£5,000 Loans For Bad Credit

Updated: July 28, 2024 Author:

Key takeaway: £5,000 is not a loan amount to be taken lightly when a bad credit score is hiking interest rates. A guarantor loan can offer the best interest rates. Never fall for lenders promising guaranteed loans, there is no such thing as a legal guaranteed loan in the UK. Credit checks are in place to protect you and your lender should always carry out credit and affordability checks before offering you a loan. 

    Is it hard to get a £5,000 loan with bad credit?

    When planning for large events, things can get pricey. With bad credit going against you, things like wedding loans for people with bad credit or a new car instead of high-interest car finance, a £5,000 loan could be worth consideration as you can take several years to repay it, helping to keep the monthly repayments as low as possible. Lenders are more interested in your ability to repay than they are financial history.

    That is, provided that you approach bad credit loan direct lenders rather than mainstream lenders like your bank as they most likely won’t approve on a £5,000 with anything better than a good credit score. That’s why you need to look for a specialist lender. As someone with bad credit, you’re viewed as a high-risk lender and banks don’t like to take risks. Bad credit lenders on the other hand understand that a blemished financial past isn’t necessarily a reflection of how you handle money today. 

    By using a bad credit lender, getting a £5,000 loan shouldn’t be overly difficult. What you will have to deal with though is higher interest rates and perhaps a shorter repayment term, limiting the total amount repayable. The longer the loan term, the higher the cost of borrowing.

    What type of loan can I get?

    For larger amounts like this, a 0% credit card could be a good option that wouldn’t see you landed with a load of interest. However, £5,000 sits quite near the top of what many credit cards will offer when your credit report doesn’t paint a good picture. You may find that you’re not even eligible for this amount of credit or a credit card at all. If that’s the case then a loan could be a better option.

    Guarantor loans

    Having a guarantor with a good credit score can help out when your credit score isn’t great. A friend or family member would co-sign to guarantee to pay off the debt – if you were to default on the loan. If you’re credit invisible or have a very low credit score then some lenders may request a guarantor be put in place. Typically, you may find that guarantor loans have a slightly better interest rate as there’s less risk of the lender losing their money.

    Homeowner secured loans

    Secured loans can be brilliant if you’ve got bad credit as you offer up assets as collateral. Because there is minimal risk to the lender, the interest rates are usually much better for secured loans than unsecured loans. For £5,000 you would be looking at something like a homeowner secured loan to obtain the money. You put your home up as security but if you fail to pay back the loan, your home could be repossessed. 

    Personal unsecured loan

    Most mainstream lenders will only consider personal unsecured loans if you have a good credit score. This is because you don’t put any assets down. However, it is still possible to get approved for a personal unsecured loan with a bad credit lender. The downside is that the interest rates can be upwards of 30% APR. £5,000 repaid over 3 years with a 30% APR would make the total repayment around £7,641. Over 5 years this would be around £9,706.

    Can I get a £5,000 loan instantly?

    Larger sums like £5,000 take time to assess. Lenders are required to conduct a creditworthiness assessment, taking into account your living costs, and current debt levels. This is a requirement for responsible lending practices. Loans can be approved fast, but for £5,000, you won’t find lenders offering decisions in under an hour. Any statement made by lenders must be clear, fair, and not misleading. For that reason, any firm offering guaranteed loans or instant decisions should be avoided.

    If you need £5,000 instantly then there’s a good chance that you’re using the loan to pay off existing debts. That’s not a great place to be in. Repeatedly taking out high interest loans to pay off other high interest loans can cause debt to spiral and your credit score is going to plummet pretty fast. 

    A debt consolidation loan could be a better option for you where all of your existing debts are combined with one lower APR. Debt consolidation loans are available if you have bad credit but again, the interest rate will be higher than if you had good credit. It is possible to get a debt consolidation loan secured against an asset too which could lower the interest rate. Just remember you risk losing any assets if you default on the loan. 

    Can I get a £5,000 loan with guaranteed approval?

    You cannot get a guaranteed loan. Lenders offering guaranteed loans with no credit check or without assessing if you can afford the loan are pulling the wool over your eyes. When you’re in a bad place financially, these deals can look very tempting. Who wouldn’t want £5,000 in their account within the hour? 

    The main thing here is credit and affordability checks are a requirement set out by the regulating body – the Financial Conduct Authority. They’re there to protect you and make sure you can repay the loan without getting into debt.

    You can check if your lender is FCA-regulated by using the Financial Services register. If they don’t show up on the register, stay clear of them. Supposed guaranteed loans aren’t the only option available to you if you have bad credit but these lenders are looking to exploit borrowers in vulnerable situations. A regulated lender will loan to people with bad credit and you’ll have the protection you need as a borrower. 

    How much will a £5,000 loan cost per month?

    The amount you pay off each month is determined by things such as the length of the loan and the interest rate. If you have bad credit you will pay more than someone with good credit. It seems unfair with a personal unsecured loan lenders need some form of protection if you have a history of late payments and that comes in the form of interest. 

    As you’ll be paying back significantly more than you borrow, it’s also worth weighing up whether you need a loan, or if you need all of what you’re applying for. While taking out a loan and paying it back on time can improve your credit score in time, defaulting on the loan or making late payments will be marked on your credit file and lower your score even more.

    £5,000 is not a loan amount that should be taken lightly and you should consider alternatives such as cutting your budget and saving more, using a 0% or low-interest credit card or using an arranged overdraft – some banks do go as high as £5,000 overdrafts. If you do use a credit card or overdraft be sure to pay it back on time to avoid fees.