Bad credit loans

Compare bad credit loans and check your eligibility in minutes[1]

What’s a bad credit loan?

A bad credit loan is an option if you’ve got a poor or limited credit history - maybe you’ve missed repayments in the past or had failed applications for credit.

Most poor credit scores are because of previously rejected applications or missed payments. But even if you’ve never borrowed before, your credit score might not meet some lender’s requirements. That’s because there’s no proof to the lender from previous borrowing that you’ll repay on time.

If you’ve ever had a County Court Judgement (CCJ) or been declared bankrupt you’re also much less likely to be accepted for a loan.

If you apply for a loan and don’t get accepted you could cause more damage to your credit score - the more applications you make more in short spaces of time, the worse it gets.

Why choose a bad credit loan?

There are a few reasons why you might be considering a bad credit loan:

  1. You’ve only got a limited choice

    Sometimes more mainstream banks and building societies won’t consider your application

  2. You’re building or repairing your credit score

    If managed responsibly, a bad credit loan can be used to improve your credit score

  3. You’re consolidating your debt

    It’s usually best to avoid taking on extra financial commitments, you could use a bad credit loan to combine your debts into one payment, instead of paying off multiple lenders

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How to compare bad credit loans

Find a loan that’s suitable for your financial situation

How can I get a loan with bad credit?

If you decide getting a loan is what you want to do, and something you can afford, compare bad credit loans - you’re more likely to find one with the cheapest interest rate and the best terms possible.

The interest rates on the kind of loans that you’re more likely to get accepted for will be higher than average and tend to have hefty admin fees too, so you need to get the best deal you can.

The best interest rates are only available to customers that lenders judge to have the best credit scores.

Soft searches and eligibility

Use a soft search (also known as a 'smart search') to find bad credit loans before applying.

It won’t leave a mark on your credit file and won’t damage your credit history.

When you use a smart search, you’ll only see loans you’re more likely to be accepted for. It gives you a better idea of the actual rates available to you and helps you make the right application.

If loan sharks, logbook and payday loans are tempting you with a quick cash injection, look at the interest rate (APR) - it'll be extremely high in comparison to other loans and credit.

Alternatives to bad credit loans

If you’re worried or not sure you can keep up with repayments on a loan, there are alternative options you can explore:

  1. Speak to your bank or building society

    If you’ve got a good relationship and history with your bank speak to them first, they might be able to help

  2. Credit unions

    These organisations are not-for-profit and have a reputation for being more understanding and supportive if you’re in financial difficulty, but you’ll need to be a member to qualify for a loan

  3. Credit cards

    There are dedicated cards for people with bad credit scores, but the limits are usually low with high interest rates - it’s worth considering all your options and using a smart search

  4. Pay down debt

    If you’ve got savings, it might be worth using it to pay off your debt - you’ll never earn more in interest then you’ll pay in interest. Selling any non-essential assets to cover costs could help too

  5. Government support

    If you receive benefits, you might be eligible for a budgeting loan from the social fund, but due to cuts and demand only those in urgent situations are likely to be approved, and it can be a slow process

  6. Family and friends

    While it might be uncomfortable to talk about initially, you might be able to work out a plan to manage your debt with help from your friends and family

  7. Peer-to-peer lending (P2P)

    Peer-to-peer lending means borrowing money directly from another person. P2P is worth looking into, but competitive rates are usually reserved for those with good credit history

  8. Get advice from the experts

    If you’ve exhausted all the options, or you’re not sure what to do next, you can talk about your debts and credit options with organisations and charities which specialise in money and debts. Try Citizen’s Advice or StepChange

Meeting the repayments and improving your credit score

Try not to use the financial breathing space you get to take out further loans or credit cards.

Focus on meeting your repayments to avoid damaging your credit rating further and, it’s if possible and affordable, try and make overpayments to minimise your debt as quickly as possible.

If you’re struggling to meet your repayments, contact your lender as a first port of call. It won’t want you to default on the debt, so it’s likely you’ll be able to work out a solution between you.

You can also contact your local Citizens Advice Bureau, National Debtline or StepChange Debt Charity for free advice.

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