Bad credit loans

What are bad credit loans?

‘Bad credit loans’ is used to describe loans that are available to those with a poor credit score or no credit history. They’re available to those who don’t qualify for typical loans, but usually at the cost of higher interest rates.

They 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 in future and improve their credit score.

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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 regularly, 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 amount, there’s a risk you could end up shifting your debt onto someone close to you if you can’t meet your repayments.

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.

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.

Use our loan calculator to get a better idea of the cost of borrowing and what you can afford, before submitting your loan application.

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): 59.9%
• Loan term: three years (36 months)
• Monthly repayment amount: £120.74
• Total amount repaid: £4,346.62
• Credit available subject to status

This is just a representative example. 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 too. For example, you might be able to borrow £2,000 over one or three years, but not over 10 years.

What do I need to apply for bad credit loans?

Use our eligibility checker to see which bad credit loans you could get. Once you’ve decided to apply for a loan, you’ll need to provide:

• All the addresses you’ve lived at for 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.

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 if you apply (eligibility) and the interest rate (APR), so you can see which have the lowest rates.
• Check out the details of the loan – for example, if you can pay it off early or make overpayments.

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.