Bad credit loans is a phrase used to describe a type of unsecured credit aimed at people with bad credit scores, whether that is because of a poor credit history or a lack of credit history.



What does bad credit mean?

If you have a history if missing repayments on credit cards or loans, or have had trouble keeping up with bills, it affects your credit score, which is referred to as having bad credit.

You might have bad credit because you owe money or you have a record of not paying bills back on time, for example. When applying for some level of finance, loan or even a new mobile phone contract, companies will look at your credit status to work out whether you’re likely to make repayments on time in the future.

There are a number of reasons why you might have a low credit score, including:

  • Bankruptcy
  • Defaults on payments
  • Too many ‘hard’ credit searches on your credit profile – a hard credit check happens when you apply for a loan, finance agreement or credit card and the lender looks into your credit history
  • County Court Judgements
  • An individual voluntary arrangement (IVA), debt management plan (DMP) or a debt relief order (DRO)

You might also have bad credit because you haven’t had the time or opportunity to build up much of a credit history. Perhaps you’re too young, you’ve emigrated from another country or you’ve never had a credit card or opened a bank account before.

If you have bad credit, you’ll find it difficult to borrow from lenders, get a credit card or apply for a mortgage as lenders will think you are ‘high risk’. They might also think you’re a bad investment as the chances of them getting repayments back will be low.

Bad credit loans

You could still get a loan, even if you have a poor credit history or bad credit rating. Compare real interest rates on our best loans for bad credit at

This type of loan would give people with a bad credit rating a chance to prove themselves and rebuild their credit score little by little by making their repayments in full and on time.

Some lenders offer loans to those with patchy or poor credit histories but you usually pay far more in interest for the privilege. Our loan calculator can take this into account.

Personal loans: These are loans which don’t require you to put up an asset as security for the loan. If you have bad credit, you may have limited options on who will lend to you and interest rates on unsecured personal loans for bad credit tend to be high.

Guarantor loans: These are loans which require you to appoint a guarantor. This is a family relative or friend who agrees to repay the loan if you are unable to. With a guarantor, you are more likely to be accepted for a loan.

Secured loans: These are loans, often known as homeowner loans, in which you are required to put up an asset such as your home as security for the loan. If you are unable to repay the loan, the lender can repossess your home to recoup the loan. These give a better chance to be approved for loan, but they do put your home at risk.

Peer to peer loans: These are loans in which you borrow from an individual instead of borrowing from a bank or building society. Find out more about how peer to peer loans work here.


How to get a loan with bad credit

If you have a poor credit rating, or simply no credit rating at all, it can be difficult to get a loan approved. However, there are some options available to you such as a bad credit loan or a loan for debt consolidation.

Some lenders offer personal loans to people with bad credit but at higher interest rates and with poorer lending options.

Before you start to look for a suitable loan, there are a few things you’ll need to have to hand before applying:

  • Your current UK address
  • An email address and contact number
  • Your annual income
  • Your general outgoings
  • Know your credit score: When you apply for a loan for bad credit, the lender usually runs a credit check. Checking your credit score beforehand will let you know where you stand. Then you can make an informed decision on whether its worth applying for a loan.
  • Improve your credit before applying: If you don’t need the money right away, it might be worth your time to take steps to improve your credit score, before applying for a loan.
  • Consider a guarantor: If you’re having trouble getting a loan because of your credit history, you can get a guarantor to back the loan to improve your chances of getting approved for a loan.
  • Avoid payday loans: Payday loans are extremely expensive with APRs often going well over 100%. These can get you caught up in a cycle of debt. They are often targeted at people who have a poor credit record who need money quickly, but are generally the most expensive type of borrowing on the market.

If you have too many loans and you’re looking to apply for another, the lender can take this as a sign that you’re going through financial instability. This can suggest that you may not be able to pay back the loan.

Where you can get a loan with bad credit

As well as traditional banks and building societies, you can consider peer-to-peer platforms and credit unions.

Credit building cards may be an option for you. While a loan may allow you to borrow a larger amount, with a credit card you can apply for a smaller amount to improve your chances of being accepted. Then make sure you keep up with repayments and eventually you can have your credit limit increased.

If you’re looking to borrow a small amount of money, then an overdraft may be a more suitable option. If you feel the need for some extra cushion to cover your regular expenses on occasion, you can apply for an overdraft with your current account provider.


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