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How to borrow with bad credit 

Can I get a loan with a poor credit score?

published: 17 October 2022
Read time: 5 minutes

You could still get a loan if you have a low credit score. Our guide explains how to improve your chances of getting approved

What to consider before getting a loan with a bad credit score  

There are a number of things to think about before taking out a new loan, particularly if you’ve struggled with debts in the past. These might include:  

Do I need the money? 

 While you may be able to get a loan if you have bad credit, the deal won’t be as good as it would be for those with a good credit rating. This means that even if you pay it back on time and in full, it will be more expensive.  

If you have the time to work on your credit score first – getting on the electoral roll and meeting existing credit and debt repayments on time and in full, for example, this should start to boost your credit rating making borrowing easier in future.  

 Always be confident and comfortable that you can afford any borrowing before you apply. Getting into difficulties with a new loan could further damage your credit rating, and in the worst cases, with secured debt you could lose your home.  

How much do I need to borrow and for how long? 

The more you borrow, the more you’re likely to pay back in interest. Also, borrowing over a longer period typically means you’ll pay back more overall. It makes sense to borrow only what you need, and – as long as you can afford the monthly instalments – to pay it off as quickly as possible.  

Can I improve my credit rating before applying?   

While it can take a more sustained period of being financially responsible to boost your credit rating, there may be ways you could boost your score more quickly.  

These include registering on the electoral roll and checking your credit report for any mistakes. Our guide to improving your credit rating offers handy tips for ways to grow your credit score. 

woman on phone sat in front of laptop

Am I eligible for a bad credit loan?  

To be eligible for a bad credit loan, you will have to meet certain criteria. This is likely to include: 

  • Being aged 18 or over  

  • Being a UK resident and have at least three years of address history in the UK 

  • Holding a UK current account 

  • Not having been declared bankrupt in the past six years 

  • Having a credit rating high enough to satisfy the loan provider’s conditions. This will differ from lender to lender  

What would be seen as a bad credit score?  

 
It’s difficult to give an exact number for a bad credit score because there are three main credit reference agencies – Experian, Equifax and TransUnion – and all use a slightly different scoring system. Lenders also have their own scoring system to judge credit applications.  

In all cases, the lower your number the worse your credit score. Our Credit Monitor service uses TransUnion’s scoring system where a 550 or below would be seen as a bad credit score.  

Is it a good idea to get a loan with bad credit?  

It depends on whether you really need the money and whether you’re confident you can keep up with repayments. If you are concerned about keeping up with repayments then taking on debt is not a good idea.    

If you don’t need the money as a necessity, such as for repairing your car so you can get to work, then you may be better to try and save up. Remember, interest on a loan means you will always pay back more than you receive. 

If part of the purpose of a bad credit loan is to help improve your credit rating as you pay it off, you might be better with a credit builder credit card. Although you’ll only be able to spend smaller amounts on credit, as long as you clear your balance every month you won’t pay any interest. 

What types of loans can I get with bad credit?  

 Unsecured personal loan 


Unsecured personal loans are not secured against any assets (such as your home). Instead, lenders will base their decision on your loan application on a range of factors, including your financial circumstances and income and your credit history and score – which is evidence of how well you’ve managed credit in the past.  

If you’re unable to meet your loan repayments on a personal loan your credit score is likely to be damaged, you could incur penalty fees and charges and the lender may arrange a County Court Judgement against you.   

Secured loan 

 Secured loans require you to use an asset as security against your borrowing – typically your home or other valuable asset. This acts as collateral to the lender in case you can’t keep up with your monthly repayments.   

Although you may be able to get a better rate and borrow more with a secured loan you should think carefully before you apply. This is because your home will be at risk of repossession by the lender if you fail to keep up with your repayments.  

Guarantor loan 

With a guarantor loan the borrower must arrange for a second person – the guarantor - to agree to be legally responsible for the loan repayments in the event the original borrower cannot repay. This lowers the risk to the lender, particularly when lending to someone with a poor credit rating.   

The guarantor, usually a friend or family member of the borrower, will have to qualify to be eligible, meeting criteria such as being aged 21 or over, working full-time and having a strong credit history - and also potentially being a homeowner. The guarantor can’t be your spouse or someone you share your bank account with.  

A guarantor loan may enable you to borrow when you have poor credit but think carefully about the arrangement. It could damage your relationship with the guarantor if you start missing repayments and they have to step in.  

Peer to peer loan 

 Peer to peer loans are a way to borrow money without using a bank, building society or traditional lender. Instead you’re borrowing your loan from an individual or group of individuals rather than from a financial institution, such as a bank.    

It may be possible to get lower interest rates with a peer to peer loan compared to traditional loans, although this will depend on how low your credit score is. In some cases those with very poor credit may not be eligible for this type of loan. You’ll usually have to be at least 18, a UK resident and have a regular income to apply. 

How much will a bad credit loan cost?  

A bad credit loan will cost more than a loan for someone who has a good credit rating because loan providers feel they are taking on additional risk when giving you the money. It means they are looking to cover any potential losses through higher rates.    

The specific terms of a loan will differ depending on the lender, its attitude to risk and your own credit rating. However, it’s likely a secured loan will be cheaper than a personal loan because you are putting up your home as security.   

You can work out how much a loan might cost depending on the interest rate and length of the term with our loans calculator. It can also show you how much you could potentially borrow depending on how much you can afford to pay back each month.  

What is the most I can borrow with poor credit?  

With an unsecured loan, you can usually access a minimum of £1,000 up to around £25,000. However, a loan for bad credit is likely to offer a much lower total amount.  

A secured loan typically allows you to borrow more depending on factors such as how much the security (your home) is worth.  

With a guarantor loan, you’ll be able to borrow anywhere from £1,000 to £10,000 but this will also depend on your credit history and income. 

How can I improve my chances of being accepted for a loan with bad credit?  

  

To improve your chances of getting a loan with bad credit you can:  

  

  • Borrow less. Potential lenders are more likely to agree to lower amounts, which will keep your monthly repayments more manageable  

  

  • Earn more. While this is unlikely to be an immediate option if you can show you can afford higher monthly repayments it will give lenders more confidence to lend 

  

  • Cut back on overheads. If you’re able to streamline your outgoings so you have fewer liabilities, you might be able to increase the chances of having your loan application approved 

  

  • Improve your credit rating. Check your credit report to see if there are ways you can improve your credit score. Our guide to improving your credit rating can help with this. Also make sure there are no errors in your credit file as this can affect your credit score. If there are mistakes contact the relevant lender to get the mistake corrected 

What are the alternatives to a loan if I have a bad credit score? 

If you have a low credit rating and need to borrow money, there are a range of alternatives to a bad credit loan. These include:   

Credit builder credit cards 

This could be an option if you only want to borrow a small amount of money and you are prepared to pay it back quickly. A credit builder credit card acts the same way as any other credit card.  

The difference is you’ll typically be given a lower credit limit and interest rates are higher. However, when used responsibly you can build up your credit rating, meaning you should be able to get better deals on loans and credit cards in the future.   

Money transfer card  

A money transfer card allows you to borrow funds and move them into your current account. Be wary of the interest rate because if you have bad credit it might be high. There could also be a fee involved - levied as a percentage of the amount you borrow.  

Arranged overdraft 

An arranged or authorised overdraft can offer more flexibility than a loan but should only be used in emergencies because interest rates can be high.   

You’re also unlikely to be able to borrow as much on an overdraft compared to a loan. On the plus side you can clear your overdraft as quickly as you like. But you’re unlikely to be offered a big overdraft if your credit score is low. 

Borrow from elsewhere 

In some cases, you may look to borrow from family or close friends. This can be a good option if you know you are unlikely to be accepted for other types of finance – but it is not without its risks and pitfalls. 

 Other useful guides 

We have a range of guides to help you with your loan decision: 

Compare loans with MoneySuperMarket  

Comparing bad credit loans is straightforward with MoneySuperMarket. We’ll ask you a few quick questions and run a ‘soft search’ that won’t harm your credit score.  

 We can then show you loans that you’re eligible for from our panel of specialist lenders and we’ll give you an idea of your chances of being accepted if you apply. You’ll be able to choose from unsecured, secured or guarantor loans.   

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this service. Instead we are usually paid a fee by the lenders, but the size of that payment doesn’t affect how we show products to customers.