Secured loans for bad credit

If you’re looking for a loan, and you have a bad credit rating, we’ll take you through the pros and cons of a secured loan, and explain how they work.

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Typical 10.8% APRC variable. Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable.

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Table of contents

Written by Mark Grimley
Read time: ~5 mins
Published: 4th October 2023

What is a secured loan for bad credit?

A secured loan for bad credit is designed for people with a poor credit score who may find it difficult getting credit like a loan, mortgage or car finance.

This type of loan is secured against an asset you own, like your home or a high-value item. If you have bad credit, loan providers may perceive you as less risky to lend to if you can offer collateral.

Secured loans work like a normal loan, except the value of your property acts as a guarantee of repayment. This means the lender could sell your home to recover the debt if you default on the loan.

The bottom line is you're borrowing against your home; therefore, your home is at risk if you can't repay what you owe.

Can I get a secured loan with bad credit?

If you have a mortgage and equity in your home, you may qualify for a secured loan for poor credit. Lenders will need to assess your financial suitability, and your approval chance depends on the risk the lender is prepared to take.

Using collateral to secure your loan could give you a better chance of success, however, the loan is likely to be more expensive if you have a bad credit rating as opposed to a good credit rating.

Why do I have a bad credit score?

If you've experienced any of the following, your credit score may have been impacted negatively;

Common reasons for a bad credit score

  • Regular late repayments
  • Regularly missing repayments
  • You're declared bankrupt
  • You have a County Court Judgement (CCJ)
  • You've been a victim of identity theft
  • You have no credit history at all

If you've experienced one or several of the reasons above, you'll likely have a poor credit rating, and, if your rating is very poor, or you have no credit history, you then may only be eligible for specialist bad credit loans or bad credit cards.

How can I improve my credit score?

If you haven't done it already, the first thing to do is check your credit report to

  • Discover what your credit rating is
  • Make sure your credit report is accurate

There are three main credit reference agencies in the UK -Experian, Equifax and Transunion, who all hold information about your borrowing habits. You don’t have just one credit score - each agency will score you slightly differently.

To access your credit report there are several free apps that will help you to monitor your credit score and give handy tips on how to improve it. These include ClearScore, Experian and Credit Karma.

Here are some ways you can boost your credit score and ensure you're eligible for the best secured loans for bad credit:

Make sure you're on the electoral roll

Lenders always check the electoral roll. It acts as proof of address and suggests stability. You could improve your credit score by not changing your address too often, but remember to register on the electoral roll if you do.

Settle balances and pay your bills on time

Missed or late payments can blemish your record and affect your rating for up to six years. Stick to your credit repayment agreements, pay bills on time, and set up direct debits where possible.

Build your credit history

If you've never had a credit card, taken out a loan or had a mobile or broadband phone contract, this could work against you.

If you've never had credit, there's no evidence that you're a responsible borrower who can pay back what you owe within the agreed time frame. You can build a credit history with a credit builder credit card, but they typically have higher interest rates.

Don't max out on your credit cards

Just because your credit limit is £2,000, it doesn't mean you have to spend it. Keep your credit utilisation low, below 30% if you can, and lenders will view you as a responsible borrower and not reliant on credit.

Where can I get a secured loan with bad credit?

Some lenders specialise in secured loans for people with bad credit but may charge high interest rates and administration fees.

Bear in mind, you will also get a mark on your credit record every time you apply for a loan because individual applications will require a hard credit search to assess your affordability and how likely you are to repay what you owe. This may lower your credit score further in the short term.

If you are considering a secured loan, Choose Wisely has partnered with a specialist loan broker who can help find you suitable options to compare without impacting your credit history. To start just complete the check eligibility journey above.

How much can I borrow with a bad credit secured loan?

The amount a secured loan lender allows you to borrow depends on numerous factors, including;

  • The amount of equity in your home
  • Your credit score
  • Your income and outgoings
  • Lender criteria

What are the pros and cons of secured loans for bad credit?

Borrowing against your home is always risky, buy if you have bad credit it could be the only way to secure the finance you need.

Here's the advantages and disadvantages of secured loans for bad credit;

  • You have a better chance of approval when you borrow against your home
  • The interest rate may be lower than a bad credit personal loan
  • You can usually borrow more money with a secured loan
  • It's an opportunity to rebuild your credit rating if you always pay back what you owe on time
  • You risk losing your home if you don't keep up with repayments
  • You'll pay higher interest rates than someone with a good credit rating
  • The interest rate could rise over the loan period, so your repayments could balloon, unless your rate is fixed

Are there any alternatives to secured loans for bad credit?

The best secured loans for bad credit are tailored to your financial circumstances, but a secured loan may not always be the right option for you.

Alternatives include:

Debt consolidation loans:

This type of loan allows you to borrow money to pay off multiple debts, e.g. credit cards, store cards and overdrafts, which you pay back with one monthly payment. A debt consolidation loan is a helpful way to gain control over your debt and build your credit score.

Credit building cards & bad credit cards:

If you just need to borrow a small amount, these cards have lower credit limits and rates than bad credit cards. However, you must repay the balance on time and in full every month to build your credit score. You could damage your credit rating further if you miss or make late payments.

Credit union loans:

If you are a credit union member or belong to a community with a credit union, you could approach them and see if they would be willing to lend to you. This type of loan typically has lower rates and is cheaper than a bad credit or short-term loan.

Guarantor loans:

This type of loan is when another person guarantees to make your repayments if you miss them or default on your loan. A guarantor is usually a family member orfriend with a good credit score. They will have credit and affordability checks performed on them too.

Secured loans for bad credit FAQs

Will a secured loan impact my credit score?

If you have been approved for a bad credit secured loan and you make your repayments in full and on time, you’ll be repairing your credit score and positively impacting your credit score.

However, when applying for a secured loan, the lender will perform a hard credit check on you, leaving a footprint on your credit report which is visible to other lenders, but it shouldn't adversely affect your credit score unless you are declined or you apply to multiple lenders in a short period of time.

If you're concerned about impacting your credit score, you can use a website like ours to find the lenders most likely to lend to you, without performing a hard credit check.

How long does it take to get a bad credit secured loan?

It depends on your financial circumstances, but typically it will take days rather than hours. You won’t be able to get a secured loan instantly because several checks, such as property valuation, credit checks and legal searches, need to take place.

You may get a quick decision in principle, but usually, the whole process takes around two to three weeks or more.

What happens if I don't pay a secured loan for bad credit?

If you cannot make repayments on your loan, you could end up further into debt or even risk losing your home.

You'll get charged extra fees if you miss or make late payments, adding to your debt. You will also further damage your credit rating and make future borrowing even harder.

The lender will have the legal right to repossess your property and may act quickly to start court proceedings if you ignore warnings. So talk to your lender if you’re struggling to make payments on time or think you may have difficulty repaying the debt.


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.

Important Information.

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

If you complete a loan search application on the Choose Wisely website, the rates shown may vary 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 13.9%APR to a maximum of 1721%APR Representative and loan repayment periods range from 3 to 60 months.

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

If you've been declined, please refer to your credit report to gain an understanding of why before making further applications.
You can access your credit report for free from Credit Karma, Clearscore or Experian.