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A wise guide to…

Can you get a loan with a default?

Many lenders will view defaults as a serious negative mark on your credit report. With “defaulted loans”, bad credit often follows, but this doesn't mean that securing credit will forever be out of reach.

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Representative 99.8% APR (fixed). Representative example: If you borrow £500 over 52 weeks at a Representative rate of 99.8% APR and an annual interest rate of 99.8% (fixed), you would pay 52 monthly instalments of £13.41. The total charge for credit will be £197.32 and the total amount payable will be £697.32.
Choose Wisely is a trading style of Choose Wisely Limited and is a free to use price comparison website. Choose Wisely Limited is authorised and regulated by the Financial Conduct Authority as a credit broker not a lender, firm reference number 730574 and is registered with the Information Commissioner’s Office number Z3106681.
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Table of contents

Written by Mark Grimley
Read time: ~5 mins
Published: 16th August 2016 Updated: 13th March 2020

What does it mean to default on a loan?

A default occurs after you have missed payments and broken the terms of your credit agreement. When payday loans default, for example, the borrower will inevitably face a higher interest rate the next time they borrow money. This is the case with most loans, and the default process can also put a serious dent in your credit score. This, by extension, damages your chances of being accepted for a loan in the future.

What happens when your loans go into default?

Your lender will request the full payment of your debt. It is possible to offer to repay your debt in affordable instalments, however, there are no guarantees your creditor will agree to this arrangement. The best thing to do is to contact your creditor to discuss your options.

With default loans, bad credit is often a result because it will remain on your credit report for six years from when the account is marked as defaulted. Credit issues can, in turn, make future borrowing more difficult or expensive. For instance, a payday loan’s default rate of interest may be higher for someone with poor credit.

Can you get a loan with a default?

After a default, loans can be tricky to obtain because it demonstrates to lenders that you have a history of struggling to repay credit. There are, however, lenders offering specialist bad credit default loans to people with weak credit reports. This means that if you have an unpaid default, personal loans will not always be completely unattainable.

Which lenders give loans to people with a previous default?

Some lenders offer default loans to borrowers struggling to borrow money due to past repayment issues. Lenders offering credit to borrowers with a poor credit history may request that all defaults have been settled. If a default is marked as settled it means it has been fully repaid but will still appear as a closed account on your credit report for 6 years.

With default loans, bad credit lenders specialising in this area are often the only option. Therefore it is important to ensure you can afford to meet monthly repayments before signing a credit agreement.

How do I get a loan with a default?

You will need to determine how much you want to borrow and how much time you will need to pay it back. It is worth giving yourself a few extra months to account for any unforeseen changes in your financial circumstances. You will then need to show the lender that you are ready, willing and able to repay that loan in the proposed time frame.

Choose Wisely’s Get Accepted process allows you to see which lenders will accept your application before you apply. This means that you can plan your repayments around what you can afford to pay back and on a timeline that suits you, reducing the likelihood of defaulting in the future and harming your credit profile.

Are there any alternatives to default loans?

It is possible to default on any loan, as every loan needs to be repaid. However, the best course of action when trying to ensure you never default on your repayments is to make sure you select the correct borrowing option on day one.

One of the ways in which you can protect against defaulting is by naming a guarantor on your borrowing application. Guarantor default loans for bad credit applicants safeguard the repayment process by nominating someone who will repay the debt if you are not able to do so, thus preventing a default.

Get the right bad credit loan

Need more information on bad credit loans and how to get accepted?

Can you lose your possessions if you default on a loan?

You can on certain secured loans. Secured loans are borrowed against the value of property, which can include physical possessions. If you default on your loan, the lender has the automatic right to repossess the collateral mentioned in the initial agreement. This can include property or vehicles if specified in the agreement.

On certain unsecured personal default loans (i.e. loans not borrowed against collateral), creditors can take additional action if your account has defaulted. This includes passing the debt to an external collection agency, taking court action, and applying to the courts to take back goods if the debt was a hire purchase.

How can I get accepted for a loan?

Choose Wisely can help you understand which lenders will accept your application and make the application process quick, simple and pain-free. All you need to do is follow our three-step process for getting accepted:

  • Fill out the form - this takes about 2 minutes and is 100% secure
  • Choose the loan you want from the selection of lenders who have responded saying they will accept your application
  • Finalise your application with your chosen lender and if accepted, you could receive the funds into your account in less than an hour

Default Loans FAQ's

Will paying my default improve my credit score?

Your credit score will gradually improve as you pay your default however, even after it is paid off it will still remain on your credit report for 6 years. Managing your default is the best way to ensure you work your way back to a better financial position.

What happens when you pay off a default?

A default will remain on your credit file for 6 years after the date it came into effect. When you settle the default it will be marked as paid but there is no way to have it removed

How do I get a default removed?

Once a default has been recorded, you won’t be able to have it removed from your credit file unless it was put there in error. To reduce its negative impact you should manage your repayments well and pay off what is owed as soon as possible. It will be marked as satisfied, which means it has been paid, once you’ve repaid the arrears. This could take a month or 2 to show accurately on your credit report.

Mark Grimley
Written by
Mark Grimley
Head of Partnerships & Take Control Author at Choose Wisely

Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.

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Important Information.

All of the information in this guide is correct at the time of writing.

Rates shown are quotes based on your personal circumstances, are subject to status and are available to those aged 18 and over. Rates available range from a minimum of 3.9%APR to a maximum of 1575%APR Representative and loan repayment periods range from 3 to 60 months.

[*][†] Once accepted, your loan can be transferred to you in as little as 15 minutes. The time that it takes for the loan to show in your bank account will depend on your lender and your bank.

If you need financial advice you can visit stepchange, speak to citizens advice, call the national debtline or speak to moneyadviceservice.org.uk.

If you've been declined, please refer to your credit report to gain an understanding of why before making further applications.
Your score can be accessed for free via any of the main credit reference agencies such as Credit Karma, Clearscore or Experian.

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk