Bad credit loans

Has your application for a loan been turned down because of your borrowing history? Some lenders are willing to do business with people with bad credit ratings, so is a bad credit loan right for you?

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A bad credit loan can allow you to borrow money where you'd otherwise struggle.

Our smart search gadget allows you to see which lenders are likely to give you a personal loan without your search impacting on your credit history

However, you'll have to pay the price for your earlier bad financial behaviour - usually literally, in the form of a higher interest rate on your repayments.

Because you're looking at less competitive rates, it's even more important to compare bad credit loans so that you can find the cheapest borrowing possible.

Depending on your circumstances, you might be able to use such a product to manage any current debt. For example, you could extend your repayment period, or even cut your interest rate.

After all, although these products can be pricier than the most competitive personal loans, they're likely to be cheaper than a high-interest credit card or that payday loan you keep rolling over for another week.

Having said that, you should still compare all the alternatives so that you can find the cheapest borrowing for you.

If you have a house as collateral then you could potentially apply for a secured loan. That can often mean you're offered a lower rate, especially if you're borrowing a high amount because you're consolidating other debt. Think carefully before securing any debt against your home, as it's then at risk if you don't keep up your repayments.

Use our smarter search gadget to see which lenders are most likely to give you a personal loan.

It won't leave a footprint on your credit file, so it won't stop you qualifying. But it will help you avoid unnecessary rejections, which damage your credit rating.

What is a bad credit loan?

A bad credit loan isn't a 'bad' thing in its own right - it's simply a loan for people with a poor credit history.

You may have missed repayments in the past, or been turned down by other lenders. Perhaps you have missed repayments, missed bill payments and/or made failed applications for credit.

To some lenders you're too much of a risk, but to others you're a chance to do some business in a competitive lending market.

If you're not sure whether a bad credit loan is right for you, you can compare loans to learn more about the different options that might be available.

Why might you have a bad credit history?

You may think of yourself as a reliable borrower, but you'd be surprised at the effect a few late payments can have on your ability to qualify for loans. 

You'd only apply for a bad credit loan if you had a poor credit rating or had been turned down by lenders before, as the rates can be higher

Even if you've never borrowed in the past, you might still struggle to qualify for the market-leading loans. After all, the lender has nothing to show that you can be relied upon to make your repayments.

If you've applied for several loans and been turned down, that can also leave blotches on your record.

If you've missed paying a bill, or had a cheque bounce, or a payment refused due to insufficient funds, this can show up as a black mark.

If you've had trouble meeting repayments in the past, you may want to protect your bad credit loan in case injury, illness or redundancy prevents you from making your monthly repayments in the future.

These kinds of payment protection insurance (PPI) policies have been mis-sold in the past and have a bad reputation - but for the right borrowers they can be genuinely useful.

Rebuilding your credit score

To build a good credit score, you need to manage your loan well for an extended period of time. The good news is that if you make all your bad credit loan repayments on time, it can actually help.

Repaying the debt early, if possible, can also show future lenders that you're a safe bet and that, whatever difficulties you've had managing money before, they are now long gone.

Think of a poor credit loan as a last-chance saloon for your record.

For more insight into how different products can affect your credit score, and to learn more about the borrowing options available to you, check out our guides.

By Felicity Hannah