Bad credit loans are designed to help anyone with a less than perfect credit score. They can also be used in the event you have not yet built up a solid credit history, or if you have been refused a loan in the past.
We help people with poor credit access personal loans from £50 to £5,000†. By analysing your overall affordability, our lenders are able to approve finance regardless of credit score.
If you’re new to loans for bad credit, take a read of our complete guide below.
Just because you have bad credit, doesn’t mean you can’t secure a loan. Getting hold of a traditional bank loan with poor credit can be tricky, but there are other loan options out there that you might not yet have considered.
For example, online lenders can help people access loans through alternative finance solutions. Many of these providers offer options for bad credit, but as with any loan product, it’s essential to do your research before making any decisions.
Bad credit loans are a high-cost, short-term credit option that is growing in popularity in the UK. However, before taking out this product you must be sure that you can realistically afford it. According to the Financial Conduct Authority (FCA), borrowers are due to repay on average 1.65 times the amount they borrow.
Bad credit loans are a type of finance specially designed for applicants with a poor credit history. Typically, if you have bad credit, you will struggle to secure a traditional loan, and that’s why personal loans for bad credit exist, to help those who can’t access money the traditional route.
But what is classed as bad credit? If you’ve got a history of failing to make repayments on time, you’ve declared bankruptcy, or you’ve received a country court judgement - these are all reasons you might have bad credit.
You may also be classed as having ‘bad credit’ if you have no evidence of previous successful borrowing. Believe it or not, applying for finance without having built up a credit history can also be difficult, so you may need to consider a loan for bad credit.
You need to be mindful, though, bad credit loans can carry higher interest rates. They also have more restrictions, and you might need to provide a guarantor to co-sign the loan agreement with you.
If you’ve done your research and decided that a bad credit loan is the best option, it’s time to make an application. Loans for bad credit are usually provided by alternative lenders online, which means you can complete all the necessary documents from the comfort of your home.
This is a straightforward step! Before applying, you need to make sure you meet the lender's criteria which can be found on their website. Applications are made online and can include information such as personal details, income and expenditures.
The lender will check and verify your application to make sure the details are correct and that you can afford to pay back the loan (this is particularly important with a bad credit loan as they offer higher interest rates!). They will also perform a credit check on you. This decision is made quickly, although sometimes they may ask you to send in more documents.
If you are successfully approved, you will be presented with a loan agreement. The lender may offer you less than what you initially applied for. Please review this carefully and make sure you are happy before deciding to accept it or not - after that, there’s no turning back!
If you accept the offer, you will receive the funds directly into your chosen bank account, sometimes within 10 minutes² after approval. That’s fast access to cash!
Payments might be made in monthly instalments for a few months or years, depending on the agreement and the amount you borrow.
If you’re struggling with debt management and you’d like to seek impartial, free advice - visit MoneyHelper (formerly the Money Advice Service).
If you have poor credit, the loan options available can be limited. However, there are some loan products that are better suited to people with bad credit. There are a few types of bad credit loans to consider:
A short-term loan is just that - short-term. You’ll pay back the money borrowed within months - usually under a year. This type of loan could be a good option if you need cash fast to pay unexpected bills, cover necessary expenses or in an emergency loan situation.
However, when considering a short-term loan for bad credit, you should be aware that due to the temporary nature of this loan type, combined with bad credit, they can result in higher interest rates.
Secured personal loans allow you to use your home or an asset as security against the loan. Using collateral can be an excellent way to raise much higher loan amounts at better interest rates, but be careful, if you miss a repayment or fail to repay the loan, you could be at risk of losing your property.
Secured loans for bad credit can be easier to obtain because the lender has more assurance that they will be able to reclaim their money in the event you default on the loan repayments. So while this loan product could result in lower interest rates, the risk for you as the borrower is greater.
A guarantor loan is a popular loan product for people with bad credit. Often, lenders will ask you to provide a guarantor for the proposed loan agreement. Essentially, you and a relative or trusted friend will need to apply for a loan together.
The person you choose as your guarantor must have a good credit score, and on signing the agreement they become legally responsible for payments in the event you are unable to pay.
Peer-to-peer lending, sometimes called social lending, is an increasingly popular way to access cash, particularly if you have poor credit. You’re matched with a ‘peer’ - bypassing banks and building societies. This peer is usually an investor, who lends money via a P2P platform at competitive, often lower interest rates.
Just as with any financial product, bad credit loans have advantages and disadvantages. It’s important to be aware of both the benefits and potential risks, before making your decision. The benefits of bad credit loans include:
Before deciding to take out a bad credit loan, it’s important to be aware of some of the disadvantages and potential risks associated with this loan product:
Before jumping into signing a bad credit loan agreement, it’s important to sit down and think about whether you truly need a payday loan for bad credit. It’s always a good idea to go through a checklist, and ask yourself:
Just so you know! At ThisLender, we only work with FCA-registered UK direct lenders. We’re a broker, and that means our service is completely free of charge to our customers.
The loan amount you can borrow with bad credit will vary depending on the lender and your affordability. Generally, your credit score will have an impact on how much you can borrow.
For example, if you have a low credit score, lenders may offer smaller loan amounts. Be aware that they will also attract much higher interest rates than if you had a good credit rating.
When you apply for a bad credit loan through ThisLender, you could be eligible to borrow up to £5,000†.
It’s important to regularly check your credit file and be aware of your credit score. There are lots of credit reference agencies that allow you to do this - so be sure to sign up to platforms like Experian, Transunion or Equifax.
Yes, a bad credit loan can help improve your credit score providing you pay the loan back on time as specified in your agreement. Taking out loans can be a good way of proving yourself as a reliable borrower.
However, if you miss a payment or fail to repay the loan, this will further harm your credit score. Damaging your credit file will limit your chances of getting credit in the future, so it’s important to be sure you will be able to repay your poor credit loan.
The best loan for bad credit depends on your personal circumstances and financial position. The research stage is important in determining the right loan product for your situation, and when doing this you must compare lender offers to ensure you get the best deal possible on your bad credit loan.
Each lender will have their own criteria, but regardless of your credit score, you must meet basic eligibility requirements such as:
Lenders will also assess your application on affordability. They will take your income and outgoings into account to make sure you can afford to pay back the loan amount you have requested.
We understand that some borrowers are not in a position to ask a friend or family member to become a guarantor for a loan. The good news is that there are lenders that offer loans with no guarantor even if you have poor or very bad credit.
Loans that don’t require a guarantor can include:
It’s worth taking the time to compare bad credit lenders and understand what their requirements are before you go ahead and apply.
If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from MoneyHelper (formerly The Money Advice Service), National Debtline or debt charity StepChange.
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Representative 49.9% APR
Representative example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28 Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. Rates from 45.3% APR to 1721% APR - your no-obligation quote and APR will be based on your personal circumstances. The minimum repayment period for any loan will be 90 days from the date the loan is issued. The maximum repayment period is 3 years.
We are a credit broker, not a lender.
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