Compare Bad Credit Loans

How to choose a bad credit loan

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 become out of control. However, sometimes the right loan can help people in such circumstances, providing it is affordable for the borrower.

Although finding a lender that offers bad credit loans isn’t as easy as finding other loans, they are still available – you just need to know where to look. We hope that our bad credit loan table will help you find some options that could work for you.

Deciding which type of bad credit loan is right

Bad credit loans come in various forms. Each type of loan is suitable for different scenarios, so it takes some careful research to ensure you are applying for the type of loan that will suit your needs and circumstances.

Main types of bad credit loan

• 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. If the borrower fails to repay, the lender has the option to force the sale of the property to recoup the money owed, so there is less risk involved. For borrowers, however, borrowing this way is risky 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 friend or loved one, who is financially stable and has a good credit score, they can opt to act as a guarantor to your loan. Although you are the borrower, your guarantor pledges to cover the cost of the repayments if you are unable.
• Regular personal loan: There are various lenders who will consider lending money to people with bad credit histories. These unsecured loans usually come with higher interest rates and you will have to meet other eligibility criteria, such having a steady reliable income income, and good affordability for the repayments.
• Peer-to-peer borrowing: Some peer-to-peer loan options may consider borrowers with a poor credit rating, but interest rates will usually be high and other lending criteria will apply.

Considerations when choosing a bad credit loan

You may find that you are pleasantly surprised with the number of bad credit loans that are available to you once you start looking. Bad credit loans may be relatively easy to obtain, but usually come with high interest rates as lending to people with poor credit is viewed as higher risk.

Some borrowers opt to take out a bad credit loan to try to improve their credit rating, which can sometimes work providing you stick to your repayment plan and repay the loan in full and on schedule. Others may find that consolidating their existing debt into one simple repayment makes their debt more manageable and affordable, although it can also result in your paying more interest across the entire term of the loan.

However, borrowers need to think carefully about their situation and their requirements. To ensure you choose the right kind of loan, ask yourself:

1. Are there cheaper alternatives available to me, such as a bank overdraft or the option of borrowing from a family member?
2. Will I be able to borrow enough?
3. Can I afford the repayments over the entire term of the loan?
4. Can I repay early without incurring charges?
5. What is the loan APR?

Choosing a bad credit loan FAQs