Loans for Bad Credit

What are bad credit loans?

Loans with bad credit are provided as a financial option for those who have a poor or non-existent credit history. You may also see them advertised as adverse credit loans or poor credit loans. Not all UK lenders accept people with poor credit histories, so you may have fewer options to choose from – but that doesn’t mean you can’t borrow. Loans for people with bad or no credit history are typically unsecured, so pose less risk to your home or car - although adverse credit secured loans are also available.

When you’re approved for a secured loan with bad credit, you’ll not only access the credit you need, but also improve your credit score in the long run. Remember that you must make your regular repayments on time in order to build your credit score back up.

If you apply for a loan with bad credit, it may mean the interest you pay is higher than with other types of personal loan. This should be taken into account when calculating your ability to meet the repayments.

What is bad credit?

Having bad credit refers to your credit score. It can be difficult to get a loan if you have bad or no credit history, as lenders see you as a risky option.

Credit scores are measured differently across the three major UK credit reporting agencies, so it can be worthwhile to get more than one credit check. This is generally a good idea to check for any mistakes on your credit report and take steps to rectify them. Bad, or poor, credit is defined by the three agencies like so:

• Experian: A score below 720 out of 999.
• Equifax: A score below 438 out of 1,000.
• TransUnion: A score below 565 out of 710.

You may have bad credit for several reasons. If you have previously accessed credit and missed payments, this will have impacted your credit score negatively. Being declared bankrupt or having a CCJ will also negatively affect your credit score.

However, you could also find it difficult to access the best deals from lenders if you have no credit history. This is often the case if you have never taken out credit such as a loan, credit card or mortgage before.

Tips to improve your credit score

Your credit score will change over time, depending on your finances. While getting a secured loan with poor credit is not impossible, taking steps to improve your credit score will benefit you in the long run. If you have a poor credit rating, there are a few crucial ways to help you improve it over time:

• Enrol on the electoral register.
• Keep active credit and debit card details up to date.
• Prioritise and consolidate any existing loan repayments.
• Use a credit card for small, regular purchases which you can repay more easily.
• Don’t always borrow to the monthly spending limit with credit cards.

These are just some of the ways to help get your credit score back on track. Depending on your financial situation, you may see positive change within a few months or a few years.

Find out more about how to improve your credit score.

What can I use a bad credit loan for?

When applying for a secured loan with bad credit history, it might be necessary to state what you will be using the loan for. While there are many reasons you might need a loan, it’s important to give the prospective lender this information to help with the application process. This is because some lenders will not allow loans for certain uses.

There are many reasons you might be applying for a secured loan with poor credit, for example:

• Home improvements: A home improvement loan could help you update and improve your house – and increase your property value.
• Purchasing a car: A car loan with bad credit can be cheaper than dealership finance plans, with rates available to suit your requirements.
• Business expenses: Give your start-up a boost or grow your customer base. Business loans can help give you the edge over your competitors.
• Consolidating existing debt: Save on fees and hassle by clearing other existing debts, in favour of a single monthly repayment, with a poor credit debt consolidation loan.
• Emergency expenses: You might find yourself with a large, unexpected bill, or costs. At times like these, a loan could be the quickest way to access the finances you need.

What to know before you apply

Income and outgoings

Lenders will ask about your income and expenses, as well as any debts you may have. This is so they can determine whether you can afford the monthly repayments on a low credit score loan, so it’s worth ensuring you have a full picture of your finances before you start.

Loan security

If you’re applying for a secured loan with poor credit, a lender will need to know about your property. This can include your house or your car. The more equity you hold, the less risky the proposition to lenders, which could mean lower rates on your repayments. If you’re applying for small loans for bad credit, you may find that a secured loan is the best option for more favourable rates. Remember that missing loan repayments could lead to your home or car being repossessed.

Credit history

Lenders will usually want to see your credit report to get an idea of your current situation. It doesn’t mean you’ll need a perfect credit history for approval at the rate you want, but knowing what is on your credit report ensures you are prepared for the application.

Purpose of your loan

You should be able to provide a clear reason for your application. Some lenders may be specific on purposes you can and can’t borrow the money for, so it helps to have your answer set out before you apply.

Your eligibility

We always do our best to search for a loan that works for you, even if you don’t have a perfect credit history. But your unique financial situation can tell lenders whether or not you are eligible. Lenders will assess your credit history and your repayment history before deciding whether to approve your loan application.

Take a look at our article on loan eligibility for further advice on applying for your loan.

Pros and cons of a bad credit loan

Before applying for a secured loan with bad credit, consider the pros and cons.

Pros

• Taking out a loan can be used to improve your credit score, provided you keep up with repayments.
• If you’re using a secured loan with bad credit to consolidate debt, it’s easier and more affordable to pay back at a single rate (though the total amount payable is likely to be higher).
• Being accepted can be a great help to your finances if other lenders have previously declined your application.

Cons

• An unsecured loan for poor credit will likely have a higher rate of interest. This can mean repayments are higher than other loan products over time.
• Missing a payment on any loan could cause your credit score to be negatively impacted.
• Falling behind on repayments on a secured bad credit loan may put your property at risk or cause your credit score to fall further.

How do I get a secured loan with bad credit with Norton Finance

No matter your reasons for needing a bad credit loan, Norton Finance will work with you to find a solution that meets your needs. If you’re applying for a secured loan with bad credit and you’re receiving benefits, have a CCJ or are searching for a joint application, we can help.

Simply fill in an application online, and our team will get to work searching our wide network of lenders and plans to provide you with a range of flexible options. Here, you will need to provide your residential status and the amount you’re looking to borrow as well as the borrowing terms. We also ask that you provide the purpose for your loan, so we can find the best options for your circumstances.

If you want to get an early idea of a repayment schedule, use our loan calculator to adjust your desired loan amount and terms.

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

When you’re ready to start your online application with us, you should have the information below to hand:

• Personal financial details
• Employment status
• Details of your income

Representative example

HOMEOWNER UNSECURED LOANS - Rates from 7.3% APR.

If you borrow £12,000 over four years at a Representative APR of 15.4% APR (fixed), you would pay £330.33 per month. The maximum APR is 99.1%.

Frequently asked questions

We’ve already covered the basics of personal loans with a bad credit rating and how they work, but there are other details to be aware of before sending your application.

Can I have a loan with a CCJ (County Court Judgement)?

Yes, it’s possible to apply for a loan with a CCJ. You may be issued with these court orders if you haven’t kept up with repayments on a previous loan. Some lenders will work with you on a repayment package that covers the debt, plus the amount you want to borrow.

Find out what a CCJ is.

How much can I borrow?

With a secured bad credit loan, you can borrow from £3,000 up to £500,000. An unsecured bad credit personal loan will allow you to borrow between £3,000 up to £25,000.

How long are the repayment terms?

Repayments on an unsecured loan can be spread over a period of between one and seven years, to ensure you can comfortably meet them. A secured loan can be repaid over terms ranging from 3 to 30 years.

What are the interest rates?

The interest rate will vary as your current circumstances and financial history are taken into consideration. Expect higher interest rates when applying for a secured loan with bad credit, as lenders will see you as financially risky. Get in touch with us to find the best options for you.

Are there urgent loans for bad credit?

If you need to access finances quickly and require an urgent loan for bad credit, we may be able to help you if it’s not a secured loan. We can offer loans within two weeks for customers in financial difficulties, whether it’s a broken boiler or urgent dental treatment. An urgent loan may have high interest rates, but we can help you find the best solution for your situation.

How long will it take?

You will receive an instant decision from us, and an unsecured poor credit loan could be in your bank account within 1-2 days. However, for secured adverse credit loans we recommend you give one to two weeks to allow your application to be processed.

Do I need a guarantor?

No, you will not need a guarantor. Our bad credit loans criteria is based on the loan applicant’s details only, so you can apply independently without asking a friend or family member for help.

Looking for more information on your personal finance and credit scores? Browse our Know How section for more topics.