Looking for a loan with bad credit? This guide contains detailed tips with everything you need to know. We’ll cover which types of loans exist, who's applicable? What to do if you have very bad credit and everything in between.
What types of loans for bad credit are there?
Before we dive too deep, it's important for any prospective borrower to make the distinction that there are different types of personal loans for bad credit, including bad credit car finance and even bad credit mortgages. Taking that into account, there are specialised loans for people who have bad credit but "bad credit loans" don't really exist. To not complicate things we refer to bad credit loans throughout this article but let's start by taking a look at other types of online loans that could be considered for those with bad credit.
Bad credit loans for unemployed people
We work with creditors that consider people who are unemployed or receiving benefits. You may have to pay a higher rate than that offered by high-street banks because, in the eyes of a lender, lending to someone without regular income will represent a bigger risk. Beware, you may also be in this bracket if you are self-employe
Unsecured loans with bad credit
Unsecured personal loans, like those offered by companies such as Likely Loans, Everyday Loans and Lendable are not protected by collateral. Meaning, if you don't make your repayment commitments the lender can’t claim your property. They appear less risky compared to their secured loans counterparts, which are things like mortgages and logbook loans. If you default on a secured loan your property could be repossessed to reclaim the costs. Unsecured lenders will provide finance agreements to people who have less than glowing credit reports, the payments just tend to be more expensive.
Bad credit payday loans
One of the options for people finding themselves in unexpected circumstances, such as a situation like a car or a boiler breakdown, is bad credit payday loans. They are a quick solution until your next pay date and are usually for smaller amounts over shorter periods. That normally means APRs are higher than other loans and any missed payments can be costly, quickly damage credit scores, mount considerable debts, affecting your ability to gain access to products and influence future borrowing. Be sure to fully understand the terms of any agreement you enter if you feel this is the only option to gain the funds needed in financial emergencies.
If you're looking for an alternative solution, or if you need larger amounts, looking for a loan with a guarantor will offer favorable terms to anyone needing financial assistance. They offer competitive rates by looking at different factors like having someone support your application who has better financial standing. They open up borrowing opportunities to people who have had difficulties with financial commitments in the past. Amigo Loans have the largest established reputation. There are other affordable options such us George Banco and Bamboo Loans.
No guarantor loans
Some loans companies require guarantors but not all of them. If your eligibility is low, and you have no guarantor to support your application, there are borrowing options, especially if you’re willing to secure assets like your car or house to the agreement in case you miss repayments.
How do I get a loan with bad credit?
Our lenders understand maintaining a perfect score isn't easy and it's common to have missed payments – but this shouldn't stop you from getting your loan funded. Our application service allows you to enter your details, in order to provide you with a list of lenders most likely to accept your application and under what terms. Based on:
- Your income and outgoings
- Credit history and score
- If you're homeowner or a tenant
- If you're a UK resident
- If you're the right age
- If you hold a UK bank account
Here’s the step by step process:
- Click the GET ACCEPTED button anywhere on this page
- Fill out the form and hit continue to the next stage
- Complete the form, selecting your marketing prefernces and click GET ACCEPTED one last time
- Wait while we securely send your data to our carefully selected lenders, once they all respond with a decision we'll show you your results
- Compare the cheapest lenders who have accepted your application
- Click GET THIS LOAN on your chosen result to continue to the lenders website and finalise your application
It's possible you may be offered a lower amount than good credit customers, as a way for the lender to manage risk. Any final lending decision is down to the discretion of the lender. In addition, anything you can do to add extra security to your application will maximise your chance of approval. This could include adding a guarantor with a good credit rating to your application.
You can look at ways to improve your credit score, this will increase your chances of being approved for products in the future. To improve your credit rating, you can do things like giving the electoral registration office your personal information, which indicates to lenders you're on the electoral register. You can close credit cards you do not use and consolidate your debts to pay them off.
Where to get loans with poor credit?
There are many different websites to help people get traditional loans but it pays to be careful. Many sites claim to offer things like guaranteed approval, high acceptance rates, impartial advice, hassle-free affordability checks, no additional fees on anything borrowed, or flexible repayment periods to potential borrowers.
On the surface the value of the potential benefits of these "attractive deals" sound like they will play to your advantage and whilst partially true in some cases, some so-called financial experts don't have borrowers best interest at heart.
At best you can run into trouble paying for a credit checking service you don't use, at worst they can force people in further financial difficulties. That's why we suggest making the Choose Wisely website your go-to for any initial application.
All of the lenders we feature appear on the financial services register. We're making a stand for financial inclusion and we're vowing to make it safe for you to compare banking and borrowing products.
Which loan company is best for poor credit?
In short, there is no one company that is best for people with poor credit. This is because lending decisions are based on the individual and their situation. We think anyone searching for a loan should instead ask… ”which loan company is best for me?”
Can I get a loan with bad credit?
It's possible to get a loan with a less than desirable credit file. You may find it harder to pick the product that matches your financial situation but we believe our Get Accepted application process is the best place to figure that out. It'll tell you which lenders will accept your application.
Bad credit loans FAQs
If you need cash for life’s hurdles then bad credit loans are suitable for those with adverse credit history, few instances of prior borrowing, and those that are new to the UK. It may not be the cheapest way to borrow, this time, but it might help you get the cash you’re looking for.
With any product, there are less than friendly providers. The key is spotting the real from the fake. We’ve removed that potential pitfall for you. All of the products featured on Choose Wisely are legitimate and registered with the Financial Conduct Authority before they're shown on this website.
If you’re new to the country, have a thin file or a poor score based on past lending then bad credit loans have their advantages. Lenders are more likely to be accepting of adverse credit history. They may also help improve your credit score if you keep up repayments demonstrating responsible lending behaviour.
The main disadvantage is the cost, it will usually be more expensive to borrow if you have a poor credit history. Evidence of multiple high-cost loans on your file may be viewed negatively by future creditors as they demonstrate a willingness to accept expensive, short term products.
Most banks offer loans with lower APRs and usually offer a range of APRs depending on your creditworthiness. These tend to be for those with good or fair credit, but it’s worth speaking to someone at your local branch to see what they would advise.
No. Traditional lenders check your credit file to assess the level of risk you represent. They determine this from your score and if you have missed payments in the past (among other factors). As part of our application process, the lenders we feature run a ‘soft credit check’ and whilst this shows on your report it doesn’t impact your score. When you complete an application with a lender they'll run a hard credit check to verify your personal details and provide a final lending decision.
If you need bad credit loans without guarantor involvement there are no-guarantor products on Choose Wisely. They have higher APRs as lenders don’t have the security of a guarantor to support your application, so they account for the risk by making borrowing slightly more expensive.
Unfortunately, it's not a ‘one size fits all’ approach as both have their pros and cons depending on your personal situation. Some cards offer similar rates to bad credit loans but may have other fees included. Some have higher rates but provide a constant line of credit. It’s important to take enough time to consider any borrowing decision before you dive in.
There are no authorised direct lenders in the UK that offer guaranteed approval. Any responsible lender has an obligation to perform adequate affordability checks on every customer to ensure they won't further damage their credit health and/or lives. If you see the promise of ‘guaranteed approval’ it’s usually a telltale sign not to be trusted.
It can depend on how recent the default activity was. Defaults clear your report after 6 years from the date of default. It's possible to find a product if you’ve had a previous default, however, it may be trickier and you may be asked to provide extra information showing account activity for longer periods.
You can still apply for a loan with previous County Court Judgements. Bad credit lenders take a reasonable view of previous financial problems. Having CCJs on your file can remove some options as only select lenders will take on the risk.
It’s not impossible to get a loan if you’ve been declared bankrupt but it is much harder. If a lender accepts your application it will likely only be for a relatively small amount. If you’re discharged from bankruptcy there’s no limit on borrowing but it's still difficult to find lenders that will accept your application. Especially in the 6 year period from the date of bankruptcy as it still shows on your report.