Bad credit loans


Couple going through paperwork with a banker

A poor credit score can make it harder to borrow money, but there are options to consider.

Read on to find out about the different ways you can lend and what you need to watch out for.

What is a bad credit loan?

A bad credit loan is just a term for the loans available to those with a lower credit score.

Whether missed repayments in the past have negatively affected your credit score or you’re yet to build one up, it can make it more difficult to get accepted for a loan or to have access to competitive interest rates.

But it’s not impossible.

Bad credit loans

Types of loans for bad credit

There are different options available for those with bad credit. It’s worth looking at:

Personal loans

You may find it more difficult to be accepted for a personal loan with poor credit, because the lender has no security if you default on your repayments. So, your choice will be limited, and you may even have to find a specialist loan provider.

If you’re able to get accepted for a personal loan, you’ll usually be subject to high interest rates and the maximum loan amount will be on the lower end of the scale.

Guarantor loans

A close family member or friend guarantees that they’ll repay the loan if you’re not able to. This can give you access to a higher loan amount, but you’ll still have high interest rates and the risk of getting a loved one into debt and affecting their future ability to borrow.

Secured loans

It can be easier to get a secured loan if you have poor credit because the bank has an asset to use as collateral. Typically, this is your home, but it could also be your car. If you fail to repay the loan, you risk repossession to pay off the debt.

You may be able to get a longer loan term, but this does mean you’ll end up paying more overall.

What to consider when taking out a bad credit loan?

Before applying consider whether it’s completely necessary, especially if you’re already struggling to make ends meet.

Another pile of debt could end up being the tipping point and this could have serious repercussions if you’ve chosen a secured loan, which at worst means losing your home.

Think through different scenarios, including what you would do if you lost your job, or an unexpectedly high bill dropped on your doorstep.

If what you’re taking the loan out for isn’t necessary, consider saving up instead.

How can I get a loan with bad credit?

All you need to do is:

  1. Tell us a few details about the loan you require, including the amount and term

  2. Fill in some information about yourself, like your personal details, employment status and income

  3. We’ll perform a soft search on your credit report and let you know which loans you may be accepted for

  4. Compare your options and if you find the right one for you, click ‘Apply’

Soft searches and eligibility

It’s vital that you use an eligibility checker, like our smart search tool, which performs a soft search on your credit report to see what the chances are of you being accepted for different loans.

Every time you apply for credit, the lender will perform a hard check on your credit report and a failed application will negatively impact your score, making it harder to apply for credit in the future.

Multiple failed applications can really do a number on it, so use smart search to weed out the products you’re not suitable for.


Before taking the plunge and applying for a loan, you may want to consider a credit card for bad credit.

They’ll usually have high interest rates and low credit limits, but you should be able to get accepted for one even with a poor (or no) credit history.

They enable you to build up your credit score if you keep on top of your payments and you’ll even have protection on purchases made over £100 - to claim under Section 75 you don't have to have paid more than £100 (or the full amount) on your credit card – the card company is liable even if you made only part of the payment on your card. Exclusions and limitations apply and you can find out more on our page for credit card protection.

It could be possible to borrow the money from a family member, just remember to treat it like a loan you’d receive from the bank to avoid any difficulty further down the line. Draw up a loan agreement detailing the loan amount, term, interest rate and monthly repayment schedule. This should be agreed by both parties.

How to compare bad credit loans?

When comparing loans, whether they’re for those with bad credit or not, it’s important to get all the information possible to make the right choice.

That includes:

  • Assessing whether the monthly payments really are affordable for your budget
  • Looking at the interest rate – will you end up paying a lot more than you borrowed? Is it worth it?
  • Are there any early repayment charges if you were able to pay it off before the loan term ends?
  • Will you be charged admin fees or any other type of fee?

Improving your credit score

Boosting your credit score can help you access better interest rates and higher loan amounts, it can also help you if you require other forms of borrowing, like a credit card or mortgage.

You can:

  • Register to vote, which will help verify your identity
  • Borrow a small amount and make your monthly repayments in full and on time
  • Only use 30% of your credit limit. Repeatedly spending close to the limit on a credit card can harm your score
  • If you have a credit card, pay off as much as you can each month, rather than just the minimum payments
  • Use a soft search when looking at credit cards or loans, and don’t make multiple applications close together
  • Make sure all the information is correct on your credit report
  • A credit builder credit card used responsibly may help to boost your score

Frequently asked questions

There are a number of reasons why you may have a poor credit score:

  • You’ve little borrowing history, so you’re yet to build one up
  • You defaulted on payments previously
  • You have multiple debts to pay off
  • You’ve recently applied for a large amount of credit
  • You’ve been rejected for credit

Contact the lender as soon as possible, preferably before you miss the first repayment.

They should be able to work with you to formulate a plan that will help you get back on track. This may be by changing the repayment schedule or granting a repayment holiday.

If you’re still struggling, speak to an adviser at StepChange or National Debtline for free advice on how to manage your debt.

It depends on where you get your credit score from as there are different categories.

A ‘poor’ score will affect your ability to access credit and if you’re accepted, you’re likely to be charged a high rate of interest and have a lower credit limit.

Below are the scores which fall into the ‘poor’ category for the three leading credit reference agencies:

  • Experian: 561-720
  • Equifax: 280-559
  • Transunion: 561-565

If your credit score is in the ‘very poor’ category, you’re unlikely to be accepted for credit at all.

Yes, most loans have an online application process and you’ll usually be notified of whether you’ve been approved or rejected via email.

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