A Guide To Very Bad Credit Loans
Updated: March 29, 2024 Author: Paul Gillooly
If you have a very low credit score but need to borrow money, you may find that you are turned down for a personal loan by many traditional high street lenders. The good news, though, is that there are still credit loan options available to you, no matter how poor your credit history. The secret to success is to look for a specialist in poor credit lending who will be able to offer you the funds you need.

Are Bad Credit Loans The Right Choice For Me?
When you’re seeking loan approval, bad credit can prove to be a significant obstacle. When your credit history is poor because of missed or late payments, CCJs, or bankruptcy, or if you have no credit history at all due to never having taken out a credit card, loan, or other financial product in the past, banks and mainstream lenders will often turn your application down since you represent too high a risk. That is why specialist bad credit loans represent your best option in these circumstances when you need to borrow money.
As someone with a low credit score, the loan types you’ll be able to apply for will probably be limited. Fortunately, though, there are some lenders who will be prepared to extend credit to you, offering you products that are tailored specifically to meet the needs of borrowers like you. These products include:
- Guarantor loans
- Secured personal loans
- Unsecured personal loans
- Payday loans
- Debt consolidation loans
Of course, if your credit score is good, you won’t need to consider a bad credit loan. You’ll have a far wider choice of lenders and products to pick from and should steer clear of these specialist products. However, for those with a less than perfect credit history, they can represent a valuable line of credit when additional funds are required for any purpose.
How Do Bad Credit Loans Work?
A bad credit loan will usually charge a higher rate of interest when compared with standard loans. Furthermore, you’re likely to only be able to borrow a smaller amount of money. This will help the lender to reduce their level of risk. However, rather than purely basing loan eligibility on the results of a credit history check, a bad credit lender will, instead, examine your individual financial circumstances in order to determine whether you’re able to afford to repay your loan.
Will I Be Eligible For A Very Bad Credit Loan?
If you require additional funds and believe your application for a loan from a mainstream lender will be refused, you can apply for a very bad credit loan. The eligibility criteria is typically:
- To be 18 or older.
- To live legally in the United Kingdom.
- To have an existing current account.
- To be able to demonstrate how you will repay the money you borrow.
How Much Interest Must I Pay On A Bad Credit Loan?
No matter which kind of bad credit loan you take out, you will need to pay interest on the money you borrow. The lender will offer you a rate of interest that is based on your current credit history and, in most cases, that will be a far higher interest rate when compared with those offered by mainstream lenders like high street banks.
It’s important to be aware that you won’t normally know the rate of interest you’ll be offered before applying for a loan. This is common practice for all kinds of loans, and not just for those with a poor credit history. Only around half of applicants who successfully apply for a loan will find that they’re offered the lender’s “representative APR”, or the advertised figure. Others are offered a loan at a higher rate of interest or are rejected by the lender.
What Will Happen If The Lender Refuses My Application?
One of the problems associated with having a refused loan application is that it can make it even harder to find a different lender who will be prepared to extend your credit. Making multiple loan applications in a short space of time will cause further damage to your credit score, since banks don’t want to lend money to someone who has already been rejected on several occasions.
Since all applications for credit show up in your credit history, you’ll find that just a couple of refusals will deter other lenders from lending you money. You should, therefore, avoid making further loan applications until some time has elapsed. Unfortunately, that may not be possible if you need money for an urgent situation. So it makes sense to get your application accepted the first time.
The best way to do this is to choose your lender wisely in the first place. If you know your credit history is bad, applying to a very bad credit lender rather than mainstream banks will give you the best chance of your application being approved. It’s also wise to use a loan comparison service that will give you a good idea of whether or not you’re likely to receive approval for your chosen loan before you make your application. The soft search that is carried out on your credit history won’t negatively impact your credit score but will enable you to determine which loans you’re most likely to be accepted for.
What Are The Advantages And Disadvantages Of Very Bad Credit Loans?
As with all financial products, there are advantages and disadvantages to taking out a bad credit loan.
The Advantages
- They offer a valuable line of credit for someone with a poor credit score who needs to borrow amounts over £1,500.
- When managed correctly, bad credit loans can help you to rebuild your credit score. As long as you continue to make your payments in full and on time, you should see your score improving over time.
The Disadvantages
- You will pay a high rate of interest which could lead to you paying a lot more than the initial value of the loan depending on how much you’re borrowing and the length of the loan period.
- If you default on your payments at any stage, you risk making your credit score even worse in the long run.
What To Consider When Thinking Of Taking Out A Very Bad Credit Loan
If you’re considering taking out a very bad credit loan, there are a few key considerations to weigh up before making your application.
Firstly, you should consider whether you really need to borrow the money in the first place or whether you could avoid taking out the loan in order to prevent further financial difficulties in the future.
You should also consider whether you’ll be able to afford to make your monthly payments before taking out the loan. Any late or missed payments could have an even more negative impact on your credit score and make it even more challenging to secure credit in the future.
If you decide that taking out a loan is your best option, you should only borrow the lowest possible amount over the shortest time frame possible.