Bad Credit Loans

Loans for people with bad credit

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Loan rates are based on your circumstances and change regularly

 

48.5% APR Representative

 

SECURED LOANS: YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE, LOAN OR ANY OTHER DEBT SECURED ON IT. 

We compare loans that can be paid back over terms of between 1 and 25 years. The APR interest rate you’ll be charged depends on your personal circumstances, and will be between 3.2% and 99.9%

This is a representative example of what it may cost: a Loan of £7,500 over 60 months at 3.3% APR would equate to monthly repayments of £135.60, and the total cost of the loan that you pay back would be £8,136.22.

What types of loans can I get if I have bad credit?

If you’ve got a poor or limited credit history, you’ll have fewer options available to you for taking out a loan – and in any case you’re likely to see higher interest rates. You should be able to choose from:

Personal loans: A personal loan won’t require you to put any assets up as collateral – but if you’ve got bad credit you’ll have limited options when it comes to lenders, and interest rates tend to be higher.

Secured loans: A secured loan is when you borrow a certain amount and use assets you own as collateral. This is most commonly your home (also known as homeowner loans) or your car (sometimes referred to as logbook loans), but lender may also accept other forms of collateral.

If you’re taking out a secured loan you should be sure you’ll always be able to make your payments – if you regularly miss payments the bank will be able to seize your collateral. This could mean you end up losing your home.

Guarantor loans: A guarantor loan is when another person commits to making your repayments if you miss them. This will generally be a friend or family member with a good credit score.

Guarantor loans are a good way to avoid risking collateral if you can’t make your debt repayments, but bear in mind if your guarantor has to pick up the payments if you’re not able to.

Peer-to-peer loans: Peer-to-peer lending involves borrowing money from other individuals, rather than a bank or building society.

You’ll be matched up with people who’ll lend you money at a certain interest rate, and you might be able to borrow larger sums at lower rates than you would with a bank. You will however still need to pass a credit check to qualify for a peer-to-peer loan.

What are the pros and cons of taking out a loan with bad credit?

Taking a loan out might sometimes be a necessity, but it isn’t a decision to take lightly – particularly if you have a poor or limited credit history. Consider the following pros and cons to help you decide:

The pros of bad credit loans

The positives of taking out a bad credit loan include:

  • Quick access to cash: Some lenders will be able to get the cash to you in 24 hours
  • A chance to improve your credit: If you keep up with your repayments you’ll be able to build a better credit report, so if you need credit or a loan in the future you should get better interest rates

The cons of bad credit loans

You should also consider the risks of a bad credit loan:

  • Higher interest rates: Lenders usually charge higher interest rates for people with poor or limited credit, so the overall loan will cost more
  • Risk of losing collateral: If you take out a secured loan and miss too many repayments your lender will seize your collateral, meaning you could lose your home

Will I qualify for a bad credit loan?

The eligibility criteria for a bad credit loan is essentially the same as for a standard loan – you’ll need to:

  • Be at least 18 years old
  • Be a UK resident
  • Be a current account owner
  • Demonstrate your ability to repay the loan

You can check how likely you are to qualify for a loan before applying by using MoneySuperMarket’s eligibility checker – preventing your credit score from being affected.

What should I consider before I apply for a loan?

Before you apply for a loan, consider the following factors:

  1. How much you need to borrow: Borrowing larger amounts can sometimes lead to lower interest rates, but be careful not to bite off more than you can chew
  2. How long you want to borrow the money over: If you’re taking a loan out over a longer term you’ll likely make smaller repayments – but you’ll also pay more in interest, making the overall cost of the loan higher
  3. How much can you afford to pay back every month: If you have bad credit it’s vital to ensure you’ll be able to make all your repayments on time and in full to prevent your credit score from falling further. You can better understand how much you can afford to borrow with our loans calculator

Can I apply for a loan without affecting my credit score?

A successful application won’t affect your credit score – as long as you aren’t making multiple applications. The safest way to see which loans are available to you without doing damage to your credit report is to run a ‘soft search’.

With MoneySuperMarket’s loan eligibility checker, you can see how likely lenders are to accept you as a customer without actually applying. This means you’ll get to see where your chances will be best to get the loan you need without impacting your credit score.

Just enter a few details about yourself and the loan you need, and we’ll show you a list of deals sorted by interest rates or your chances of approval.

How can I improve my credit rating?

Taking out a bad credit loan and making your repayments in full and on time will help build your credit score, so you’ll find it easier to get a loan or line of credit in the future. For more on what you can do to improve your credit rating, read our guide on boosting your credit score.

Why might I have been refused a loan in the past?

Lenders take account of several factors when deciding whether to accept your loan application. Some of the most common reasons for being rejected include:

  • Bad credit rating: The standout reason for rejected applications, a bad credit rating indicates to lenders that you’re going through financial difficulties and therefore might struggle to repay what you borrow
  • Limited credit history: If you’re young or from abroad you won’t have had the chance to build a reputable credit history, which can make it harder to be eligible for some loans
  • Unstable employment history: Your employment history also contributes to your credit rating, and if you change jobs often, it can be another indicator of financial instability
  • Too many loans/open lines of credit: If you have too many open loans or lines of credit it can appear to lenders that you’re in a difficult financial situation
  • Low or irregular income: This can depend on the amount you want to borrow, but for larger loans a low or irregular income could convince lenders you won’t be able to make your repayments
  • Not enough assets to secure the loan: If you have a poor credit rating you might have to take out a secured loan – which means you’ll put an asset like your car or home up for collateral. However if you don’t have enough to offer up as security for the loan, it’s likely your application will be rejected
  • Errors on application: This won’t necessarily relate to your credit history, but making mistakes on a loan application could lead to a rejection – which would then have a negative impact on your credit score, making it harder to apply for credit or loans in the future

What happens if my loan application is refused?

If your application for a loan is refused, it will show up on your credit report. A single failed application isn’t the end of the world, but multiple rejections will damage your credit score and ring alarm bells with lenders, so you’ll struggle to take out credit or another loan in the future.

This is why you should avoid making any more applications if your first is rejected, at least for a short while, until you can improve your circumstances or find a loan you’ll be more likely to get.

What do I need to apply for a bad credit loan?

When you compare loans with MoneySuperMarket, you’ll need the following information to hand to make your application:

  • Your full permanent UK address
  • Your contact details, including your phone number and likely your email
  • Contact details for your guarantor if you need one
  • Details about your incomings and outgoings

Our eligibility checker will show you which loans you’ll be more likely to get if you apply, so you can make your decision with confidence and avoid damaging your credit score.

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

You may want to consider an alternative to taking out a bad credit loan, in which case you could apply for a credit builder credit card, switch to a bank account with an interest-free overdraft, or take out a payday loan.

Compare bad credit loans

If you’re looking to take out a loan and your credit history isn’t quite where you want it, comparing loans with MoneySuperMarket lets you see what loans you’ll be more likely to get without affecting your score. All you need to do is tell us how much you want to borrow, what you need it for and how long you want the loan term to last, and we’ll show you a list of deals to choose from.

You’ll be able to adjust the loan amount and length as you need, and you can sort the results by both your chances of approval if you apply, and the interest rate you’ll get if your application is successful. This can be particularly helpful if you’ve got bad credit, as it means you won’t need to make multiple applications to find a loan – you’ll be able to apply with more confidence that you’ll be accepted.