Bad credit personal loans (original) (raw)

Comparison of loans for bad credit

Table ordered by representative APR with affiliated products first.

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Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.

Late repayments can cause you serious money problems. See our debt help guides.

Can I get a loan with bad credit?

Yes, you may be still eligible for a personal loan even with a poor or low credit score. However, you may find your options are more limited in terms of the lenders you can choose, as well as the size of your loan amount and the rate you receive.

Depending on your situation, it may be a better idea to try and improve your credit score before applying for a loan. If you need a loan in the near future, there are ways to improve your chances of getting a loan with bad credit.

How to get approved for a bad credit personal loan

Unfortunately, there is no universal secret to getting approved for a loan if you have bad credit. However, there are a few things you can do to improve your chances:

• Check your credit score to see where you stand.
  By checking your credit score you get an idea of your credit position and where you fall in the credit-active population.
• Don’t make too many credit applications at once.
  This is a red flag to lenders and may hinder your chances at future credit approvals. If you have done this, try and wait to make any future applications.
• Check for “soft searching” facilities. Many lenders are now able to carry out a “soft search” Twhere they tell you your likelihood of being approved and give a personalised quote, without affecting your credit score, and sometimes without leaving a “footprint” that would be visible to potential lenders.

What are your personal loan options with bad credit?

There are various credit options for people with a bad credit rating. Here are some of the main ones:

• Specialist bad credit loans.
  Some lenders such as those compared above have made a niche for themselves by catering specifically to those with less than perfect credit histories. These loans typically cost more, but eligibility is based more on affordability that credit score.
• Secured personal loans.
  If you’re able to provide collateral, such as a car, equity in your home or another high-value asset, a lender may be more willing to overlook a few negative marks on your credit file.
• Guarantor personal loans.
  Do you have a partner, close friend or relative who is willing to guarantee the loan for you? You may be able to qualify for a guarantor personal loan. There are certain bad credit lenders who offer tailored products for borrowers that you may want to consider.
• Payday/short term loans.
  Are you only looking to borrow a small amount to cover an unexpected shortfall? You could consider a short-term loan. These lenders are less focused on your credit history and more focused on your current financial position and ability to repay the loan.
• Credit builder credit cards.
  With a credit builder credit card, you start with a low credit limit, but quickly get opportunities for this to be reviewed. This type of card is designed as an interim solution, to help borrowers build or improve their credit record before moving on to different credit products.
• Alternative specialist lenders. There are a few innovative lenders such as Drafty, that offer alternative takes on short term loans, to help people avoid expensive unauthorised overdraft fees.

Don’t forget: talking to lenders is also a great idea – you may be surprised at how flexible they can be. Ultimately, lenders do want to lend money – they have to do so responsibly, but it’s in their interests to work with borrowers to find a sustainable credit solution.

Get up to £3,000 when you need it with Drafty

• Get ongoing access to a flexible line of credit
• No late fees, no early repayment fees
• Find out if you’ll be approved without affecting your credit score

Representative Example: Assumed credit limit: £1200. Representative 96.2% APR (variable). Annual interest rate 69.4% (variable).

Personal loans with no credit history

Lenders are also wary of lending to people without much in the way of credit history. This might include 18-year olds or newly-arrived migrants. If you’re in this situation there are a few things you could do to help your case:

• Register on the electoral roll.
  Visit your local council’s website to register.
• Open a UK current account.
  Showing lenders that you can keep up direct debits and utility payments will help show that you are likely to keep up repayments on a loan. Making regular deposits into savings could bolster your case further.
• Start small. By borrowing just a small amount, for example using a credit builder credit card, you can demonstrate that you pay back loans responsibly.

What about a broker?

As long as you bear in mind that it’s unlikely to check the whole market, but instead a subsection of lenders with whom it has an arrangement, then a broker can take the strain out of finding a competitive personal loan deal. Brokers find the best rate available to you from their panel of lenders, taking into account your individual circumstances. Normally this service is free, because the broker will earn a referral fee from the lender.

Some brokers or “matching services” run soft searches with a range of lenders in seconds, meaning that without any impact on your credit score you’ll be able to get realistic rate quotes for loans you’re likely to be approved for. This can be a smart way to avoid disappointment, protect your credit score and focus on lenders likely to approve you.

If you’re comparing any credit-based products, it won’t be long before you’ll come across the Annual Percentage Rate (APR).

This figure is designed to provide an annual summary of the cost of a loan and takes into account both interest and any mandatory charges to be paid (for example an arrangement fee) over the duration of a loan.

All lenders must calculate the APR of their products in the same way, and must tell you the APR before you sign an agreement, so for consumers it can be a handy tool for comparison.

If you’re looking at bad credit personal loans, expect higher APRs than those you’ll see comparing standard products. This means borrowing will be more expensive but also that it’s easier to be approved if you don’t have a great credit score.

Bear in mind, however, that lenders are only obliged to award this rate to 51% of those who take out the loan – the other 49% could pay more. That’s why it’s often referred to as the representative APR. Depending on your circumstances, you may be offered a better or a worse rate than the advertised APR.

Bottom line

Having a bad credit score may make it difficult or more expensive to get a personal loan. If you have poor credit, you could consider getting a guarantor loan but it’s important to keep in mind that the guarantor will be responsible for any missing repayments. If you’re looking to improve your credit score, you can read our guide for some helpful tips.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.

Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio

Chris's expertise

Chris has written 617 Finder guides across topics including:

• Loans & credit cards
• Building credit
• Financial health

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