NHS Loans for Bad Credit

Updated: October 09, 2024 Author:

Key Takeaways: Specialist lenders acknowledge the higher job security NHS staff have, and are more open to approving loans based on affordablity and service history rather than past discrepancies.

    Loans Offered by NHS Trusts, or through Partnerships

    The NHS doesn’t provide loans per se.

    They do offer salary advance schemes. 

    Most salary advances are up to £500 loans, repayable through payroll (wage deduction) over six months (salary advance may be referred to as a hardship loan). 

    The terms and criteria differ between NHS Trusts.

    Your line manager is the person to speak to if you need a short-term advance. 

    Aside from the NHS Trust employing you, several private lenders exclusively provide loans to public sector workers.

    They prefer to offer loans to NHS workers knowing they have higher job security.

    The vast majority of NHS workers have long service histories.

    How Much Can You Borrow on an NHS Salary?

    The amount you can borrow is directly related to the amount you earn.

    Higher earnings doesn’t equate to higher potential borrowing because a higher cost of living leaves less disposable income.

    What matters to lenders is that you can afford to keep up repayments and meet your living expenses without financial hardship.

    Eligibility Criteria for Loans with Bad Credit

    Every lender has a set criteria used for a base-level assessment.

    If you don’t meet the eligibility criteria, your application will fail.

    With bad credit, the important information lenders assess is your credit history.

    Not your credit score, but rather, the information that’s causing your score to be below average.

    Negative markers on your credit files include things like late and missed payments, money judgment orders (CCJ, IVA, bankruptcy etc.), accounts in default, and your current debt utilisation in comparison to your income.

    A high debt-to-income ratio can indicate that you’re already borrowing more than you should.

    Lenders tend to prefer applicants with no higher than 30% of their income going toward debt repayments.

    Anything over that can risk you using your wages to pay down debts before your living expenses.

    Responsible lending requires companies to take steps that ensure you can comfortably repay the loan without sacrificing the necessities needed for day-to-day living.

    Finance Schemes for NHS Workers with Bad Credit to Leverage

    If your employer is partnered with a lender providing NHS loans in the form of salary advances, repayments can be arranged through “salary deduction”. 

    The advantage of using private sector lenders for public sector staff loans is they may offer preferable interest rates because repayments are automatically paid from payroll.

    As long as you remain employed with the same Trust, the lender has the assurance of being paid. 

    Some lenders use Open Banking for faster income verification.

    When they can see your income and expenses, they can easily assess whether you can afford the monthly deductions or not. 

    Should you be ineligible for NHS staff loans, specialist lenders may be able to assist.

    A bad credit loan direct lender specialising in key worker loans is Salad Money.

    They don’t check your credit score; instead they approve or reject your application based on affordability of repayments. 

    The maximum loan repayment term with Salad Money is 18 months and the max you can borrow is £1,000.

    Should you need a loan that’s repayable over a longer term, or more than £1,000, use our loan eligibility checker to see which lenders could approve the loan amount you need. 

    Types of NHS Staff Loans

    No Credit Check Loans

    Public sector employees tend to have higher job security.

    Lenders prefer customers who have been with the same employer as it indicates stability.

    Most will require at least six months of employment history with the same NHS Trust, and stable hours.

    As the decision to approve or refuse the loan is based on evidence of earnings and your ability to afford the repayments, some will run an eligibility checker, others may not use a credit check at all.

    An affordability assessment will be done as it is a regulatory requirement.

    Guarantor loans

    For a higher chance of approval, consider applying for a guarantor loan with a co-signer with a good credit history.

    It’s a form of security for lenders to guarantee that if you fail to keep up repayments, your guarantor will assume the responsibility and continue to repay the loan.

    Payday Loans

    Payday loans are high-cost-short-term-credit (HCSTC), that work like instalment loans.

    These are not designed for repeated use, but rather for urgent loans.

    In December of 2022, Moneyboat reported a 39% increase in healthcare workers applying for payday loans, indicating zero emergency savings to get through an expensive time of the year.

    CDFIs are the Alternative to Payday Lenders

    To avoid high-cost borrowing, Responsible Finance sheds light on Community Development Finance Institutions stepping up to provide affordable finance to people who are either credit invisible or have bad credit.

    Salad Money reports that 4 in 10 of their customers have a CCJ, which would see them rejected by other lenders. They reliably repay.

    NHS Credit Union Loans

    Credit union loans offer a more favourable option, especially if you live in the northern part of the country.

    They are generally more lenient to people with a bad credit history, and often offer lower, competitive rates. You can get upwards of £7,500 at 8% with repayments spread over 3 to 60 months.

    You can apply to a credit union for a car loan, a mortgage loan, and even unsecured loans too.

    However, credit unions only grant loans to their members and a handful of them are geo-locked.

    If you don’t live within a certain location, or aren’t a member of a certain association, you may not be eligible for their loans.

    NHS Salary Sacrifice Schemes

    Numerous NHS Trusts run salary sacrifice schemes.

    For example, rather than taking out car finance, you may qualify for a vehicle through an NHS Car Scheme.

    There are nuances involved and you can’t just approach a company offering it.

    Your line manager is who to speak to because it is part of a Salary Sacrifice Scheme and only available to NHS staff who have completed their probationary period.

    How NHS car schemes work

    Payments that would go to a private car finance agreement are instead deducted from your wages.

    Depending on what NHS band you are on, the salary sacrifice could take your wages below the required minimum wage.

    If you are eligible, NHS car schemes are a lease agreement lasting up to three years.

    During the term of the lease, the cost of the car is inclusive of insurance, breakdown cover, and servicing.

    Importantly, buying a car through salary sacrifice is classed as a company car and that can have tax implications.

    NHS Car Schemes can be reported in two ways.

    Your employer can classify it as a “Benefit in Kind” using form p11d, which would change your tax code, or it could be taxed at source, in which case, your tax code wouldn’t change.

    Changes to your tax code change how much tax you pay, your National Insurance contributions, and your pension contributions, including your employers’ contributions to a pension scheme.

    If you’re considering a car on finance and think salary sacrifice to be worth considering, seek financial advice first.

    NHS Trusts are partnered with charities that can give you advice on a range of issues, including tax.

    Other forms of NHS Salary Sacrifice

    If your employer is partnered with Vivup, you can buy home and electronic appliances through Payroll Pay.

    Using Vivup should work out cheaper than using a payday loan provider, or using a mail order catalogue to replace a broken appliance on expensive finance.

    With salary sacrifice, you can pay for much more than financing a car. Use it to pay for your family holidays, meet childcare costs, and even pay for an annual gym membership directly from your wages.

    Financial Assistance Resources for NHS Workers

    The NHS is among the largest employers in Britain.

    Most NHS Trusts have resources in place to support the financial wellbeing of employees. 

    Among these, you’ll find links to companies offering NHS discounts, and how to check you’re maximising potential tax savings from claiming employment expenses (such as work uniforms and cleaning allowances), and how to go about claiming a tax refund if you haven’t.

    Public Sector Non-Repayable Grants

    Benevolent Funds

    Benevolent funds are provided by charities as non-repayable grants. Some are regional funds, others are industry-specific, with several being available in the public sector, and health and social care.

    The Association of Charitable Organisations maintains a database of member charities that could provide financial assistance when you need it most.