However, your options can be limited if you’ve got bad credit or had problems paying a loan back before.
Many people think a low credit score makes them an unattractive prospect for lenders, but there are plenty of lenders who will offer loans for bad credit.
Believe Money is a professional loans broker dedicated to helping clients find the best borrowing solution for their needs.
Working with us means you can benefit from a fully bespoke service and enjoy a hassle-free application process.
Are you a homeowner or a tenant?
What is a bad credit score?
In the UK, there are three main credit reference agencies (CRAs): Equifax, Experian, and TransUnion. Each CRA uses a different scoring system, but they all use a similar range of factors to calculate your credit score. These factors include:
- Your payment history: This is the most important factor in determining your credit score. Lenders want to see that you have a history of making on-time payments.
- The amount of debt you owe: Lenders want to see that you have a manageable amount of debt.
- The length of your credit history: Lenders want to see that you have a long history of managing credit responsibly.
- The types of credit you have: Lenders want to see that you have a variety of credit accounts, such as credit cards and loans.
- Your credit enquiries: Lenders want to see that you are not applying for too much credit too often.
The table below shows the credit score ranges used by each CRA:
|Credit Reference Agency
|Bad Credit Score
|Good Credit Score
|680 and above
|700 and above
|720 and above
A credit score of 629 or below is considered to be bad credit. This means that you may have difficulty getting approved for a loan or may have to pay a higher interest rate.
A credit score of 680 or above is considered to be good credit. This means that you are more likely to be approved for a loan and will likely get a lower interest rate.
It is important to note that credit scores can change over time. If you make on-time payments and keep your debt levels low, your credit score will improve. If you miss payments or take on too much debt, your credit score will decline.
15.6 million people in the UK feel the impacts of a poor credit score, but solutions are available.
According to an article by The Express, 15.6 million people in the UK delay purchasing a home, getting married and even changing careers due to a poor credit rating.
We’re living in challenging times, with Covid-19 slowly moving past us, and the cost of living crisis causing more families to rely on credit cards and loans.
Even the smallest things can contribute to a low credit rating, such as making a credit card payment a couple of days too late or choosing the wrong interest rate.
The critical thing to remember is that many people struggle to reach – and maintain – a good credit history, so there will always be loan who specialise in providing borrowing solutions for people who might not pass the general criteria.
The specialists at Believe Money find our clients the best loans for their circumstances. With so many solutions to choose between, we’re confident we can help you find a loan.
Here are the main options for individuals with poor credit.
While personal loans aren’t usually available for people with low credit scores, some providers out there will make an exception. However, these loans are controversial because they often come with high-interest rates and short repayment periods.
As personal loans are unsecured, they don’t require any collateral, such as property or valuable items. Lenders are taking on more risk, and most prefer candidates with good credit scores.
The amount of money you can borrow might be lower due to your credit rating, and many people will avoid these loans because of the high repayments.
However, a personal loan could be a good solution if you already have limited options and need some cash.
Secured loans are one of the most popular solutions if you want to borrow money. They typically don’t require someone to have an excellent credit score because these loans let you use collateral as security.
For example, the lender will let you borrow money if you have viable equity from a property or other valuable assets.
However, these loans aren’t available if you don’t have collateral, so they’re not suitable for everyone.
Many people with bad credit scores opt for guarantor loans, which give them more freedom. They’re often considered a last resort when all other avenues are closed to applications.
A guaranteed loan requires a close friend or family member of the borrower to sign the agreement. However, if you default on the loan, your guarantor will be responsible for making repayments, which puts some people off.
You’ll need to find someone with good credit and willing to take on the risk of repayments, so it depends on your family more than anything else.
Also, despite offering a guarantor, many loans have higher interest rates because lenders don’t have as much security.
These are short-term loans that are typically repaid within two weeks. They have very high interest rates and fees, so they should only be used as a last resort.
Microloans are small loans that are typically offered to entrepreneurs and small businesses. They have lower interest rates and fees than payday loans, but they may still be too expensive for some borrowers.
Are you ready to take out a bad credit loan?
Consider the amount of money you need to borrow, the length of time you need to repay it, and the interest rates and fees involved. You should also make sure that you can afford the monthly repayments.
Here’s what you should think about before applying for a loan:
Can you build your credit score before?
Every time you want to make a significant purchase, the retailer or bank will check your credit record. Building up a good score will make life easier, especially when it comes to securing loans or buying a property.
Some people increase their score before applying for a loan because it opens up better interest rates and repayment terms.
Some ways to improve your credit score include:
- Pay off your debts. This is the most important thing you can do to improve your credit score. Lenders want to see that you are able to manage your debt responsibly. If you have a lot of debt, it may be helpful to consolidate your debt into one loan with a lower interest rate.
- Make on-time payments. This is another important factor that lenders consider when evaluating your credit score. If you make all of your payments on time, it will show lenders that you are a responsible borrower.
- Dispute inaccurate information on your credit report. If you see any inaccurate information on your credit report, such as late payments that you did not make, you should dispute it. This can help to improve your credit score.
- Open a new credit card. If you do not have any credit history, or if your credit history is very limited, you may want to open a new credit card. This will help to establish a credit history and can help to improve your credit score.
- Use less than 30% of your available credit. Lenders look at your credit utilisation ratio, which is the amount of credit you are using divided by the total amount of credit you have available. A low credit utilisation ratio is considered to be a good thing.
- Avoid applying for too many loans or credit cards in a short period of time. This can lower your credit score.
- Wait. It takes time to improve your credit score. It may take several months or even years to see significant improvement.
It is important to note that not all of these things will improve your credit score in the same way. Paying off your debts and making on-time payments are the most important things you can do.
Can you afford the loan?
People with a bad credit history often find that their loans come with high-interest rates, as lenders want more security. You’ll have to pay more each month than someone with excellent credit, and also ensure you don’t miss any monthly repayments.
An unexpected expense, such as car or boiler repairs, could impact your loan repayments, creating issues further down the line.
If you know that you live on a tight budget each month, it might be best to improve your financial situation before taking out a loan.
Failing to stick to your payment schedule could cause problems
Lenders expect people to make monthly loan payments, but defaulting on those payments could put you at risk. Some loan providers will discuss any financial difficulties you’re having and might be able to make repayments, but this isn’t a guarantee.
If you owe money to a lender, they can make a new payment schedule or get a debt collection agency to recover any outstanding amounts through your assets.
In serious cases, you could also end up in court with a judgement on your file.
Lenders consider numerous factors
- Credit score is one of the most important factors that lenders consider when approving bad credit loans. A good credit score shows that you have a history of making on-time payments and managing your debt responsibly. However, even if you have a poor credit score, you may still be able to get approved for a bad credit loan if you have other factors in your favour, such as a stable employment history and a high income.
- Employment history is another important factor that lenders consider. Lenders want to see that you have a steady job and a consistent income. If you have been employed for a long time and have a good track record of job stability, this will be a positive factor in your application.
- Income is also important to lenders. They want to make sure that you can afford the monthly payments on the loan. If you have a high income, this will be a positive factor in your application.
- Debt-to-income ratio is the amount of debt you have compared to your income. A high debt-to-income ratio can make it difficult to get approved for a loan, even if you have a good credit score. Lenders want to make sure that you have enough disposable income to make the monthly payments on the loan.
- History of making on-time payments is another important factor that lenders consider. If you have a history of making on-time payments, this will show lenders that you are a responsible borrower. However, if you have a history of late payments or defaults, this will be a negative factor in your application.
- Collateral is something of value that you can offer to the lender as security if you default on the loan. If you have collateral, such as a car or a house, this can make it more likely that you will be approved for a loan. However, owning a house doesn’t guarantee a loan because lenders need to look at your current equity. For example, if your home is worth £300,000, but you have a mortgage of £250,000, your equity will only be £50,000, so you can borrow up to that amount.
- Other factors lenders may also consider other factors, such as your age, your marital status, and your financial goals. If you are a young borrower, you may have a harder time getting approved for a loan than an older borrower. If you are married, your spouse’s income and credit history may also be considered. And if you have specific financial goals, such as buying a house or starting a business, lenders may be more willing to work with you.
It is important to note that not all lenders will consider all of these factors. Some lenders may focus more on one factor than another. It is also important to remember that even if you have a good credit score, you may still be denied a loan if you have other negative factors in your application.
If you are denied a loan, it is important to ask the lender why you were denied. This will help you understand what you need to do to improve your chances of getting approved for a loan in the future.
The different interest rates and fees associated with bad credit loans
- Interest rates for bad credit loans can range from 10% to 40% APR (annual percentage rate). The interest rate you are offered will depend on a number of factors, including your credit score, the amount of money you borrow, and the length of the loan term.
- Fees associated with bad credit loans can also be high. These fees can include:
- Arrangement fees, which are charged when you take out the loan. These fees can range from £100 to £300.
- Early repayment fees, which are charged if you repay the loan early. These fees can be up to 5% of the outstanding balance.
- Monthly service fees, which are charged each month to cover the lender’s administrative costs. These fees can range from £5 to £10.
The different repayment terms available for bad credit loans
- Repayment terms for bad credit loans can range from 12 months to 60 months. The repayment term you are offered will depend on a number of factors, including your credit score, the amount of money you borrow, and the interest rate you are offered.
- Short-term bad credit loans typically have repayment terms of 12 to 24 months. These loans are often offered by payday lenders and other high-cost lenders. They typically have very high interest rates and fees, so they should only be used as a last resort.
- Medium-term bad credit loans typically have repayment terms of 24 to 36 months. These loans may be offered by banks and other mainstream lenders. They typically have lower interest rates and fees than short-term bad credit loans, but they may still be more expensive than loans for borrowers with good credit.
- Long-term bad credit loans typically have repayment terms of 36 to 60 months. These loans may be offered by banks and other mainstream lenders. They typically have the lowest interest rates and fees of all the bad credit loans, but they may still be more expensive than loans for borrowers with good credit.
It is important to choose a repayment term that you can afford. If you cannot afford the monthly repayments, you may end up defaulting on the loan, which could damage your credit score even further.
How much can I borrow?
There are no set amount lenders offer because it depends on the above circumstances. Also, the type of loan will determine how much money you receive.
Secured loans are ideal for large purchases, as these loans can exceed £100,000. However, you won’t be eligible for secured loans if you don’t own a home.
Instead, your options will be limited to unsecured loans, they usually offer lower amounts of money.
The cut-off point is under £25,000, so these loans typically pay for smaller purchases or debt consolidation.
Search for bad credit loans with Believe Money
If you’re looking for a loan online, you’ll notice how many providers say no to individuals with bad credit. Unfortunately, traditional lenders have strict eligibility rules – but that’s what Believe Money is here for.
As a specialist brokerage, we offer a fully bespoke service for people who need help finding a loan provider.
We’ve shown numerous clients that past money troubles don’t necessarily mean their borrowing options are curtailed – we can help you, no matter your circumstances.
Here’s how we can support you:
We partner with specialist lenders
While you can go online and find lenders who’ll take you on, you won’t have much choice. As a broker, we partner with multiple lenders, including those who offer money to individuals considered higher risk.
If you’re having no luck with mainstream lenders, we can help you get a loan that suits your financial state.
Our checks won’t affect your credit score
We need to perform credit checks to match you with the best lenders. However, our soft credit check won’t impact your score, so you can rest assured that we’ll help you without worsening the situation.
Competitive interest rates
Wherever possible, we try to ensure our lenders offer competitive interest rates. Your credit score and factors such as missed payments will have an impact, but we go out of our way to find a suitable loan.
Compare bad credit loans today
When finding the best loan for your needs, we’ll always work hard to deliver a solution. Once we find the best option from our expansive network of UK lenders, you can make an application.
Our brokers support clients with loan applications and charge no upfront fees. So, if you want a brighter financial future, please call us for a free consultation, or contact us through our website.
Compare Bad Credit Loans
With Believe Money, bad credit isn’t an obstacle to accessing affordable finance and loan options. As a finance broker we have access to hundreds of finance and exclusive deals to get you the best option for your circumstances. Even if you have defaults, CCJs and bankruptcy on your credit file, our advisors work hard to get you the finance you need.
We specialise in bad credit finance including secured loans for bad credit, bad credit debt consolidation and loans to build credit. So if you’re concerned about your credit rating and your ability to borrow money, get in touch for free, helpful advice.
We specialise in bad credit finance including secured loans for bad credit, bad credit debt consolidation and loans to build credit. So if you’re concerned about your credit rating and your ability to borrow money, get in touch or give us a call on 01302 591 360 for free, helpful advice.
Why Use Believe Money?
Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan providers.
Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.
How does bad credit affect my loan options?
Some people with bad credit scores get loan approval but have to pay higher interest rates. Traditional lenders might limit your options, but specialist lenders will judge you individually.
What types of loans are available for bad credit borrowers?
The availability of these loans may depend on your specific financial situation and the lender’s policies. That’s why it’s best to go through a broker because more solutions are available.
Do lenders offer bad credit loans without checking your credit score?
Also, if you’re a homeowner or have other valuable collateral, you can get a secured loan which relies less on your credit score.
Remember, with any loan; it’s essential to consider the terms and conditions before committing to a loan without a credit check.
How can I improve my chances of securing a bad credit loan?
Some lenders will also accept guarantors, so there are ways to get a loan. Think about what’s best for you now because if you can pay off some debts, you’ll have a better credit score for the loan application.
What are the interest rates for bad credit loans?
Secured loans have lower interest rates than personal loans, and they’re easier to get if you hold equity in your property.
Are there any alternatives to bad credit loans?
Can a bad credit loan help me rebuild my credit score?
How can I find reputable lenders offering bad credit loans?
Avoid those companies at all costs, and go through a reputable broker to access proper lenders.
Believe Money doesn’t partner with any companies offering payday loans, and we ensure our brokers are upfront about any repayments and interest rates.
How It works
Simple, easy application
We search our panel of lenders to find the deal that’s right for you
When you confirm your chosen deal, we get your application moving
The money lands in your bank
account – usually within two weeks
We compare loans from our panel of the UK’s top lenders to get you the best deal.
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