£8,000 Loans for Bad Credit

Updated: April 28, 2024 Author:

Key takeaways: Guarantor loans can be easier to get when you have a poor credit rating because another person takes on responsibility if you’re unable to pay – but this can be risky for both of you. If you can’t find a guarantor, you may be able to borrow through a secured loan or from a direct lender. Each option has pros and cons, and whether any are right for you requires careful consideration. Improving your credit rating is possible, but it requires persistence.

If you have poor or no credit history, you may be finding it difficult to get accepted for a loan. Around 1 in 5 people in the UK have a bad credit rating – so, as stressful as your situation may feel, you are not alone. If you’ve already struggled to get approval for a personal loan, there are other options you can try.

Guarantor Loans for Bad Credit

One option for borrowing with bad credit could be a guarantor loan. When you have a guarantor loan, another person – usually someone with a good credit rating – signs on to agree to repay the loan if you aren’t able to. Guarantor loans can be easier to get approved for because your guarantor is acting as a “back up” – the lender has mitigated the risk that their loan won’t get repaid, therefore, they’re more likely to agree to lend to you.

However, this is a serious responsibility for your guarantor, and they will be held accountable for any missed repayments. If they are also unable to repay your loan, this can affect their credit rating. If creditors get involved, they will contact your guarantor instead of you. Therefore, it’s important that your guarantor is someone you know well enough to discuss your finances with. They are usually a friend or family member, but they can be anybody, provided they are not linked to the company you are applying to for the loan. As an example, most Credit Unions will state that a guarantor cannot be employed or volunteer with the Credit Union you are applying to. As an example, you couldn’t walk into a branch, discuss your loan options and ask the advisor to co-sign your loan. They aren’t allowed.

Guarantor loans are often a good option if you have no credit history but you do have an income, and you’re confident you can repay your loan. Having no credit history means you’re “credit invisible”, which makes it just as difficult to get a loan as if you had bad credit. This is because lenders have no evidence to show that you can make reliable repayments, but you can improve your rating quickly if you do repay your loans on schedule.

However, if you do have poor credit history and aren’t able to find someone willing to take on responsibility for your loan, there are loans you can apply for with no guarantor.

Secured Loans For Bad Credit With No Guarantor

If you have no guarantor, a secured loan for bad credit may be an option for you. A secured loan uses an asset you own as collateral in the event that you aren’t able to repay what you borrowed. This could be: property, as in a second charge mortgage; a vehicle, as in a V5/logbook loan, or; a valuable item like jewellery or technology, as in a pawnbroker loan. For a loan of around £8,000, you are more likely to be looking at a second charge mortgage or logbook loan.

When your loan is secured against an asset, the lender has the right to take possession of the asset in the event that you aren’t able to repay your loan. They will usually sell it at auction and use the funds generated to cover what you owe. Any extra will be paid back to you. On the other hand, if the sale of your item doesn’t cover the remaining loan, you will still be liable to repay the missing amount.

This type of loan can be easier to get approved for when you have bad credit, because your asset gives assurance to the lender that they will get the full amount of their loan back. However, it’s important to be absolutely sure that you can repay your loan, as you are at risk of losing your home or your vehicle.

Can I Get a Loan from a Direct Lender with Bad Credit?

Direct lenders are creditors with no association to a bank – so they lend directly to you. They can be found online or on the high street, and they should be registered with the Financial Conduct Authority.  Registration with the FCA indicates that the direct lender is regulated and agrees to act in your best interests. You can search the FCA’s register to confirm whether a direct lender is affiliated with them.

Sometimes, direct lenders are easier to borrow from when you have a poor credit rating, but their interest rates are often higher than the interest rates from banks. This means that you repay more each month, and more overall. The interest rate you get depends on the type of loan, the lender, your credit history, and other financial information like your existing loans and income.

Can I Get a Loan Without a Credit Check?

Lenders will always require a credit check, even if it’s just a “soft” credit check – this type of credit check doesn’t impact your credit score. On the other hand, a “hard” credit check might decrease your score, because it implies you may be looking for lots of loans. However, some lenders may place less emphasis on your credit score and take into account your current situation, including your income, employment status, and other financial information instead.

You are more likely to find a loan like this from “bad credit lenders” – that is, lenders specifically set up to help people with poor credit. Bad credit lenders work with people in your situation all the time, so you may find them to be less judgemental and easier to speak with than banks or other direct lenders.

What Can I Do if I Can’t Get a Loan?

If you’ve exhausted all of these options and you’re still finding it difficult to get a loan, it may be time to consider other debt management strategies like downsizing or utilising a debt management plan. 

Ultimately, lenders have a responsibility to act in your best interest, so they may not offer you a loan if they don’t feel you are able to repay it. It’s important for you to also be sure you can repay your loan, otherwise you may find yourself in an even more difficult situation. No matter how tough things might seem, bad credit is fixable with careful planning and management. Continue to explore your options until you feel confident about the right solution for you.