AA Personal Loans Review – Forbes Advisor UK

Key Features

• Fixed 5.5% (representative APR) on loans between £7,500 and £15,000
• Fixed 5.4% (representative APR) on equivalent loans for AA members
• Loan sizes ranging from £1,000 to £40,000
• Repayment terms between 12 months and 7 years
• 12 months free AA cover for new customers

Will I be eligible?

To be eligible for a personal loan with AA, you must be a UK resident – having lived in the country for at least three years – aged 21 or over, with an annual income of at least £12,000.

You will also need a good credit rating, and no history of county court judgements or bankruptcy and a UK bank or building society that can pay direct debits.

For loans above £25,000, AA imposes some additional eligibility criteria. You must have an annual income of at least £20,000, and cannot be self-employed or living with parents.

AA also stipulates that loans above this value cannot be used for debt consolidation, or home improvement on rented properties. 

Applying through an eligibility checker will show how likely you are to be accepted by a range of loan providers before you make a formal application – and it will not impact your credit score. 

If you’re an existing AA customer, it’s worth noting that you cannot apply for additional funds if this would take your borrowing total above £25,000. 

What more should I know?

When it comes to personal loans, comparing a range of providers can help ensure you’re getting the best deal for your needs before starting an application.

To apply for a loan with AA, you’ll need to submit an application online – but you can contact customer services via phone with any issues. 

If you’re a current policyholder with AA, be sure to declare this during the loan application. Members can access APRs as low as 5.4% – a 0.1% discount compared with rates for non-members. 

While this discount may sound small, it can add up over the course of a repayment term, particularly for larger loans. 

On the other hand, if you’re new to the AA you’ll receive 12 months’ free basic breakdown cover if accepted for a personal loan. For an additional £1, you can upgrade to a Roadside Assistance policy, which offers extra features such as unlimited call-outs and member benefits. 

Once the application is completed, AA usually provides an instant decision. However, in some cases the lender may need additional details, and will reach out via post within five days. 

Once you have been accepted for a loan with AA, the funds should reach your account within two business days. 

The loan must be repaid in instalments via Direct Debit. The value of each instalment will be laid out when you apply, and once the first payment has been taken, you can choose a different day of the month for subsequent payments to be taken. 

If you decide to pay the loan off faster, you can also make overpayments by contacting AA. 

The lender does not charge fees for overpaying, or settling your debt early – but you may still be liable for up to 58 days’ worth of interest. 

Once an overpayment is made, you can either repay the remaining debt over a shorter period, or keep the original repayment term with lower monthly instalments.

If you think you’ll miss a payment at any point, get in touch with AA directly. You may be able to reschedule or reduce the payment. Otherwise, you’ll be hit with a late payment fee of £12, and your credit score could be affected.

It’s worth bearing in mind that AA does not allow payment holidays during your loan term. 

Is an AA personal loan right for me?

If you’re planning to borrow a lump sum for a one off expense such as buying a car, funding a wedding or making home improvements, AA can offer some competitive interest rates.

Borrowing in the £7,500 to £15,000 range comes with the lowest APR of 5.5% (fixed), or 5.4% for members. Bear in mind this rate is only representative, which means the rate you are offered may vary depending on your credit score and personal circumstances.

If you plan to borrow less than £7,500, representative APRs range from 6.7% to 15.2%. At the other end of the spectrum, the representative APR for borrowing above £25,000 is 8.1% (representative).

AA says the maximum APR you could be charged for any personal loan is 27.5%. 

If you plan to use a personal loan to consolidate debt, make sure it’s the most affordable solution before you apply. 

What are my alternatives?

If you’re looking to borrow a relatively small amount – up to around £1,200 – you could consider making the purchase using a credit card with a 0% introductory interest rate.

These cards allow you to borrow interest-free – provided you pay off the total balance before the promotional 0% period expires. The length of these promotional periods varies between providers and cards, and you may not be offered the term you see advertised.

However you choose to borrow, comparing a wide range of options before committing to a provider could help you find the best deal.

Using an eligibility checker could also be helpful, since they run a ‘soft search’ on your credit history, which estimates how likely you are to be accepted for each loan or credit card without leaving a mark on your credit file.