£14,000 Loans for Bad Credit

Updated: July 28, 2024 Author: Paul Gillooly

Key Takeaways: Subprime lenders are where to apply for £14,000 loans and similar high-value amounts. Interest rates are higher on unsecured personal loans and lower on secured loans. You can increase your chances of being approved by applying for a guarantor loan or a joint loan with someone with a better credit rating, and/or a higher salary to help meet affordability requirements. 

The Specialist Lenders it Pays to Know About!

With bad credit hindering your ability to get finance approved, it pays to slow down, analyse what’s available, and research the lenders willing to approve. Those are not the banks and building societies used for everyday banking, but instead, it’s the lenders that focus specifically on lending to high-risk borrowers. They go by a few names – bad credit loan companies, or near-prime and subprime lenders. Near-prime lenders are more willing to approve loans to individuals with fair or average credit scores, whereas mainstream lenders won’t entertain anything less than a good credit score. 

Bad credit lenders accept higher-risk borrowers, sometimes with severely affected credit ratings due to legal proceedings being taken to recover the costs of debts that have gone bad for whatever reason. It could be that you lost your job midway through a long-term loan, and failed to get the creditor to agree to a negotiated repayment term, resulting in a CCJ being issued by the courts, severely hindering your ability to access finance from the usual institutions. When that happens, subprime lenders are there with finance options that may be suitable.

How Much Will a £14,000 Loan Cost from a Subprime Lender? 

The cost of borrowing from bad credit lenders is higher. They charge more in interest because of the higher risk associated with lending to customers with entries on their credit file indicating a higher probability of defaulting on the loan. The usual types of finance options available are the same – secured loans, unsecured personal loans, guarantor loans, and some credit unions offer high-value loans with longer time to repay. 

The highest cost will be unsecured loans with no guarantor as those carry the highest risk to the lender. Anything you can do to assure lenders that they will be repaid the capital plus interest goes in your favour. That can be securing the £14,000 loan with the logbook of a vehicle worth double the amount you’re borrowing, or asking a relative or close friend to act as a guarantor for the loan amount. With bad credit, unsecured loans typically have rates over 6.5% APR for high-value loans with repayment terms of 5 to 7 years. Secured loans have lower interest rates, but are still in the double digits because of the adverse credit history.

How Guarantor Loans Can Help People with Bad Credit

Guarantor loans are used by lenders as a form of security. If you fail to repay the loan, the debt collection procedures can be raised against you or the person acting as the guarantor. Debt collectors tend to chase the easiest target, which is always those with the most to lose. When considering a guarantor loan, it helps to approach a lender with a guarantor who is a homeowner or can use something of higher value than the loan amount as security against defaulting. 

If approved, some lenders will release the funds to the guarantors’ nominated bank account as a safeguard that they know the amount of money they are co-signing for. It would then be up to the guarantor to transfer the funds to your account. You would be responsible for making the monthly loan repayments, but if you were to miss payments, the creditor (loan company) would then resort to asking your guarantor to take ownership of the loan and make the repayments from their account. 

If that does happen, it can have consequences for the guarantors’ credit score, not solely for the monthly repayments they’d have to make, but the debt would be reported on their credit file, increasing their total amount of debt. That can make it harder to obtain finance in the future as the total debt owed may be too high in light of their income. Generally, if 50% of a person’s monthly salary is used to pay down debts, that’s a bad situation to be in. Lenders will be hesitant to approve future loans due to the affordability requirements. 

Applying for a guarantor loan will still require you to be able to pass the lenders’ affordability criteria – for both people – applicant and guarantor. In 2023, the FCA intervened when a lender was issuing high-risk guarantor loans without sufficient processes in place to ensure the repayments were affordable. The firm could have been fined almost £73M, but instead, it was decided the funds be put into a financial redress scheme for affected customers. Since then, that lender has gone into liquidation and can no longer trade. 

Lenders take affordability seriously because if the regulator has to intervene, lenders can be forced to cease trading, or face financial consequences so severe that they can no longer afford to continue the business. The assessments lenders conduct are not there to block your access to finance. They’re a protection against unfair practices that could lead you into a debt spiral by being unable to keep up repayments.

Consider If Applying Jointly Could be Beneficial

Joint loans work similarly to guarantor loans, with the main difference being both people have joint liability for repayments. The wording on the credit agreement will stipulate it has “joint and several liability”, which means both people are agreeing to repay the loan in its entirety. It doesn’t matter who spends the money, or on what, both people are agreeing to honour the loan agreement and pay the lender back in accordance with the repayment schedule. With a joint loan, any missed or late payments can be reported to both people’s credit reports, making future financing even more difficult to secure. 

3 Scenarios Where Joint Loans Can Offer a Lifeline: 

Bad credit history: When this is your only obstacle to securing the £14,000 loan you need, teaming up with someone with a better credit score, and has more assets that could be used as security can increase your chance of approval. 

Earning a low income: With a bad credit score, interest rates are higher and when you’re on a low income, you may not have enough to comfortably afford the monthly repayments. In such scenarios, having a joint applicant, preferably with a higher income than you, can help sway the decision to approve funding in your favour. 

For bigger shared purchases: Couples experience expensive life events frequently. A newborn to the family, a bigger car or minivan required, or a home extension to avoid the need to move to a bigger home. For things that make financial sense to borrow together, where there’s going to be equal ownership such as when the home is already financed on a joint mortgage, taking on a joint personal loan together can increase the chances of approval, and possibly with a fairer interest rate considering both applicants are assuring repayments.

The Pitfalls of Joint Loans in Same Households

The pitfall when you borrow with your spouse is that if you fall on hard times, and can’t keep up repayments, there’s much more on the line because both people will be required to find the funds to pay back the loan. Best practice when considering joint loans from the same household is to plan a budget where if your financial circumstances were to take a turn for the worse, there’d be a plan in place for where costs can be cut from the monthly budget to make sure the loan repayments can continue to be made on time.

Important Advice to Protect Against Financial Abuse

If you ever feel at risk of financial abuse – which is when someone is applying or pressuring you into taking out a joint loan or agreeing to be a guarantor, there are steps you can take to put a stop to it. The simplest is to password protect your credit report by adding a password NOC (Notice of Correction) to your credit reports with each of the three credit scoring companies / reference agencies used by creditors. When a lender attempts to conduct a credit check, you’ll be required to answer additional personal security questions to verify it is you asking for the loan. Research from SurvivingEconomicAbuse.org revealed that 1 in 13 people had credit taken out in their name without consent. They have worked in conjunction with Experian, and the Money Advice Plus group to produce a detailed guide about dealing with Economic Abuse and Your Credit Report, and the government have since issued a toolkit for the debt advice sector to assist those with debt problems arising from economic abuse in relationships.