tesco loan?

Tesco like all loan companies will take applications on a case by case basis meaning no one will know for sure until they apply. However what all lenders are looking for prior to issuing loans is a good credit score.

Do Tesco loans give an instant decision?

Yes the decision is instant, whether or not you have been approved for a Tesco loan.

How long does a Tesco loan take?

If the instant decision is positive, you will then be sent an agreement confirming the loan amount, the repayments and Tesco’s terms and conditions. All standard stuff really nothing to stress about. Then after you sign the agreement, they pay the money straight into your bank account.  

Can I have two Tesco loans?

You can apply for a second but no, you cannot have two Tesco loans. Sounds confusing, it isn’t – what happens is, if you are approved for a second loan they use that money to pay off the first Tesco loan. You are then left only with the second loan amount.

How much would a £20,000 pound loan cost per month?

A representative example of borrowing £20,000 would mean repayments of around 360 pounds per month. That’s with a loan term of 5 years (i.e paying the loan pay over 5 years). The total amount repayable is £21,550. So about £1,550 in interest. 

However, up the repayment duration to 7 years and the monthly repayments come down 275 pounds. But at 7 years you end up paying more interest so the total loan amount you have to repay goes up to around £22,760. So about £2,760 in interest. Or £1210 more expensive than the 5 year loan example above.

Lets run another example:

Say you require that same £20,000 loan but you can pay it back faster than 5 years. Let’s say you can pay it back in just 3 years. That loan would have estimated monthly repayments of around £585 and the total amount repayable is £20,900.

So you can see paying loans back over a longer duration makes the monthly payments less but the total amount repayable goes up due to the interest. Whereas paying a loan back over a shorter period would mean higher monthly payments but the total amount repayable is less. 

The great thing about the Tesco loans is they are flexible. Using the Tesco loan calculator you can type in the amount you wish to borrow and then set the repayment term and it gives you the monthly repayment amount. In the Tesco loan calculator you are able to play around with it all to find the perfect fit for your financial requirements.  

Tesco loans are unsecured, what does that mean?

Simply means that the loan won’t be secured against your home or say your car or any asset you own for that matter.

Tesco Loans and Club card points?

Do you get Tesco Clubcard points when you make loan repayments? The answer sadly is no you don’t. But Tesco actually state this on their website:

‘Do you have a Tesco Clubcard? Enter your Tesco Clubcard number when you apply as it may positively impact your application’

‘Positively impact your application’ – that’s awesome! So when you apply make sure you enter your Clubcard number – cool life hack!

Can you increase your Tesco Bank loan?

Yes, you can apply to borrow more. But there is small print here, you can only apply to borrow more once you have made 8 consecutive loan repayments. So with one repayment a month you can apply only after 8 months.

Bear in mind the minimum additional amount you can apply to borrow is £1,000.

Can you get a personal loan with a credit score of 550?

You may be able to get a Tesco loan with a credit score of 550, but what it could mean is you don’t get approved for a loan with the best interest rates. As to them, you are a higher risk. Also it could affect the size of loan you could be approved for.

How do loans affect my credit score?

A loan application will leave a ‘footprint’ in your credit file. This cannot be avoided as lenders have to check your credit file to obtain your credit history. However we have found a Tesco Loan or any other loan for that matter should only affect your credit score by 5 or so points. And this usually recovers very quickly.

But one advantage of having a loan is that it can actually increase your credit score. Provided you make the payments on time and keep everything in good order. So for instance someone without ever having had any credit will probably have no credit score. But someone who has well-managed credit cards or has had loans, (again well managed so making the payments on time etc), will probably have a better credit score.

It’s why some people take out a ‘credit’ card and buy small things on ‘credit’ in an attempt to build up their credit score. The science behind it is its demonstrating that someone has credit and has managed the payments. A credit score is like a credit track record, the better the track record the better the score and so on. 

Alternatives to a Tesco Loan…

Sure, there are tonnes, I can’t list them all – so why Tesco then?

Well firstly they are authorised and regulated by the financial conduct authority, meaning no funny business.

Secondly the instant decision on whether you have been accepted just makes life simple. You know where you stand with them right away.

Thirdly the flexibility. Traditionally lenders wanted their money back every month, in full without question. Tesco are much more flexible with the ability for ‘early loan repayment’, payment holidays and you’re able to apply to even borrow more should you need it.