£3,000 Loans For Bad Credit

Updated: July 28, 2024 Author:

Key takeaway: Lenders providing a £3,000 loan to those with bad credit will charge more, but, base the rate charged on the risk posed. Short-term loans with bad credit often have a much higher interest rate. There’s no magic number when it comes to the perfect credit score for securing a loan as bad credit lenders take other factors beyond your financial history into consideration. 

    How easy is it to get a £3,000 loan with bad credit?

    It might surprise you to know that many lenders class £3,000 as a small loan and when compared to things like a mortgage, it certainly is a small amount. The problem is when you need that amount of money and you have bad credit, it can feel overwhelming to know where to start. 

    So is it easy to get a loan with bad credit? Not without doing some deep digging into lenders and the eligibility criteria they’re willing to accept. That’s what stipulates the level of risk they’re willing to take on. Bad credit lenders exist for a reason. That reason is that you’re not the only person in the UK with a bad credit score. In fact, 1 in 5 people have poor credit – and with that many people facing the same barriers you may be, you can rest assured that there is help out there.

    Many lenders specialise in bad credit loans. They realise that your financial history isn’t necessarily a reflection of your current position. A bad credit score might impact the amount you can borrow and result in a higher interest rate but it doesn’t exclude you from borrowing.

    The process for getting a £3,000 loan Approved

    The first step is deciding whether you want to look at taking out a secured or unsecured loan. Secured loans are usually easier to obtain with bad credit as you offer up assets as collateral. However, it’s highly unlikely that you’re going to have a big diamond ring lying around that you want to use for a £3000 loan. Assets like your car and home can be used but this is usually for bigger loans. Logbook loans is when your car is used as collateral and it help out with smaller loans, however the interest rates on these are high so they’re likely not the first option to explore.

    Guarantor loans can be an option for those with very bad credit and no assets. If you default on the payment, the debt falls to your guarantor. If you’re credit invisible, lenders may require a guarantor as you have no credit history for them to base their decision on. Lenders are more likely to approve a guarantor loan than an unsecured personal loan because of the safety net of the repayment falling to someone else.

    Unsecured personal loans are probably the best option when it comes to loan amounts in the £3,000 area. You don’t need collateral or a guarantor but the lower your credit score, the higher the interest rate will be. It can seem unfair being targeted in this way but if you repay the loan on time, it can actually improve your credit score and put you in better standing for future borrowing.

    Many bad credit lenders will carry out a soft check or quotation search first, which can tell you if you’d be eligible for a loan, quickly. Soft searches also don’t show on your credit file so if you are rejected, there’s no need to worry about your credit score dropping further. Multiple searches or rejections on your credit report can be a red flag to lenders so look for lenders that offer a soft search first. 

    Many unsecured personal loans offer a same-day decision so the money can be with you quickly. Always ensure that your lender is registered with the FCA so you have protection if something goes wrong.

    What is the monthly payment on a £3,000 loan?

    The repayments vary wildly based on the loan term and the APR quoted by the lender. The higher the interest rate charged, the higher the total cost of repayment. Lessen interest payable by repaying in under 1-year. The longer the loan repayment term, the more you’ll pay in the long run.

    An unsecured personal loan of £3,000 will typically have a minimum repayment term of 12 months and some lenders will go up to 5 years but their average tends to sit at a maximum of 24 months. 

    As a rule of thumb, short-term loans tend to have a higher interest rate than those taken out over many years. Your bad credit rating will also mean lenders are likely to increase the rate because you’re viewed as a high-risk borrower. Those with a good credit score have a track record of paying on time, which is why lenders reward them with more favourable interest rates. The low credit score only lasts up to 6 years, as the information then drops from your credit report, so you can financially start over, and get better rates in the future once your credit score improves.

    The APR on personal unsecured loans can sit anywhere between 20% and 100% though some lenders will have an APR even higher. The average APR for someone with good credit is around 10% for £3,000. The higher the amount, the lower the rate. Someone with good credit taking out a loan of £3,000 over 18 months would pay back around £3,240. To give you some perspective on how higher interest rates can affect those with bad credit, here’s what you can expect to pay back over 18 months with various APRs:

    • 20% – £3,497
    • 40% – £4,037
    • 60% – £4,619
    • 80% – £5,239
    • 100% – £5,895

    What credit score is needed for a £3,000 loan?

    There is no magic number for a credit score that lenders look for. They do don’t even use the ones the credit scoring companies give them. Rather, they use their own scorecard based on the risks they’re willing to accept and provide quotes based on the risk level they’d be taking on if they approved the loan. The three main credit rating agencies in the UK –  Equifax, Experian and TransUnion all have different ratings. To put it simplisticly though the higher the number on your credit rating the better your score is considered to be. That’s not to say that if you have a low number you won’t ever be able to get a loan. 

    Banks are less likely to lend to you if you have bad credit but bad credit lenders don’t work in the same way. A checkered financial past isn’t always indicative of how you handle your money in the present day which is why bad credit lenders will look at other eligibility factors beyond your credit score. 

    It would be nice if there was a magic number when it came to credit scores as we’d all know what to aim for but having a regular income, being able to make loan repayments on time and keeping borrowing amounts low all help boost your chances of being approved for a loan even with bad credit.