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
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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. Loans for bad credit are for people who don’t qualify for typical loans, but usually at the cost of higher interest rates.

Loans for bad credit may also come with other restrictions, such as a maximum loan term or a borrowing limit. These 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’re more likely to be accepted for a loan in future and to improve their credit score.

Why can’t I get approved for a loan?

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 to make a loan, they’ll 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.

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, expect to pay higher interest rates compared to 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, which acts as your collateral. 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 bigger loan, there’s a risk you could end up shifting your debt onto someone close to you if you can’t meet your repayments.

How to get a loan with bad credit

If you’re going to apply for a loan with bad credit, here are some things to think about:

Check your credit score and credit report — knowing your credit score could help you understand how lenders will look at you. Addressing any errors on your credit report may also 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 a risk.
Consider the type of loan you’re applying for — if you’re hoping to borrow a large amount, you’re more likely to be accepted for a secured loan, rather than a personal loan. This is because you’re securing the loan against a valuable asset, which will ease concerns that lenders may have about 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. For example, if you have no credit history, a guarantor loan could help you get a loan more easily. If your guarantor has a good credit history, it could be easier for you to be approved by lenders. It’s very important that you and your guarantor are both aware of the financial responsibility you have to each other. A guarantor will be responsible for paying the loan, if you’re unable to do so.

If you’re a homeowner, a secured loan could be easier to be approved for, especially if you’re hoping to borrow a larger amount. This is because you could secure the loan against your home to reduce the risk to lenders. Just be aware that you risk having your home repossessed if you can’t keep up with your repayments.

Why do I have a bad credit score?

Your credit score will be affected if you’ve:

Failed to stick to a credit agreement
Made late repayments or missed repayments
Been declared bankrupt
Have a County Court Judgment (CCJ) against you
Entered into an Individual Voluntary Arrangement (IVA)
Never borrowed money before.

Each of the three main UK credit reference agencies – 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]

A poor credit score doesn’t mean you can’t get a loan – it just means you’ll probably have fewer lenders to choose from and you’ll have to pay a high interest rate. If you’re hoping to get a loan with bad credit, you may still be eligible for some poor credit loans.

^[2] Accurate as of May 2024.

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 25% below your credit limit – constantly spending at the limit of your credit card or overdraft can hurt your credit score.
Repay on time – make sure you consistently meet any monthly repayments. Set up direct debits so you don’t miss any payments.
Consider a credit builder card – designed for people with bad credit, a low limit credit builder card could help you improve your score by showing you can manage your finances responsibly.

Why choose Compare the Market for bad credit loans?

No impact on
your credit score
when using our eligibility checker

See what loans you could be eligible for in under 4 minutes^[1]

We search loans from a
range of leading providers

^[1]Correct as of June 2024.

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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 to help you find the best loan for you:

The amount you’re borrowing – it’s unlikely you’ll be allowed to borrow a large amount with a low credit score, but you still 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 with the interest added.
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 comparison service allows you to compare loan rates quickly and easily.
Your monthly repayment amount – how much you can afford will be unique to your own financial situation, so it’s important to find the best loan for you. 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 and 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.

Am I eligible for personal loans for bad credit?

To be eligible for a bad credit loan, you must:

Be a UK resident
Be at least 18 years old
Have a current account.

The lender will also run a hard credit check to look at your credit history. They’ll want to check you’re able to repay the loan, before lending to you.

Other eligibility criteria could include providing proof of income and employment status, as well as meeting any credit score requirements.

To find out how likely you are to qualify for bad credit loans, use our loan eligibility checker. It won't impact your credit score.

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 to expect, 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

To find a loan that’s right for you, start by comparing bad credit loans with us.

The amount you can borrow with a bad credit loan will vary among lenders and the risk you present. 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 over 10 years.

See how much you could borrow

What 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.

Credit-building credit cards allow you to build up your credit history by borrowing a small amount of money, between £100 and £1,000.
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 and you’ll probably get better terms. 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 get organised by working 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.

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 potential 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 check, 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 may require further information against the property you’re using as collateral. A guarantor loan will require the lender to verify certain details about your chosen guarantor. They’ll also need to meet eligibility criteria and sign a contract.

How to manage your loan repayments

Missed or late payments can harm your credit score and you could face late payment charges. To avoid this, set up automatic payments from your bank account. Your loan repayments could be set up as a:

Direct Debit – your lender takes money from your account each month on an agreed date.
Standing order – you pay a fixed amount from your bank account each month, which you can change or cancel at any time.
Continuous payment authority (CPA) – you give the lender permission to choose when and how much money to take from your account 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 payment holiday.

MoneyHelper also has information on where to get free debt advice.

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 you need to make absolutely sure that the loan is affordable – and that you’re getting the right deal for you.”

- The Editorial Team, Experts in personal finance, insurance and utilities

Compare bad credit loans

If you need to find loans for bad credit, but have a less-than-glowing credit report, we can help. If you compare bad credit 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, if you can pay it off early or make overpayments.

Start comparing loans

Frequently asked questions

What happens if I get refused a bad credit loan?

Having a bad credit loan refused doesn’t mean you’ll automatically be rejected if you make another application. Before you apply again, though, it’s a good idea to find out which loans for bad credit you’re likely to be eligible for.

You should also make sure your credit score is in the best shape possible.

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 current loans, maxed-out credit cards and other debts.
You have a bad credit rating because of missed 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 pay back the loan.
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.

If you have a history of being rejected for loans, you should think about finding loans for bad credit scores.

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.

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.

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.

Soft searches will still appear on your credit file but lenders won’t be able to see them, so it won’t impact their decision to approve or reject any applications you make.