Compare Bad Credit Loans

What is a bad credit loan?

Bad credit loans are meant for people who have a poor credit score due either to past money troubles or limited credit history.

You can use bad credit loans for many different reasons, such as car repairs, or to consolidate your debts into one single repayment, which can make it easier to repay them and keep track. Some people take out a bad credit loan to try to improve their credit score by showing they can manage debt.

Taking out a loan when you already have a poor credit rating isn’t an easy decision to make. Anyone who has struggled with debt problems in the past will be aware of how easy it is for debt to pile up and get out of control. However, sometimes the right loan can help people in such circumstances, providing it is affordable for the borrower.

How to get a loan with bad credit

Before you think about getting a loan, you should work out a budget so you know how much you can afford to borrow and repay each month. This will help you when you start looking at different loans as you can find one that best meets your requirements and circumstances.

You may also want to check your credit score to see if there are any easy ways to improve it, as a better credit score will help you to get a more competitive loan.

You can check your eligibility for a loan and receive quotes using the tool above. You can also browse through the options on our comparison table to find out the representative APR of each provider, how much you can borrow, and the loan terms on offer. You can also see more details about their eligibility criteria.

You should only apply for a loan if you are confident of being accepted, as loan applications will appear on your credit history and could affect your score.

When you apply, lenders will ask for proof of personal details including your name, address, age, employment status, income, and more.

What are the advantages of a loan for bad credit?

Some of the advantages of a bad credit loan are:

• You can borrow a lump sum of money to use for many different purposes.
• As long as you repay the loan in full and on time, you’ll improve your credit score.
• If you have bad credit, you’re more likely to be accepted for one of these loans than a standard personal loan.

What are the disadvantages of a loan for bad credit?

However, you need to consider some of the downsides of getting a bad credit loan, including:

• These loans typically come with higher interest rates.
• You may not be able to borrow as much as someone with a good credit score.
• Your loan options are more limited as not all providers offer bad credit loans.

Types of bad credit loans

Bad credit loans come in various forms. It’s worth spending some time researching these different loan options to make sure you choose the right one for your situation.

Personal loan

There are various lenders that will consider offering a personal loan to people with bad credit histories. These are unsecured loans, which will often come with higher interest rates than loans that offer some form of security. To qualify for an unsecured loan, you will have to meet other eligibility criteria, such as having a steady reliable income, and be able to afford the repayments.

Secured loan

Although secured loan providers tend to offer larger sums of money over a long period of time, they are often less strict about borrowers’ credit ratings as the loan is secured against a property or other high-value asset, such as a car. If the borrower fails to repay, the lender has the option to force the sale of the property or goods to get back the money they’re owed, so there is less risk to the lender. This means interest rates can be lower than on an unsecured loan.

For borrowers, however, there is a risk that you could lose your home, so it’s vital that you are confident you can meet the repayment responsibilities before committing to a secured bad credit loan.

Guarantor loans

Guarantor loans are a popular, unsecured method to obtain a loan despite having a poor credit history. If you have a close family member or friend who is financially stable and has a good credit score, they can opt to act as a guarantor for your loan. Although you are the borrower, your guarantor agrees to cover the cost of the repayments if you are unable to.

Peer-to-peer borrowing

Peer-to-peer loans are offered by private investors rather than traditional lenders. Some peer-to-peer loan options may be available to borrowers with a poor credit score, but interest rates will usually be high and other lending criteria will apply.

Debt consolidation loans

By merging different loans into a single loan, you can simplify your repayments with a bad credit consolidation loan. These loans come with a single level of interest from one lender, as opposed to maintaining multiple rates from multiple lenders on different debts. However, bear in mind that consolidating your debts may mean you pay more in interest overall. Debt consolidation loans can be secured or unsecured.

Applying for a bad credit loan

Before applying for a bad credit loan, you’ll want to think carefully about whether this type of loan is the best option for you. To ensure you choose the right kind of loan, ask yourself:

• Are there cheaper alternatives available to me, such as a bank overdraft or the option of borrowing from a family member?
• Will I be able to borrow enough?
• Can I afford the repayments over the entire term of the loan?
• Can I repay early without incurring charges?
• What is the loan APR?
• If you decide that applying for a bad credit loan is right for you, use our comparison table to see what deals are on offer and check your eligibility.

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