Bad Credit Loans, Scotland

Updated: August 02, 2024 Author: Paul Gillooly

Subprime lenders, Credit Unions, and Pawnbrokers offer several types of bad credit loans in Scotland.

Why You May Need a Bad Credit Loan in Scotland

Lenders check your credit reports with credit reference agencies. Negative entries like late payments and accounts in default or using too much of your avaialable credit on revolving credit accounts can lower your credit score. Low credit scores indicate a higher risk to lenders. Bad credit loans are for people with low credit scores.

Before making any personal loan application, your first step should always be to check your credit score. After all, you need to know exactly what the situation is so that you can deal with it appropriately. There’s a chance your credit rating may not be as bad as you expect. 

You can check your credit score for free with one or all three of the credit reference agencies used in the UK – Equifax, Experian, and TransUnion. Checking your score also gives you the chance to see if there are any mistakes that need correcting. 

Each credit reference agency will present you with a number that is technically your credit score. However, it’s important to remember that prospective lenders won’t see that number. They only see information about your credit history. It’s also important to keep in mind that all lenders have their own criteria when it comes to offering loans, and each will have specific eligibility criteria. When you have an adverse credit history, the challenge is matching the lending criteria of a lender to the issue(s) on your credit report that cause loan applications to be rejected. It’s not your credit score, but the information on your credit reports like CCJs, bankruptcies, accounts in default, or having credit cards with balances close to the credit limit that cause issues getting loans approved.

Can I Get A Personal Loan From My Bank With Bad Credit?

While it may not be impossible to get a personal loan from your bank in Scotland with a poor credit score, realistically, it’s not going to be your most likely solution. Traditional lenders like high street banks are less willing to extend credit to those with a less than perfect financial past. Luckily, there are plenty of other options to consider as alternatives. 

Are There Specialist Bad Credit Lenders In Scotland?

Wherever you’re based in the UK, you can access lenders who specialise in offering loans to people with poor credit. It’s important to compare your options though, since not all will offer you the same terms and conditions, and you need to read all the small print to check you know what you’ll be signing up for. 

Bear in mind that you won’t just be paying back the amount you borrowed. There’ll be interest and potentially other fees and charges to pay too, which will vary between loan providers. You need to work out the total amount you’ll be paying back before making a decision. 

It’s a good idea to pre-qualify for your chosen loan before you make an application. Every time you apply to borrow money, a hard search is recorded on your credit file which can be seen by other lenders. There are some companies that offer soft search loans to avoid this exact scenario happening. If your application is refused using a hard credit check, other lenders will see this information, and will be more likely to turn your application down. 

Where to Get Bad Credit Loans in Scotland

Credit Unions

An alternative option to consider is approaching a credit union to secure a loan. Several credit unions in Scotland lend money to people living within their area. For example, Scotwest offers services to anyone living in West Scotland, Perth and Kinross, Stirling, the Highlands or Dumfries and Galloway. There are also credit unions that offer loans to people working within certain occupations such as the police or the NHS who may lend you money if you meet their criteria. 

CDFI Loans

A CDFI (Community Development Finance Institution) provide (mainly) business loans and they cater to those with a poor credit history. Research from the British Business Bank revealed that the majority of people getting funding through a CDFI are those who are underserved by the legacy banks and even challenger banks. The main CDFI in Scotland is Social Investment Scotland. Others such as the Big Issue Fund operate nationally. If you’re interested in raising funds to start a business or a project that can benefit your local community, CDFIs may be worth exploring. You can find a list of CDFIs here.

Guarantor Loans

If you have a friend or family member who is willing and able to be your guarantor, you could apply for a guarantor loan. This may be an easier way to get your hands on the money you need but remember that if you fail to make your repayments on time, your guarantor will be responsible for paying off your debt, and that could cause some significant issues in your personal life. 

Payday Loans

Taking out a payday loan could be an option if you only need to borrow a small amount of money that can be back within the month as interest accrues daily. Rates are high so the faster the loan’s repaid, the less it’ll cost. There are plenty of payday lenders to choose from, although it’s crucial to pay close attention to the terms and conditions before you accept the loan. 

Pawnbroker Loans

If you have an item of value such as a piece of jewellery, a musical instrument, or a watch, you may be able to obtain a pawnbroker loan using your asset as collateral. The amount you’ll be able to borrow will only be as high as the value of the item you intend to use, so in most cases, this option is only suitable for borrowing small sums.

Secured Loans

If you own a property or a car, a secured loan could be a solution for you. These are one of the easier types of loan to obtain with poor credit, since the lender is accepting your asset as collateral, it’s also a solution to consider if you need a larger amount over a longer period of time. However, you need to keep in mind that if you fail to meet your repayments, your item could be sold to pay the loan off with interest. 

Credit Builder Credit Cards

Applying for a credit builder credit card could be an option if you only need to borrow a small amount such as £100 loans or £200 loans. This can also be a good way to start rebuilding your credit score as the objective of these accounts is to build a positive credit history by reporting on-time payments and account handling.

Lines Of Credit

Similar to an overdraft, a line of credit allows you to borrow up to a specified amount whenever you need it. You only need to apply once then you have the option open to you whenever necessary.