What is a bad credit loan?
A bad credit loan is a type of personal loan intended for people who don’t have a great credit history. Your credit history might be poor, for example, if you haven’t kept up with monthly repayments in the past, or it might even be non-existent if you’ve never borrowed money previously. Often this makes it more difficult to get accepted for a personal loan.
A poor credit history doesn’t permanently exclude you from being able to access a personal loan. We can find lenders who might be able to offer you a bad credit loan if your credit rating isn’t the best. Loans for bad credit typically come with a higher interest rate and additional restrictions compared to other types of personal loans. These restrictions help reduce the risk of someone with a bad credit rating not repaying the money they’ve borrowed. You might even be able to improve your credit score if you take out a bad credit loan and keep up with your loan repayments successfully.
Applying for a loan with bad credit
If you have poor credit and need to apply for a loan, the first step is to work out what you can comfortable afford in terms of monthly repayments. When you know what monthly payments you can manage, you can apply for a loan with a credit broker like us. However, don’t be overambitious and apply for loans you’re unlikely to receive. Every application is recorded, and unsuccessful applications for personal loans can negatively affect your credit score even further. This means it could become even more difficult for you to apply for a loan in the future.
Often it’s a good idea to use credit reference agencies to check your eligibility before you apply to borrow money. This helps you to avoid unsuccessful applications that affect your credit score and waste your time.
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Do I need a guarantor?
Guarantor loans are when someone else guarantees your monthly payments. Most loans don’t need a guarantor, but some lenders might ask for one if you have bad credit and aren’t confident that you can keep up with your monthly repayments. However, you don’t always need a guarantor loan when you have a poor credit history.
The options for non-guarantor loans can sometimes be more limited when you don’t have a great credit rating. You might also have to pay higher interest rates than with guarantor loans. However, the lenders we work with might be able to offer you a loan without a guarantor, even if you have a bad or non-existent credit history. Fill out our easy to understand application form to find out more about what your options are.
What type of bad credit loans are there?
The main types of bad credit loans are secured loans or unsecured personal loans. These loans can come with or without a guarantor.
With an unsecured loan, you’re not borrowing money against any assets. Loans like this are often a popular choice for everyday or unexpected expenses and can range from under £100 to thousands of pounds. Because you’re not borrowing against anything you own means there’s no risk to any of your valuable assets when you take out this type of personal loan. That’s a great thing for you, but lenders might consider it riskier if you have poor credit. This might mean higher interest rates or added restrictions than you’d get with a mainstream loan.
With secured loans, you borrow money against an asset you possess, such as your home or vehicle. Mortgages are probably the most common type of secured loan, with the money borrowed against your property. You might be able to get a secured bad credit loan even if you’ve been turned down for an unsecured loan.
However, this type of loan means it’s a lot riskier if you don’t keep up with your loan repayments. There could be serious consequences other than a negative impact on your credit score, such as the possibility of losing your home. Before you make any applications for secured loans, be certain that you can definitely afford your monthly repayments.
Can I get a bad credit loan with no credit check?
Rules from the Financial Conduct Authority state that lenders need to demonstrate that they are lending money responsibly, so a loan with no credit check is not possible. Therefore, they must carry out some checks before they offer you a personal loan. This sometimes means that obtaining credit loans can be trickier when you have a bad credit score.
Generally, lenders will want to check your credit file before they lend you any money, but options are available if you want to avoid this. Some lenders can carry out a soft credit check rather than a full one. Unlike a full check of your credit rating, a soft credit check won’t leave any trace on your credit file. This means your credit score won’t be affected if you get turned down. Be aware that these bad credit loans often come with higher fees and interest rates. Again, this means it’s really important to make sure you can afford the monthly payments before you commit to taking out a personal loan.