Quick loans from £100 to £15,000

Bad credit loans are loans designed for people who have a poor credit history and a low credit score.

A poor credit score typically results from negative entries on your credit report, which may make it harder to access loans from mainstream lenders.

Lenders specialising in bad credit loans are more willing to consider applicants with these issues, though they often charge higher interest rates to offset the increased risk.

Common factors that can lead to bad credit include:

• Late or missed payments: Missing due dates on credit cards, loans, or utility bills.
• Accounts in default: When you fail to meet the terms of a credit agreement, such as stopping payments altogether.
• County Court Judgements (CCJs): A court order requiring you to repay a debt.
• Bankruptcy: A legal status indicating you cannot repay your outstanding debts.
• Individual Voluntary Arrangements (IVAs): A formal agreement with creditors to pay off debts over time.
• Debt Management Plans (DMPs): An informal arrangement where you make reduced payments to creditors.
• Debt Relief Orders (DROs): A government-approved scheme for people with low income and few assets who can’t pay their debts.

While these loans can offer access to funds for those with a poor credit score, they often come with higher interest rates and stricter repayment terms.

It’s important to understand the risks and consider if it’s the right financial move for you before applying.

Getting turned down for a loan can be frustrating, but there are several common reasons why lenders might not approve your application.

Here are some key factors that could be affecting your chances:

1. Poor Credit History

Lenders assess your credit history to determine how reliable you are at repaying debt.

If you have missed payments, defaulted on loans, or have a history of high credit use, this can make you look risky to lenders.

A low credit score is a common reason for loan rejections.

2. Low Income

Lenders want to be confident that you can afford the repayments.

If your income is too low compared to the amount you want to borrow, they may worry that you won’t be able to keep up with payments.

3. Too Much Existing Debt

If you already have significant debt, it could raise concerns about your ability to manage more.

Lenders look at your debt-to-income ratio, which measures how much of your income goes towards existing debt repayments.

If this is too high, it can lead to rejection.

4. Unstable Employment

If you’ve just started a new job or have a history of frequent job changes, lenders may see this as a sign of financial instability.

Many lenders prefer to see consistent employment over a long period.

5. Incomplete or Inaccurate Application

Even simple errors on your loan application can lead to rejection.

Make sure all your details are correct, complete, and consistent with other information lenders can access, like your credit file.

6. Loan Purpose

Some lenders may reject your application if the reason for the loan doesn’t align with their policy.

For instance, loans for gambling, certain types of investments, or business-related purposes might not be accepted by some lenders.

7. Too Many Credit Applications

Applying for too many loans or credit cards in a short period can damage your credit score and make you appear desperate for credit, which can be off-putting for lenders.

8. No Credit History

If you’ve never borrowed before, lenders might struggle to assess your creditworthiness.

While you may not have bad credit, having no credit history at all can still be a problem, as lenders have no way of predicting how you’ll manage a loan.

What Can You Do?

• Check your credit report to ensure it’s accurate and correct any errors.
• Work on improving your credit score by making repayments on time and reducing outstanding debt.
• Consider applying for a smaller loan or waiting until your financial situation improves before applying again.
• Seek help from a financial advisor or a credit union that might have more flexible criteria.

Improving your financial profile over time will increase your chances of loan approval.

If you have bad credit, there are several loan options to consider:

Guarantor Loans – A guarantor agrees to make repayments if you can’t. This can increase your chances of approval, even with a poor credit score.

Secured Loans – These are backed by an asset, like your home or car, reducing the risk for the lender. However, failure to repay could result in losing your asset.

Bad Credit Personal Loans – Some lenders specialise in offering loans to individuals with poor credit, but these usually come with higher interest rates.

Payday Loans – Short-term loans that offer quick access to small amounts of money, but they come with very high interest rates and fees, making them risky.

Credit Union Loans – Credit unions may offer loans with more flexible terms and lower interest rates than payday or personal loans, even if you have bad credit.

Always compare terms and interest rates to ensure you choose the best option for your financial situation.

Use the Statutory Credit Report option from each of the three credit reference agencies. 

• Equifax 
• Experian
• Transunion

A statutory credit report will show your credit history for the past six years.

This is what lenders see when you apply for credit.

It doesn’t have to show a credit score, however, that’s only a guideline anyway.

Credit scoring models differ among financial institutions.

The quickest way is to use an eligibility checker to see if a lender would consider your application, and if so, which one. Checking your eligibility doesn’t affect your credit score.

The manual method for a thorough lender analysis is to check your report and apply to bad credit loan direct lenders with an eligibility criteria that match your credit history.

Some subprime lenders will accept applicants with a CCJ as long as they are over 3 years old (as an example). If you have an active IVA or similarly serious negative marker on your credit report, you’ll need a specialist lender.

The eligibility criteria of the lender you apply to is what matters. Not just your credit score.

A loan to pay off debt is called a debt consolidation loan.

Bad credit loans have higher interest rates due to the higher risk the lender assumes, but they could be more affordable for paying off multiple higher interest-bearing debts, such as a high balance on a high APR credit card, a payday loan, and car finance, provided the APR (Annual Percentage Rate) is lower than those of the debts being paid off.

You may need proof of ID, proof of income, and proof of expenses.

Lenders might ask for recent copies of your bank statement, or they may use Open Banking to view bank statements online, speeding up the process.

The purpose is to assess whether you can afford the monthly repayments.

Authorised lenders are regulated by the Financial Conduct Authority, requiring them to conduct a creditworthiness assessment.

Failing to carry out a reasonable assessment for affordability can see complaints escalate to the Financial Ombudsman for unaffordable lending practices.

Firms that provide loans to people with bad credit generally approve applications on the basis of your ability to repay rather than your credit history.

Some lenders cater to people with a poor credit history and are either on a low income, or receiving certain benefits, such as Personal Independence Payments, or Carers Allowance.

It’s also possible for lenders to assess income as earnings from employment only, in which case, any top-up income from Universal Credit or Working Tax Credit may not be counted as income for the purposes of an affordability assessment.