Bad Credit Loans Guide

Below is our informative guide to Bad Credit Loans, we have listed relevant information, common questions, products and services from the most trusted finance companies on the market.

Calculate a Bad Credit Loan    Bad Credit Loans Guide

What are Bad Credit Loans?

Bad credit loans are like the superheroes of the financial world. They swoop in to save the day when your credit score is less than impressive. These loans are specifically designed for people who have struggled with their credit in the past and may have a few dings on their credit report.

Not all bad credit loans are created equal. It’s important to know the different types available to make sure you’re getting the best deal for your situation. Whether you’re in need of a personal loan, auto loan, or mortgage, understanding the options will empower you to make smarter financial decisions.

What is a Bad Credit Loan?

How do Bad Credit Loans Work?

Bad Credit Loans Information Guide - Loans Website Directory
Credit scores can sometimes feel like a mysterious number assigned by a secret society. But fear not! Credit scores are determined by analyzing your credit history, payment history, outstanding debts, and other factors. It’s like a report card for your financial responsibility. The higher your score, the lower the risk you pose to lenders.

Factors that contribute to bad credit

Bad credit isn’t a reflection of your worth as a person – it simply means you’ve encountered some financial bumps along the road. Late payments, high credit card balances, bankruptcy, or even just having too little credit history can all contribute to a less-than-ideal credit score. We’ve all made mistakes, but it’s how we bounce back that counts.

Impact of bad credit on loan applications

Let’s face it, bad credit can sometimes feel like a giant red flag to lenders. It may make them hesitant to lend you money, or they might charge higher interest rates to compensate for the perceived risk. But fear not, there is light at the end of the tunnel. Bad credit loans are specifically designed to cater to those with less-than-perfect credit, giving you a chance to rebuild your financial reputation.

Table of Contents

FAQ abou tBad Credit Loans

What is a Bad Credit Loan?

Bad Credit Loans Guide

A Bad Credit Loan is a type of loan specifically designed for individuals with a poor credit history or low credit score. When traditional lenders, such as banks or other financial institutions, deem an individual to have bad credit, they may be hesitant to lend money due to the perceived higher risk associated with such borrowers. ]

Bad credit loans provide an alternative option for these individuals, who may require funds for various purposes including debt consolidation, home improvement, or emergencies. These loans typically come with higher interest rates compared to traditional loans and often require collateral or a co-signer to minimize the lender’s risk. However, bad credit loans can offer individuals an opportunity to rebuild their credit if timely payments are made throughout the loan term.

It is important for borrowers to carefully assess their financial situation and weigh the potential benefits and risks before opting for a bad credit loan.

Best Bad Credit Loans

If you’ve done the work and figured out that a personal loan makes sense for you, there’s no shortage of options to choose from. There are thousands of personal loan lenders out there, we break down a few of the best personal loans to choose from.

See Which Loans You Qualify For

 

Best Bad Credit Loans for Low Rates

Loan.co.uk

Bad Credit Loans Guide, Services and Products from Loan co.uk

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  • Loan Amounts £1000 – £30,000
  • Loan Terms from 3 to 18 months
  • No Minimum Credit Score

About Loan.co.uk

An award winning, UK based loans and mortgages fintech, we have helped 1,000’s of people to consolidate their debt and fund home improvements, weddings and other life changing purchases. We have also helped 1000’s people to consolidate their over expensive debt. We are rated 4.97 out of 5 on Reviews.co.uk from more than 1650 reviewers. We provide completely free, no obligation quotes after searching our extensive panel of lenders with 1000’s of secured loans products from across the market using the most advanced technology in the country. Loan.co.uk is a credit broker not a lender. Loan.co.uk is authorised and regulated by the Financial Conduct Authority, FCA reg number 718486.

At Loan.co.uk, a senior leadership team with over a 100 years’ experience in digital loan acquisition and fulfilment, merges cutting edge proprietary technology, with a simple consumer brand and a team of the most helpful, experienced and professional employees in the country, on a mission to simplify the way UK consumers borrow money forever. We believe our fusion of hard working, talented people and forward-thinking technology can help you.

What makes us different.

  1. We pay for everything –  Credit searches, valuations, legal searches, third party references. We cover the cost of everything.
  2. Our client fees are up to 60% cheaper than our homeowner loan competitors.
  3. Market leading technology. We continue to invest millions of pounds in our technology to make the client experience simple, transparent and hassle-free.
  4. We will work with you to understand how we can be successful together, helping our mutual clients obtain the money they need, while generating income for your business.

Calculate A Bad Credit Loan

 

Best Loans for Bad Credit

PostOffice.co.uk

Bad Credit Loans Guide, Services and Products from Post Office Personal Loans

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  • Loan Amounts £1,000 – £50,000
  • Loan Terms 12 – 84 months
  • APR Range 8.49% – 35.97%
  • No Minimum Credit Score

About Post Office Personal Loans

At Post Office®, we aspire to be at the very heart of customers’ choice by becoming the most trusted provider of essential services to every person in the land.

We’re the UK’s largest retail network and the largest financial services chain in the UK with more branches than all of the UK’s banks and building societies put together. We also have growing direct channels such as contact centres and online – meaning we’re there for more customers, in more ways.

Post Office® and its partners offer over 170 products under four product pillars:

• Financial Services

• Mails & Retail (not currently available on the affiliate program)

• Government Services (not currently available on the affiliate program)

The Post Office® is now more than it ever was – an independent multi-channel business, with a vibrant, fast-growing financial services business, separated from Royal Mail and embarking on a new era of growth, modernisation and customer excellence in serving the UK population.

We have the largest retail network in the UK with almost 11,800 branches. And we want to grow further: we are a multi-channel business providing more than 170 products and services to our customers but our vision is to deliver more. Our financial services business, for instance, is one of the fastest growing in the UK, with almost 3 million customers, a growing mortgage business and a current account being piloted in 2013. The Post Office®, trusted and part of the fabric of our society, is an increasingly credible alternative to the high street banks.

Choose a loan between £1,000 and £25,000 with fixed monthly repayments.Post Office Money® Personal Loans are provided by Bank of Ireland (UK)

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Best Bad Credit Loans for Small Loans

AA Loans

Bad Credit Loans Guide, Services and Products from the AA Personal Loans

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  • Loan Amounts £1,000 – £40,000
  • Loan Terms 12 – 60 months
  • APR Range 8.05% – 36.00%
  • No Minimum Credit Score

About The AA Loans

AA Loans offer unsecured personal loans, they can be used for debt consolidation, car, home improvements etc. The rate is currently 3.3% (from 23rd June 2020) and is provided by Bank of Ireland UK.

USPs

  • Fixed monthly repayments for the duration of the loan
  • Spread the repayments over 1-7 years
  • No arrangement or set up fee
  • Other Loan amounts and terms available. Loan amounts range from £1,000 to £25,000, with terms available from 1-7 years.

To apply for an AA Loan applicants must:

  • Have been a UK resident for at least 3 years
  • Be over 21 and no older than 70 when the loan term ends
  • Have a regular (minimum) annual income of £12,000 (gross). If you are self- employed you must have been employed for a minimum of 2 years
  • Have a UK based bank or building society current account that can pay direct debits
  • Ensure that they can meet the repayments, as missed payments incur a charge and could have severe consequences on their ability to obtain future credit

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Best Bad Credit Loans for Fast Funding

MasterLoan.co.uk

Bad Credit Loans Guide, Services and Products from Master Loan Company

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  • Loan Amounts £2,000 – £36,500
  • Loan Terms 12 – 72 months
  • APR Range 7.99% – 35.99%
  • No Minimum Credit Score

About MasterLoan.co.uk

Masterloan.co.uk compare 100’s of different loan plans, no matter where you are in the UK. Our dedicated home loans team will search and find the best solution for you and at all times we will keep you informed of you home loan application. We offer homeowners and business owners loans and mortgages and offer loans from £1,000 up to £2.5 Million with fast market leading completions.

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Best Bad Credit Loans for No Fees

Quick Car Finance

Bad Credit Loans Guide, Services and Products from Quick Car Finance

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  • Loan Amounts £5,000 – £100,000
  • Loan Terms 12 – 84 months
  • APR Range 8.99% – 23.43%
  • No Minimum Credit Score

About Quick Car Finance

As one of the leading car financing companies in the UK we are delighted to be able to offer no obligation car loans without arrangement fees. It’s our mission to only offer a premium service and that’s why we are well on the way to being the number one car financing company in the United Kingdom. We have over 72 different finance tiers and we are renowned for offering a high quality service. With 5* Trust Pilot customer ratings, we’ve arranged car financing for thousands of happy customers – will you be our next?

Why customers choose Quick Car Finance??

      • Best Car Finance Deals £4,000 – £25,000+
      • Used By 500,000+ People Last Year
      • High Acceptance Rate & Poor Credit Considered
      • Email creatives available upon request
      • 100% Free & No Commitment
      • Super Fast & Easy Application
      • Over 250,000 vehicles to choose from
      • Top rated 4.8 Star reviews on google (Compared to 4.1 for CarFinance 247 & 4.4 for Zuto)

Best Bad Credit Loans for Credit Cards

Score Mastercard

Bad Credit Loans Guide, Services and Products from Score Mastercard

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Score MasterCard

The Secured Score Mastercard® is one of the first credit building solutions the UK, providing a credit building solution to both consumers and new businesses looking to establish positive trade history.

Personal Secured Score Mastercard

  • Minimum requirements: UK bank account. Applicants must be over the age of 18 and must have income/employment, credit check required, no active CCJ, IVA or Bankruptcy.
  • Payment history reported to UK credit agencies, helping build credit score and tradeline history
  • No minimum credit score required
  • High approval rate due to the secured nature of the card
  • Accepted at all Mastercard® locations
  • Eco-friendly card made from recycled and degradable materials
  • 30-day money back guarantee 
  • 0% interest charged on purchases and outstanding balances 
  • Shariah certified card for those of the Muslim faith
  • Affordable credit building solution at just 29.99% APR
  • No annual fee
  • Flexible credit limit starting at 250 GBP determined by applicant and deposit amount chosen
  • Cardholder chooses most convenient monthly repayment date
  • One-time credit access fee of 10% of credit limit
  • Monthly subscription fee of £19.99 (waived for the first 30 days)

About DND Finance

Since 2000, DND Finance has established itself as a multi-national finance company helping the underserved corporate and consumer finance arenas in both the UK and Canada.  As a division of D&D Leasing UK, the company was founded by Bill Dost, offering business financing solutions in the loan, vehicle, equipment finance and leasing markets in the UK. DND Finance is fully authorised and regulated by the FCA, and is a member of….

The company has recently launched its Secured Score Mastercard® in the UK, providing a credit building solution to both consumers and companies looking to establish positive trade history.  Between its UK and Canadian operations, the company has helped thousands of customers obtain access to affordable credit solutions to move forward in life.  The Score Mastercard® was created out of a personal story experienced by DND Finance founder, Bill Dost, over 20 years ago. Out of this experience came the vision to create an affordable, accessible UK card solution that would truly help change people’s financial future, avoiding the pitfalls that can so easily be experienced with poor or no credit. In particular, people and companies in the UK who have been, or are currently, oppressed by the financial system.

Perfect for those individuals or businesses that have been turned down for credit, or new to credit, the Secured Score Mastercard® is about granting a solution that educates, equips and dignifies the user, instilling confidence to take steps forward to build their credit score, achieve a bright financial future and join a community along the way.

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Advantages and Disadvantages of Bad Credit Loans

Bad Credit Loans Guide,

If you’re thinking of taking out a bad credit  loan, here are some pros and cons to weigh up first.

Benefits of a Bad Credit Loan:

A bad credit loan can provide numerous benefits for individuals with a less-than-perfect credit history. First and foremost, it offers an opportunity to rebuild or improve one’s credit score by making timely payments on the borrowed amount. This can help restore financial stability and demonstrate responsible borrowing behavior, which can be crucial for future loans or credit applications.

Additionally, bad credit loans often come with more lenient eligibility criteria compared to traditional bank loans, making them accessible for those who have been rejected elsewhere. Moreover, these loans provide a lifeline during emergencies or when unexpected expenses arise that cannot be covered using savings alone. These funds can be used for various purposes such as debt consolidation, medical bills, vehicle repairs, or home improvements.

Overall, bad credit loans offer borrowers a chance to secure necessary funds while simultaneously working towards improving their creditworthiness in the long term.

Drawbacks of a Personal loan:

A bad credit loan, also known as a subprime or high-risk loan, is designed for individuals with a poor credit history and limited borrowing options. While these loans offer the opportunity to access much-needed funds in difficult times, they come with several drawbacks. Firstly, bad credit loans typically carry higher interest rates compared to traditional loans, making them more expensive over the long term. This can result in a heavier financial burden for borrowers who are already struggling financially.

Moreover, the repayment terms of these loans tend to be shorter, increasing the monthly payment amount and potentially adding additional stress on the borrower’s budget. Additionally, securing a bad credit loan often requires collateral or a co-signer, putting personal assets or relationships at stake in case of default.

Finally, taking out a bad credit loan may have a negative impact on one’s credit score if repayments are not made timely or consistently. Overall, while bad credit loans can provide temporary relief to those with limited options, they come with significant disadvantages that must be carefully considered before applying for such financing.

How to Apply for a Bad Credit Loan?

Bad Credit Loans Guide,

When you use our eligibility checker, we’ll show you a list of bad credit loans you might qualify for.

Once you’ve chosen a personal loan, you’ll be taken to the lender’s site to apply. You’ll need to have details including:

  • 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.

This helps the lender assess whether you’ll be able to make the loan repayments.

What are the Alternatives to Bad Credit Loans?

Bad Credit Loans Guide, - Types of Bad Credit Loans

There are five main alternatives to bad credit loans:

Secured loan

If you’re having trouble getting accepted for a personal loan or you’re looking to borrow more than £25,000, you could try applying for a secured loan. This type of loan is also known as a homeowner loan.

You’ll need to offer an asset such as your home or car as collateral. This could be recovered by the lender if you fail to make the repayments.

Because secured loans are less risky for lenders, they tend to offer:

  • Lower interest rates
  • Longer terms
  • Higher borrowing limits.

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Credit cards

If you’re looking to borrow a small amount, a 0% interest credit card could be a useful alternative to a personal loan.

Make sure you can afford to keep up with the minimum monthly repayments and ideally repay the full amount before your 0% period ends.

Apply for a Credit Card

Overdraft facility

If you only need to borrow a small amount of money for a very short time, consider using an interest-free overdraft, if you have one. If you don’t, it could be worth looking at alternative current accounts that offer this facility.

Peer-to-peer personal loan

Peer-to-peer (P2P) loans work in a similar way to standard personal loans. The difference is you borrow money from another person or group of people, instead of a bank or building society.

You can find P2P lenders on dedicated websites. Interest rates vary and can be affected by your credit score. However, P2P lending can sometimes offer lower interest rates compared to traditional lenders.

Car Finance

Car finance helps people buy a car that they couldn’t normally pay for up front. You’ll typically pay a deposit, followed by monthly repayments (with interest) over a fixed term. This could be from two years up to five years.

There are several different types of car finance available:

  • Hire Purchase (HP) – your loan will be secured against the car, and you’ll split its cost into monthly repayments. Once you’ve made the last repayment, the car will be yours to keep.
  • Personal Contract Purchase (PCP) – this type of agreement is based on the amount of value the car will lose during the loan term (its depreciation) rather than its total value. At the end of the agreement, you can hand the car back, buy it by paying a one-off balloon payment, or use any positive equity as a deposit in a new loan.

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Frequently Asked Questions about Personal Loans

There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.

  • 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.

  • 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 could be eligible for without affecting your score. Doing this can help you see what amounts and rates of interest you could get for loans you’re likely to be accepted for, based on your credit history.

  • What is the easiest loan to get approved for?

    That depends on your own specific circumstances. In some cases, if you own your home, you might find it easier to apply for a secured loan.
    If you have poor credit and are struggling to find personal loans, guarantor loans might be easier – but they depend on having a friend or family member to vouch for you.

  • Can I get approved for a loan online?

    It’s very easy to check your eligibility for loans online, and it’s just as easy to apply for a loan. Certain providers might approve you quickly, though most people with poor credit will be subject to more thorough credit checks – which can often take 24 hours or more. You’ll be notified on whether you are successful either by phone or email.

  • How long will it take to get my money?

    With some lenders, you can get your money on the same day as your application if you already hold an account with them. But you can normally expect to get your money within a week.
    The quote will be valid for 30 days, so it gives you time to look for your dream car if you haven’t already found it. Once you have decided, you’ll need to provide the details of the car and of your approved dealer. The money will be transferred to the dealer and you’ll receive the deeds to the car when you collect it.

  • What can I do if I need to borrow more than they’ll lend?

    If you need to borrow more than the lender is willing to offer you, or you need more than the typical £25,000 limit, consider a secured loan. You can borrow £100,000 or even more with a secured loan, but you’ll need to offer something of value as collateral, like your home.
    Think carefully before taking out this type of loan. If you miss repayments, the lender can seize the asset you put up as collateral to repay what you owe.

  • What happens if I can’t repay my loan?

    If you’re struggling to repay your loan, contact your lender as soon as possible. They may be able to support you with managing your repayments. Alternatively, contact a debt advice service. They’ll be able to help you organise a debt repayment plan with your lender.
    If you can’t reach a compromise with your lender, you’ll probably be charged penalty fees for partial, late or missed repayments.

  • Can I repay my loan early?

    You can pay off your personal loan early, but you might have to pay an early repayment charge (ERC). Early repayment charges vary, but you can usually expect to pay the equivalent of one to two months’ interest.

  • What will happen if UK interest rates change?

    If your personal loan has a fixed interest rate, it won’t be affected if UK interest rates change. Your monthly repayments should remain the same, regardless of what happens to the Bank of England base rate.

  • Can I get approved for a loan online?

    It’s very easy to check your eligibility for loans online, and it’s just as easy to apply for a loan. Certain providers might approve you quickly, though most people with poor credit will be subject to more thorough credit checks – which can often take 24 hours or more. You’ll be notified on whether you are successful either by phone or email.

  • Can I apply for a small loan when I have bad credit?

    Yes it is possible to apply for a small loan for bad credit. Typically the smallest loan you could apply for through MoneySuperMarket is likely to be around £1,000.

  • Can I apply for a ‘no-guarantor’ loan with bad credit?

    Any loan that doesn’t require the borrower to have a ‘guarantor’ is a no-guarantor loan. So this would apply to unsecured personal loans and secured loans, for example. If you have a bad credit history and a low credit score it can be difficult to be accepted for a personal loan. There are specialist bad credit lenders. But if you are accepted for a loan, you’re likely to only be able to borrow a small sum and the interest rate will be high.
    If you’re a homeowner you might be able to borrow a secured loan. But remember your home will be at risk of repossession by the lender if you can’t keep up with your repayments.
    You can apply for a loan with no guarantor even if you have bad credit, but if you’re rejected for the loan this could further damage your credit score. When you search for a loan with MoneySuperMarket we’ll show you your chances of being accepted for different loan deals before you apply – so you’ll know where you stand.

  • What do I need to consider when taking out a loan with bad credit?

    If you have bad credit and you want to take out a loan, it’s important to think about if you’ll be able to pay off the loan. If you don’t keep up with the loan repayments, your bad credit score can get even worse.

  • What is considered a poor credit score?

    What is considered a poor credit score will depend on the credit reference agency you use. There are three main credit reference agencies – TransUnion, Experian and Equifax – and they all use different scoring systems.
    But generally speaking, any score at the lower end of CRA’s spectrum will be a bad credit score. Here at MoneySuperMarket, our Credit Monitor service uses the TransUnion scoring system. TransUnion classes ‘very poor’ credit scores in the range of 300 – 600, and ratings of 601 – 660 are considered ‘poor’.

  • Will my credit score rise if I pay my loan back on time?

    Yes, your credit score will improve if you pay your loan back on time. By keeping up with your loan agreement, you’re showing lenders you are a responsible borrower and in turn, your credit rating will rise.

  • Can I get instant approval on a bad credit loan?

    You can get instant approval on a bad credit loan, however it’s important to remember that a reputable lender will carry out a credit check.

Types of Loans, Products and other services available

There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.

Credit Cards

Start Building your Credit History with the Score Mastercard

The only secured credit card available regardless of your credit history, to get the break you deserve.

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