Bad credit loans
Compare loans for those with bad credit
- Having poor credit doesn’t mean you can’t find a loan, check your eligibility without affecting your credit score
- Search for the right bad credit loan, before you apply
- Enter your details and compare loans from our trusted providers
What are bad credit loans?
The term ‘bad credit loans’ is used to describe loans that are available to those with a poor credit score or no credit history. These low credit score loans could be an option for people who don’t qualify for typical loans, but they usually come with higher interest rates.
Loans for poor credit may also come with other restrictions, such as a maximum loan term or a borrowing limit. These restrictions are all used by lenders to minimise the risk associated with lending money to someone with bad credit.
However, if someone with poor credit successfully pays off a bad credit loan with no issues, they could improve their credit score. That could mean they’re more likely to be accepted for a loan or another type of credit in future.
Is a bad credit loan suitable for me?
If you’ve been rejected for a loan, it could be that your credit score isn’t high enough. This is something lenders check when you apply for a loan or credit, as it helps them decide whether you’re a suitable and reliable borrower.
Many lenders now have automated systems that score your application and credit history. If you fall below a set figure that they feel comfortable with, they could automatically reject your application.
Loans for bad credit are designed for people who’ve struggled to get a loan previously or who haven’t yet built up a credit score. Borrowing a small amount and making your repayments on time could be a good way to improve your credit score and get better borrowing terms in future.
But only borrow money if you need too. And make sure that any loan you’re applying for is affordable. Responsible lenders won’t give you a loan if they think you’ll struggle to repay it.
What types of loan can I get with bad credit?
While your options may be reduced, there are several types of bad credit loans available:
Personal loan
If you don’t have any assets – like a house, for example – to use as security, then one option is an unsecured personal loan. This allows you to borrow money at a fixed interest rate and pay it back over an agreed length of time in instalments.
If you have a bad credit score, you’re more likely to be declined or pay a higher interest rate than those with a good credit score.
Secured loan
If you’ve been refused an unsecured personal loan in the past, you might be more successful applying for a secured loan. Secured loans are guaranteed against one of your valuable assets, most commonly your home, which acts as security to the lender.
The asset may depend on the amount you’re borrowing, but common examples include your home or car. If you can’t meet your repayments, you risk having that asset repossessed.
Guarantor loan
A guarantor loan is when a friend or relative promises to pay back the loan if you can’t. While this could give you access to a loan that you wouldn’t be eligible for by yourself, there’s a risk you could end up shifting your debt onto someone close to you if you can’t meet your repayments.
Please note that you can’t compare guarantor loans with Compare the Market.
How much can I borrow with a personal loan for bad credit?
It varies, depending on your personal circumstances and the lender. Many banks and building societies offer personal loans ranging from £1,000 up to £25,000. However, personal loans specifically targeted at people with bad credit may have much stricter lending limits.
When deciding how much you can afford to borrow, lenders will look at factors including:
- Your income and expenses
- Your credit score
- How much debt you have
- Your reason for taking out the loan
- If you’re securing the loan against an asset.
To improve your chances of being approved for a loan, it’s essential to do your own checks first to see what you can afford to borrow. Make a budget, taking into account your income and expenses, and work out what you can reasonably afford to repay.
You can use our loan calculator to see how different loan terms and rates can affect the cost of a bad credit loan. It can help you to work out how much different loans could cost you, both in monthly repayments and overall.
What should I consider before I apply for bad credit loans?
Applying for a loan is a big decision and not one you should take lightly, especially if you already have other debts. But if you do decide it’s right for you, here are the most important factors to consider when looking at loans:
- The amount you’re borrowing – even with smaller loan amounts, you need to be confident you’ll be able to meet your repayments. The more you borrow, the more you’ll need to pay back. With interest.
- The period you’re borrowing over – this is known as the term. Borrowing over a longer period will normally lower your monthly repayments. But don’t just go for the maximum term length, as you’ll end up paying more overall when you factor in the interest added to your loan.
- The interest rate – lower interest rates are often reserved for longer terms or higher borrowing amounts, but it’s good to compare rates from different providers. Our loans comparison service allows you to compare rates quickly and easily.
- Your monthly repayment amount – how much you can afford will be unique to your own financial situation. The last thing you want is to miss or make a late repayment, and potentially damage your credit score further.
- Additional fees – It’s important to check the small print for any additional fees that could affect the cost of your loan. These could include a late payment penalty or an Early Repayment Charge if you want to pay off your loan early.
Use our loan calculator to get a better idea of the cost of borrowing and what you can afford, before submitting your loan application.
How to get a loan with bad credit
Some steps to take if you’re going to apply for a loan with bad credit:
- Check your credit score and credit report – knowing your credit score could help you understand how lenders will look at you. And addressing any errors on your credit report could improve your score. Find out more about free credit checks.
- Only borrow what you really need – try to keep the amount you’re borrowing as small as possible. Lenders will be reluctant to loan large sums to those they view as high risk.
- Consider the type of loan you’re applying for – if you’re hoping to borrow a large amount, you may have a better chance of being accepted for a secured loan. Securing the loan against an asset could ease the lender’s concerns, but it’s a greater risk for you.
- Use a loans eligibility checker – Compare the Market’s eligibility checker can help you find loans that you’re likely to be accepted for without impacting your credit score.
What’s the easiest loan to get with bad credit?
That depends on your situation. If you have no credit history, a guarantor loan could help you get a loan more easily.
It’s very important that both you and your guarantor are aware of the financial responsibility you have to each other. A guarantor will be responsible for paying the loan balance in full if you’re unable to do so.
If you’re a homeowner and hoping to borrow a larger amount, a secured loan could be easier to get. Securing the loan against your home reduces the risk to lenders.
Just be aware that you risk having your home repossessed if you can’t keep up with your repayments.
Why choose Compare the Market for bad credit loans?
No impact on
your credit score
when using our eligibility checker
Use our free eligibility checker to view personalised results
We search loans from a
range of leading providers
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Am I eligible for a personal loan for bad credit?
To find out how likely you are to be accepted for a bad credit loan, use our loan eligibility checker. It’s a soft search, so it won’t impact your credit score.
Eligible criteria can vary among lenders but, in general, to be eligible for a bad credit loan, you must:
- Be a UK resident
- Be at least 18 years old
- Have a UK bank or building society current account.
When you apply, the lender will run a hard credit check to take a more in-depth look at your credit history. They’ll also want to see proof of income and employment status. That’s because they want to check you’re able to repay the loan.
Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.
What borrowing limits and interest rates do loans for bad credit offer?
Interest rates for poor credit loans tend to be higher than average rates for other loans. This is because you’re considered to be a higher risk.
To get an idea of the loan rates, here’s a representative example:
| Loan amount | £2,000 |
|---|---|
| Representative APR (annual percentage rate)** | 40% |
| Loan term | Three years (36 months) |
| Monthly repayment amount | £89.48 |
| Total interest | £1,221.37 |
| Total loan amount | £3,221.37 |
**This is just a representative example. The figures are for illustrative purposes only. Credit is subject to status and eligibility.
The amount you can borrow with a bad credit loan will vary from lender to lender and is based on the risk of you not repaying what you borrow in full. Some lenders may have rules about how much they’re willing to lend over particular time periods. For example, you might be able to borrow £2,000 over one or three years, but not stretch it out over 10 years.
See how much you could borrowWhat are the alternatives to taking out bad credit loans?
Before applying for a bad credit loan, you might want to consider these options to see if they’re more suitable for your needs.
- A credit-building credit card lets you borrow a small amount and can prove to lenders that you can be trusted with managing debt. Ultimately, this could improve your credit score, provided you make your repayments on time and stay within your credit limit.
- An arranged overdraft could be helpful during a short-term cash crisis. Just be aware that interest rates can be as high as 40%.
- Borrowing from family or friends could help you out of a financial hole. But make sure you draw up a loan agreement that everyone is happy with to avoid fallouts further down the line.
- Peer-to-peer (P2P) loan – it might be possible to find a bad credit loan online through a P2P lending site. However, it’s unlikely you’ll get a low interest rate without a good credit rating.
- Get debt advice – a debt adviser could help you work out a suitable budget and payment plan for your debts. They might even be able to negotiate with lenders and creditors on your behalf.
- Remortgage – if you have equity in your home, you might be able to remortgage and release some of the cash to pay off existing debts. However, your monthly mortgage payments might go up and you could end up paying more interest overall.
(Equity is the current value of your property less any remaining mortgage and any loans you have where the property has been used to secure the borrowing.)
What do I need to apply for bad credit loans?
Use our online eligibility checker to find out which bad credit loans you might be eligible for without impacting your credit score. Once you’ve decided to apply for a loan, you’ll need to provide:
- All the addresses you’ve lived at in the past three years
- Your email address
- Your employer’s details, including their address and phone number
- Details of your monthly income and outgoings
- Your bank or building society account details
- Information about any CCJs or bankruptcy.
Your chosen lender will then run a hard credit check on you. This will be marked on your credit report. Once they’ve carried out their credit and affordability checks, they’ll either approve or reject your loan application.
Depending on the type of loan you’re applying for, there may be further requirements. For example, a secured loan will require further information about the property you’re using as security.
With a guarantor loan, the lender will check the financial situation of your chosen guarantor. If approved, the guarantor will need to sign a legal contract.
How to manage your loan repayments
Missed or late payments can harm your credit score and you could face late payment charges from your lender. To avoid this, set up automatic payments from your bank account. For example, you could set up a direct debit or standing order to cover your loan repayments.
Whichever payment method you choose, make sure you have enough money in your account to cover the payments each month.
If you’re worried about making your loan repayments, contact your lender as soon as possible. It’s in their interests to help you figure out a way to pay. For example, they could agree to a more manageable repayment plan or offer a short-term payment holiday.
MoneyHelper has information on where to get free debt advice.
How can I improve my credit score?
There are steps you can take to increase the likelihood of being approved for a loan, most of which will also help you boost your credit score.
- Check your credit report – make sure all the information held on you by credit reference agencies is correct. Ask them to amend anything that’s wrong.
- Get on the electoral register – loan providers use this to confirm your identity and address, so registering to vote can help your application.
- Use our eligibility calculator – find out which loans you might be eligible for without any impact on your credit score.
- Try to stay below 25% of your credit limit – constantly being at the limit of your credit card or overdraft is seen as a negative and can hurt your credit score.
- Repay on time – make sure you consistently make any monthly repayments on time. Set up direct debits to make sure you don’t miss any payments.
- Consider a credit builder card – a low-limit credit builder card could help you improve your credit score by showing you can manage your finances responsibly. Just be aware that interest rates on credit builder cards can be very high. If you do use one, be sure to pay off your statement balance on time and in full every month to avoid paying interest.
What our expert says...
“Provided you can make the repayments, taking out a loan when you have bad credit can be useful and can even help repair or improve your credit score. But be sure you need the loan and that it’s affordable.”
- The Editorial Team, Experts in personal finance, insurance and utilities
Compare bad credit loans
It’s worth noting that although there are bad credit loans specifically aimed at people with poor credit, you may qualify for other personal loans, even if you have a less-than-glowing credit report. That’s why it’s a good idea to shop around using a comparison service like ours.
If you compare loans with us, we’ll only show you those that you’re likely to be accepted for – without affecting your credit score.
- Tell us how much you want to borrow and for how long
- We’ll show you a list of options to choose from
- You can adjust the loan amount or the length of the loan to see how this will affect monthly payments and overall costs
- You can sort your results by chance of approval (eligibility)
- Check out the details of the loan – for example, whether you can pay it off early or make overpayments.
Frequently asked questions
Why do I have a bad credit score?
Your credit score could be low if you have:
- Failed to stick to a credit agreement
- Made late repayments or missed repayments
- Been declared bankrupt
- Have a County Court Judgment (CCJ) registered against you
- Entered into an Individual Voluntary Arrangement (IVA)
- Financial links to someone with poor credit – for example, someone you share a joint account or mortgage with
- Multiple lender searches on your credit record in a short space of time. This can look as if you have financial difficulties
- Never borrowed money before.
Thankfully, a poor credit score isn’t set in stone. Although it can take time, there are ways to build your credit score and improve your chances of borrowing at better rates in the future.
What counts as a bad credit score?
Each of the three main UK credit reference agencies (CRAs) – Experian, Equifax and TransUnion – have a different score for what they consider bad credit:
- Experian: 720 or below (out of 999)[2]
- Equifax: 438 or below (out of 1,000)[2]
- TransUnion: 565 or below (out of 710)[2]
It’s worth getting a free credit check from each of the main CRAs to make sure the information they have on you is correct.
[2] Accurate as of July 2024.
Can I get a loan with an IVA?
It’s possible to get a loan while you have an individual voluntary agreement (IVA), but you’ll need to get approval from the insolvency practitioner (IP) supervising the arrangement if you want to borrow more than £500.
An IVA is a legally binding contract between you and your creditors to pay back your debts over an agreed period. Many lenders consider it too risky to lend to someone in an IVA. And those who do will likely charge high interest rates.
It’s often not a good idea to take on new debt when you’re in an IVA. Your IP can advise you on how to get your finances back on track.
You can also get free and impartial advice on managing debt from charities like National Debtline and StepChange.
Can I get a guaranteed loan for bad credit?
In reality, guaranteed loans don’t exist in the UK, regardless of whether you have good credit or bad credit. The Financial Conduct Authority (FCA) requires all lenders to perform credit and affordability checks before they approve a loan. This is to make sure that you can afford the loan.
Although it’s not guaranteed, you can use our loan eligibility checker to see which of our loans you’re likely to be accepted for, without any impact on your credit score.
What happens if I get refused a bad credit loan?
If you’ve been refused a loan, it’s important to find out why, so you can make any necessary changes before applying again.
It’s a good idea to wait a while before you apply for another loan. Too many credit applications in a short amount of time can be a red flag to lenders. You can take the time to get your finances and credit score in a better shape.
Before you apply again, it’s a good idea to find out which loans for bad credit you’re likely to be eligible for.
Why have I been rejected for a loan in the past?
There are several reasons why you may have been rejected for a loan:
- You have too many loans, maxed-out credit cards and other debts.
- You have a bad credit rating because of a history of missed or late payments, or other debts
- You have no credit history because you’ve never borrowed money before
- You don’t have a steady job with a regular income
- You don’t earn enough to comfortably afford the loan repayments
- You don’t own a house or a car to put up as security against a secured loan.
- There are mistakes and inconsistencies on your application form.
Understanding why you were rejected for a loan can help you make the necessary changes to improve your chances of being accepted for a loan in the future.
Can I apply for a loan without affecting my credit score?
Applying for a loan will – in most cases – leave a hard search on your credit file, which could have a negative impact on your credit score when you first take out the loan. But it’s very easy to see which loans you might be eligible for without affecting your score.
Our eligibility checker can help you see amounts and rates of loans you might be accepted for based on your credit history.
If you choose to go ahead with a loan, this could change your ‘debt to income ratio’ – that is how much you owe compared to how much you earn. This could impact your affordability to future lenders. But if you manage your loan responsibly and prove you’re a reliable borrower, this could help build your score.
What is a soft search?
A soft search is a way of looking for loans or credit cards without affecting your credit score. Traditional credit checks (or hard credit checks) will leave a mark on your credit file, which potential lenders can see when you apply for a loan.
If you’ve applied for credit many times, other lenders can see this and may be put off lending to you. That’s because they may assume these multiple applications mean you have financial problems.
Soft searches will still appear on your credit file, but lenders won’t be able to see them. That means it won’t impact their decision to approve or reject any applications you make.
