Guaranteed Loans for Bad Credit

Updated: June 13, 2024 Author:

Key Takeaways There is no such thing as a guaranteed loan that gives a borrower who has bad credit access to funds without taking into account their credit score or the affordability of the loan. While offers of a guaranteed loan can be attractive for those under financial stress, it is a regulatory requirement for a lender to perform credit checks prior to lending. Always avoid misleading offers which promise a guaranteed loan and seek an alternative solution. 

What is a guaranteed loan?

Any loan agreement that could be approved without looking at your credit score or the level of affordability would be termed a guaranteed loan. If they were legally available then you would receive the amount you asked for without any checks on your ability to meet the repayments.  

If you see an advert for a guaranteed loan, you are being misled. For those who find that their financial circumstances make a standard personal loan from a high street lender unattainable, it is tempting to look closer at such offers. Promises of things like easy loans with money in your account within one hour of approval can make them an attractive option for those in urgent financial need. The key point to note here is that credit checks are a regulatory requirement on the part of the lender and are in your best interests as they help check your ability to repay the loan. There is no such thing as a legal guaranteed loan in the UK. 

Why might you look for a guaranteed loan?

Your credit score is the biggest factor that impacts your ability to be approved for a standard personal loan. Those with bad credit will typically find that their borrowing options are significantly constrained, with higher repayments and lower total borrowings being the norm. The issue here is that those with bad credit will often be unable to find a standard personal loan that will accept them, and they therefore turn to guaranteed loans. 

Typical reasons given by applicants for looking for guaranteed loans include:

  • Sudden Loss of Income: Many of us find that we live pay cheque to pay cheque, which can make redundancy or issues with a personal business highly stressful. Searching for a guaranteed loan can feel like a way out if you’re in this situation 
  • Urgent Repair Work: If the boiler breaks or your car needs some additional work to pass its MOT, you would hope that you can fall back on savings or a credit card. For those where this is simply not an option right now, and for whom a personal loan is out of reach due to bad credit, searching for a guaranteed loan may seem like the next best thing 
  • Medical Emergencies: Having a loved one who is suddenly incapacitated can put an ever greater strain on your household finances. Some choose to search for a short-term guaranteed loan or an emergency loan to get through what is already an emotionally and financially draining period 

Regardless of your individual circumstances, it is important to note that there is no such thing as a guaranteed loan that is regulated properly by the FCA. Offers of such loans are designed to exploit those in difficult situations and are not being offered in your best interests. 

Are guaranteed loans marketed at people with poor credit?

While you no doubt have every intention of boosting your credit score, it’s important to note that the process typically takes 12-18 months. This means that it is not realistic to make significant improvement to your score and be approved for a standard personal loan if you need to secure funds in the next couple of weeks. Misleading promises of guaranteed loans are often marketed specifically at those with bad credit for this exact reason. They are not in your best interests and should be avoided for the sake of your long-term financial health. 

Why do you see guaranteed loans advertised?

When all other sources of financial assistance are seemingly out of reach to a particular group of borrowers, there are those who will attempt to circumvent legal obligations to make a profit. 

  • Guaranteed loans will never be approved by the FCA and therefore their lending practices are not independently overseen — they are not properly regulated loans
  • Providers of so-called guaranteed loans are at best misleading borrowers and at worst simply exploiting them for financial gain 
  • The way in which supposed guaranteed loans are marketed can make it seem like they are the last resort and the only course of action — this is not the case and they are not properly structured loans 

What are the alternatives to guaranteed loans with bad credit?

When searching for an urgent funding solution, taking the time to assess whether the lender has your best interests at heart is essential. There are a number of same-day loan products that actually undertake the correct checks and balances to assess the affordability of the proposed agreement. While they will charge higher fees and interest than personal loans for those with higher credit scores, they do have the following plus points: 

  • Same-day loan agreements offered by trusted, established lenders who are regulated and overseen by the FCA will follow all current best practices 
  • This means they will automatically provide help and assistance should you notify them that you are at risk of defaulting on your agreed repayment schedule 
  • Loans delivered by lenders who are FCA regulated will be assessed to check that they are in your best interests 

The key takeaway point here is that there is no such thing as a properly regulated guaranteed loan in the UK. Any offer that either states or implies that funding is guaranteed is at best misleading the borrower and at worst exploiting them for financial gain. 

Connecting with a reputable borrower whose processes are overseen by the FCA is the only way to borrow money with peace of mind. A register is maintained with every licensed lender and broker on the FCA website. If you see promises of guarantees, search the company name on the FCA register. You’ll likely find they are not licensed, or acting as a broker, in which case, the guarantee only applies to them, not the lender who ‘will’ run a credit check. You can get loans approved with a soft credit check, but you can’t get no credit check loans.