Bad Credit Loans information 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.
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.
Table of Contents
- What Is a Bad Credit Loan?
- How do Bad Credit Loans work?
- Best Bad Credit Loans
- Advantages and Disadvantages of Bad Credit Loans
- Benefits of a Bad Credit Loans
- Drawbacks of a Bad Credit Loans
- How to Apply for a Bad Credit Loans
- Alternatives to BadCredit Loans
- FAQ about Bad Credit Loans
What is a Bad Credit Loan?
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.
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.
Best Bad Credit Loans
- Best for Low Rates
- Best for Bad Credit
- Best for Small Loans
- Best for Fast Funding
- Best for No Fees
- Best for Credit Cards
See Which Loans You Qualify For
Best Bad Credit Loans for Low Rates
Loan.co.uk
- 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.
- We pay for everything – Credit searches, valuations, legal searches, third party references. We cover the cost of everything.
- Our client fees are up to 60% cheaper than our homeowner loan competitors.
- Market leading technology. We continue to invest millions of pounds in our technology to make the client experience simple, transparent and hassle-free.
- 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.
Best Loans for Bad Credit
PostOffice.co.uk
- Loan Amounts £1,000 – £50,000
- Loan Terms 12 – 84 months
- APR Range 8.49% – 35.97%
- No Minimum Credit Score
About Post Office Bad CreditLoans
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)
Best Bad Credit Loans for Small Loans
AA Loans
- 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
Best Bad Credit Loans for Fast Funding
MasterLoan.co.uk
- 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.
Best Bad Credit Loans for No Fees
Quick Car Finance
- 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
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.
Advantages and Disadvantages of Bad Credit Loans
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 Bad Credit 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?
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?
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.
Get a Instant Secured Loan Quote
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.
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.
Compare Bad Credit Loans
Click a comparison website below to recieve bad credit loans quote.
Frequently Asked Questions about Bad Credit Loans
There are several different types of bad credit loans available, with different eligibility criteria, that are designed to suit different needs and circumstances.
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How Much do Personal Loans cost?
The cost of a personal loan depends on how much you want to borrow, the APR and how long you take to pay back the money. Interest rates vary according to the size and length of the loan. A longer loan term may attract lower rates, but the overall cost will be higher than a short-term loan. And borrowers with poor credit scores will be charged higher interest rates. We can arrange finance for most cars and vans and cover the majority of UK dealers.
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What happens if I miss a personal loan repayment?
If you miss a loan repayment, the lender may add extra charges and interest to your loan. Missed payments will also be noted on your credit report, which could harm your credit score and make it harder for you to borrow in the future. If you think you’re going to miss a payment, contact your lender. The sooner you discuss your options, the more flexible the lender may be.
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Do I need a good credit score to get a personal loan?
You may be able to get a personal loan with bad credit, but it will affect how much you can borrow and the amount of interest you’ll be charged. The better your credit score, the better terms you’ll be offered for a personal loan because the lender will be more confident you’ll be able to repay it. However, buying a car on finance can be more expensive than buying outright. Unless you get a 0% finance deal, you’ll likely be paying interest over several years and there’s a cost to that. Make sure you’re fully aware of the costs involved and only commit if you’re confident you can pay the car off.
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Can you be pre-approved for a personal loan?
Yes, you can be pre-approved for a personal loan. Pre-approval means your loan application will be accepted based on the information you’ve provided. The interest rate, loan amount and term length will all be guaranteed, pending final checks from the lender. Put simply, it’s a ‘what you see is what you get’ deal. Credit is subject to status and additional affordability checks.
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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.
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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.
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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.
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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.
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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.
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How long will it take to get the money?
Every lender differs. Some can get you the funds same day. However, it's usual for the money to come through in about three to five days. You can then arrange with the dealer to pick up your new car.
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How do I calculate my deposit?
Your deposit is the amount of money you have available to pay the dealership upfront. This could include savings and/or the value of a current vehicle as a part-exchange, and it’s taken off the total sum of the car you’re buying.
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Can I sell my old car, as a deposit?
Yes, you can sell your car online and use the money as a deposit for your new car. You can sell your car online with the AA, thanks to our partnership with Motorway. Get the best price for your car from 5,000+ dealers. It’s completely free with home collection.
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Can I pay off the loan early?
Yes, you can pay off your loan at any time without incurring any early repayment charges. You will receive a rebate of interest if you pay off the loan early. You can also make overpayments with most of our lenders to help shorten the length of your loan.
Other Types of Loans Available
There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.
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