Bad Credit Loans

Bad credit - don't despair, you still have options
Bad credit – don’t despair, you still have options

Bad credit loans are a personal finance option for people who may, for whatever reason, have a bad credit score. It’s an umbrella term that refers to a number of different types of loan for people who have been rejected by traditional forms of lending.

If you were wondering how to get a loan with bad credit, this page will run through the different loan types available across the market and function as a dedicated frequently asked questions page, giving you peace of mind and the practical knowledge you need to take your search for a loan forward – with the help of our loan market expertise.

So, let’s start at the start. Traditional lenders may refuse standard credit if your credit report is poor. This can be a result of a variety of factors, with different loan companies each considering different criteria when determining whether your credit is ‘bad’. This means that having a bad credit rating doesn’t mean you’re necessarily bad with money – in fact, it’s very easy to slip into a bad credit scenario, with factors such as a period out of work, an illness, or simply being a young person without a credit history playing a role. Typically, the fundamental indicators of ‘bad credit’ include:

  • If you have a lot of debt
  • If you’ve applied for credit too regularly (i.e. more than once every three months)
  • If you’ve missed payments or defaulted on a bank account
  • If you have difficulty repaying lenders, or are subject to a County Court Judgement (CCJ), Individual Voluntary Arrangement, or Debt Management Plan
  • If you have been declared bankrupt
  • If you don’t have much of a credit history (this could simply be because you’re a young person)


Generally speaking, most loans for people with bad credit have greater restrictions and more stringent payback conditions. This is because negative influences on your consumer credit file – a collection of data surrounding your borrowing and repayment activity – serve as indicators to lenders as to how trustworthy you are to repay your loan.

If any of the aforementioned bad credit indicators apply to you, this doesn’t mean you’re out of borrowing options. On the contrary, there are a lot of options out there on the market for an individual with bad credit looking for a loan. Below, we’ll list the typical eligibility criteria, as well as discussing whether these types of loans are right for your situation, and what some of the current borrowing options are.

Eligibility criteria

To be deemed eligible to receive a bad credit loan, there are certain criteria you need to meet. Though your eligibility is judged on a case by case basis, with each individual loan provider following their own unique set of specifications, there are fundamental criteria under which you’ll need to fall:

  • Employed (this includes self-employment, but some lenders may be more hesitant in such cases – be prepared, with solid evidence of a steady income rate in this situation)
    UK resident
  • Over 18 years old
  • Able to provide evidence of UK address

Are bad credit loans for me?

If you fall under the eligibility criteria we’ve mentioned and your financial history shows an ability to borrow and repay in a timely fashion, the short answer is yes, bad credit loans are for you. However, there’s more to consider than the fundamentals alone. Let’s look a little deeper…

Advantages of bad credit loans

  • Long repayment window – More often than not, you’re able to negotiate a fair repayment window with your loan provider of anywhere from 1-5 years, meaning you don’t need to worry about very short-term repayments
  • Quick access to funds – If accepted, loans are paid into your account within a few days from your initial application – sometimes, it’s even the same day. This is great when urgent funding is required, for whatever reason
  • Rebuild your credit score – Perhaps the biggest advantage of a bad credit loan is the ability to rebuild your credit score by meeting monthly repayments and proving you’re a trustworthy borrower – this will make borrowing easier in the future

Disadvantages of bad credit loans

  • High interest rates – Bad credit loans come with the downside of typically high APR. APR stands for the annual percentage rate, and is the rate at which interest is charged across a one-year window. The higher the APR, the more money you’ll end up paying in the long run
  • Negative impact on your credit score – While meeting all your repayments on time can help to strengthen your credit score, failure to meet these deadlines can have the opposite effect. Missed payments will be recorded at further detriment to your credit score, making future borrowing opportunities even tougher to find
  • Repossession – Failure to meet multiple payments can lead to drastic measures on the lender’s behalf, such as car and home repossession. Naturally, this can have a dramatic impact on a person’s livelihood


Applying for a bad credit loan is not something that should be done without complete consideration of contextual factors. Think thoroughly about how the advantages and disadvantages detailed above apply to your personal situation and weigh them up against your financial alternatives. These include:


  • Overdrafts – If you’re planning on borrowing a small amount over a short window, applying for an overdraft on your current account may be your best option. Some banks offer an interest-free overdraft buffer (although this is typically a significantly low amount), with a small fee and low interest rates to be paid upon breaching this buffer. This should not be seen as a viable long-term borrowing option, though
  • Bad credit card – Bad credit cards are specifically designed for those with a low credit score, but, much like the targeted loans, these often come with high rates of interest. On top of that, the amount you’re allowed to borrow on these cards is often lower than that of a loan, meaning this isn’t a great option for those looking to fund greater expenses

Types of bad credit loans

There are a variety of borrowing options available to those with bad credit. These include:

Personal loans

A personal loan can be used for anything from a car to a holiday to the consolidation of existing debt. They typically have a fixed interest rate and are also known as unsecured loans, as they don’t require an asset like a house to be used as security for the lender.

Personal loans are typically best for sums over £1,000, with the maximum borrowing amount typically being around £25,000. However, this does vary depending on the lender, with each charging their own fixed rates of interest – as a general rule, though, it’s best never to borrow more than you need (or can comfortably afford to repay).

To give you a clearer idea, here’s a representative example of the type of costs you could be dealing with:


A personal loan of £7,500 borrowed at 3.3% APR (these rates will generally range from 3.2% to 99.9% depending on your personal circumstances) over a 60-month period equates to even monthly payments of £135.60 with a total repayable amount of £8,136.22.

Guarantor loans

Guarantor loans are geared more towards people with bad credit, as they require a guarantor – usually a family member or close friend – to guarantee the payments. This often means that the repayments are more manageable. Another advantage of guarantor loans is that your successful repayments will count positively towards your credit score. Just make sure you have a trustworthy and reliable guarantor in case you default at any point.

Payday loans

Payday loans are meant to be a stop-gap measure to cover unexpected payments before payday, so small amounts of up to £1,000 are commonly lent to people with bad credit. This type of loan is generally considered to be more of a ‘guaranteed loan’ for bad credit holders – but the sky-high interest rates associated with these sorts of loans make them very expensive, relatively speaking, compared with some of the popular alternatives. It’s vital to take caution when considering applying for a payday loan as, if you fall behind on your repayments, you could risk losing money and further growing your debt.

Logbook loans

Logbook loans are loans that are secured against the value of your car, which can make them a viable option if you don’t have a guarantor but do have a roadworthy car of significant value. Be advised, though, that your car could be repossessed if you fail to keep up with payments – which could have especially great repercussions if you’re dependent on your car for work.

Peer-to-peer loans

Peer-to-peer loans involve borrowing through an individual lender, as opposed to going through a bank or building society. Peer-to-peer lending websites match you with potential lenders who are prepared to loan to you following their own individual background checks, sometimes at lower interest rates and in greater amounts than their standard counterparts.

Is it possible to take out no credit check loans?

All loans inevitably (and necessarily) involve some form of credit check – it’s a simple case of making sure you’re capable of comfortably paying back the money you’re looking to borrow. Bad credit loans are simply a type of loan catered to those with a poor credit rating. For this reason, if you need to take out a loan, it’s crucial to thoroughly assess your options and ensure the lender you apply with is FCA approved before handing over your details.

So, how do I apply?

The amount of time it takes to approve and fund a loan depends on the lender, as well as how fast your bank typically processes payments – but it’s not uncommon to receive a decision on your loan the same day as your application is submitted.

To apply, you’ll need to provide all of the required information to the relevant lender and sign a loan agreement. More often than not, this can be done online.

What can you spend a bad credit loan on?

If your bad credit loan application is approved, it can be used to pay large expenses up-front, just like any other type of personal loan. From weddings to family holidays, car financing to home improvements, your loan can be spent on a variety of overheads you aren’t able to pay for at that time with your basic income alone.

Alternatively, these loans may also be used to consolidate any outstanding debts into one monthly repayment – potentially lowering the amount of interest paid across all of your debts.

What happens if I default on a payment?

It should go without saying that, throughout your loan application process, you should be certain that you can afford the repayments – as failure to do so could worsen your already bad credit score if you default on a repayment for a poor credit loan. A sensible way forward after defaulting or being refused finance is to look at ways to improve your credit rating and bring yourself out of hard times. We know that falling into financial difficulty can affect anyone, so our advice is to contact the loan provider and try to come to a resolution.

For further information regarding loans and financial best practices, explore our blog, where you can find top tips, guidance and more.

For impartial advice on your current financial situation and guidance when keeping up with your outgoings is becoming unmanageable, visit the Citizens Advice website. If you’d rather pick up the phone to talk to an expert about your circumstances, on the other hand, you can call the free national debt helpline on 0808 808 4000.