£12,000 Loans For Bad Credit

Updated: April 28, 2024 Author: Paul Gillooly

Key takeaway: Securing a £12,000 loan is difficult when you have a bad credit history. Nevertheless, there is a good chance of approval if you opt for secured loans, guarantor loans, credit union loans, and even unsecured personal loans. Know that lenders will run a check against your credit but your history won’t be harmed if they do a soft check. Approval isn’t guaranteed but your chances are better if you put your best foot forward. 

In the United Kingdom, approximately 7.1 million people are constantly passed over for financial aid because they have a poor credit rating. So, don’t be dismayed if mainstream banks and lenders refuse you a loan of £12,000. It doesn’t mean you cannot get access to that amount of funds, it only means you’ve got limited options. With the right mindset and research, you can get a good deal that’ll pull you out of your current financial constraints. 

However, be mindful and realise that £12,000 is not a small loan. Only take out loans of this amount if you really need it. Ideally, it should be for ventures that improve your financial standing, like key business machinery that’ll make a return; or for emergencies that take you out of a bad situation. Taking out loans for impulse spending or fleeting desires will only put you in bigger financial troubles down the road. 

£12,000 Loan Options for Bad Credit

There are several loan types you can apply for with a chance of getting approval despite your credit rating. It all depends on your profile and personal circumstances. 

Guarantor Loans 

This type of loan doesn’t require any collateral and comes with good interest rates, but you’ll need someone else – a guarantor- to sign off on it with you.  The implication is that your guarantor takes on the risk of the loan in your stead. Should you fail to make repayments in a timely manner, they will be required to repay the loan. 

Getting a friend, colleague, or relative with a decent financial situation to stand as your guarantor improves your chances of getting approval for a guarantor loan. Just be aware of the implications of the loan. If you’re having difficulties with repayments, it’s better to inform them ahead of time and come up with a plan so the two of you don’t end up in financial difficulties. 

Secured Loans 

Secured loans are a good option for borrowers with bad credit who own valuable property like a vehicle or a house. Lenders are more open to assist owners with valuables as they can use those assets as collateral onto which the risk of the loan can be transferred. 

When considering your application, they’ll carry out an evaluation of the collateral, and your loan-to-asset value ratio could play a significant role in their decision. So, if your collateral is worth less of your loan amount, you may be rejected. 

Secured loans often come with decent interest rates and can be spread for up to 10 years or more. However, be aware of the consequences you’ll face if you can’t repay the loan. The lender will be within their legal rights to repossess your car, house or any other collateral you provide. They can liquidate these assets to cover the loan payments. 

Credit Union Loans 

Credit unions are self-help cooperatives whose members pool resources together to provide each other with financial aid. They can be lenient towards people with bad credit and they could offer loan interests as low as 3% APR sometimes. 

However, credit unions only offer loans to members and joining them is often based on stringent rules. To be a member, you have to share a common bond with the other members like living or working in the same area, working for the same employer, belonging to the same church, trade union, association, et al. Ensure that a credit union is registered with the appropriate government authorities before you join them. 

Unsecured Personal Loans

Unsecured personal loans require no collateral but often come with higher interest rates. Borrowers with a bad credit score have lower chances of approval for this type of loan. And if your application is approved, you may be charged a relatively higher interest rate and fees. 

If you’re going to apply for this type of loan with bad credit, ensure that you apply to a lender that specialises in bad credit loans. They may soften their stance on your credit score and focus on other areas of your applications to make a decision. 

Does a £12,000 Loan Require a Credit Check? 

Contrary to what some lenders and loan ads may say, every loan application requires a credit check. This is a requirement set out by the regulator – the Financial Conduct Authority (FCA). Every lender is obligated to adhere to principles of responsible lending practices. Some lenders would run a soft check over a hard one, which won’t damage your credit. They are still required to ensure you can afford the repayments. Applying to lenders who conduct only soft checks, which is eligibility, can help prevent further damaging your credit reports.

How Much are the Fees, Interest and Monthly Repayments on a £12,000 Loan? 

The fees and interest rate on every £12,000 loan depends majorly on the lender and the loan terms. And the monthly repayments depend on the interest rate and loan terms. 

If the interest rate is 10% APR (as it is in some secured loans) and you choose to repay the amount over a period of 2 years, you can expect a monthly repayment of £553 with a total interest of roughly £1,300. 

If the interest rate is as high as 30% APR (as it is in some unsecured loans) and your repayment period is 2 years, expect to pay back around £670 each month, amounting to about £4,100 in interest. 

As a result, it’s important to understand the loan terms and repayment conditions before you agree to any loan. Be sure you can afford the repayments before okaying the deal, and always consider the total cost of borrowing.

£12,000 Loan With Bad Credit: Application Requirements and Approval Chances

Application for most loans these days is online via the lender’s website. To be eligible, you have to be over 18 years old and provide important personal information including your address. Additionally, you have to provide information about your employment and income history as well as documentation to back it up. 

The lender will carry out affordability assessments based on the information you’ve provided. This is their way of checking if you actually have the means and capability to repay the loan. 

No loan application is guaranteed approval. However, you’ll have a chance if you put your best foot forward. Lenders often consider loan applications holistically and instead of focusing on just your credit score, will put serious considerations on other aspects of your application.