Bad Credit Loans I How To Get A Loan I Finance Rate

Whilst it’s often seen as a negative thing, having a poor credit score doesn’t necessarily exclude you from taking out a loan. There are many different types of loans that you can apply for with poor credit history, which are often known as bad credit loans.

As you might expect, bad credit loans are specifically designed for people with poor credit ratings. There may be additional repayment terms attached, but you should be able to find something suitable, no matter how low your credit score is.

At Finance Rate, we’re experts in the financial world, aiming to give you as much information as we possibly can, so that you can make the right decision about your finances. We cover a wide range of topics, with bad credit loans being just one aspect of what we do.

If you’d like to find out more about our other services, please head to our homepage.

Table of Contents

How does the credit score system work?

Lenders use one of the three most common companies: Equifax, Experian and TransUnion. Credit reference agencies and lenders use the credit score system to assess an individual’s creditworthiness. It helps lenders evaluate the risk of extending credit to a borrower based on your credit history and financial behaviour.

The credit score system begins with a credit report – a record of an individual’s credit history compiled by credit reference agencies. This report includes information such as:

Credit accounts
Payment history
Outstanding balances
Public documents (e.g., bankruptcies, court judgments)
Hard inquiries

The credit scoring model uses mathematical algorithms or scoring models to analyse all of this information and calculates a numerical value – that is how your credit score is born. Let’s break down what the numbers mean according to the agency:

Agency	Very Poor	Poor	Fair	Good	Very Good	Excellent
Equifax	N/A	0-438	439-530	531-670	671-810	811-1000
Experian	0-560	561-720	721-880	881-960	N/A	961-999
TransUnion	0-550	551-565	566-603	604-627	N/A	628-710

What factors do lenders take into account?

You may have come across some of these phrases before, but let’s get into what factors lenders look at, and what they mean:

Payment history: The history of timely or late payments on credit accounts.
Credit utilisation: The proportion of available credit that you use.
Length of credit history: The time the individual has been using credit.
Credit mix: The variety of credit accounts, such as credit cards, loans, or mortgages.
New credit applications: The frequency of recent credit applications and inquiries.

Understanding your credit score and the factors that influence it can help you make informed decisions and take action to improve or maintain a healthy credit profile. Regularly reviewing your credit report and practising responsible financial habits are vital in managing your creditworthiness.

What credit score do I start with?

The truth is that there is no starting credit score, but it doesn’t start at 0. Usually, it starts at 300, which is the lowest possible FICO score. When you first enter the credit system, such as when you turn 18 or start using credit products, you essentially have a ‘thin file’ or no credit history. Credit scores typically range from 0 to 999 or 0 to 700, depending on the credit reference agency that calculates the score.

How can I check my credit score?

In order to improve your credit score, you first need to know what your current score is. You’ll also be able to see all the information that banks and potential lenders can see about you, which should be useful in the long run.

To check your current credit score, you’ll need to contact one of three main credit reference agencies (CRA):

– Experian
– TransUnion
– Equifax

You’ll have to create an account with each credit agency to be able to carry out a credit check, but this isn’t something you need to pay for. By law, this service has to be carried out for free.

You can contact all three CRAs if you prefer. Doing so will carry out a soft credit check, which means the search won’t go on your credit record (which could have negative consequences). Each credit agency has a different way of scoring information and they collect information in different ways. This means that your report may be slightly different, depending on the CRAs you apply with. If you check your credit report and discover that you have a less-than-perfect credit score, you can then take steps to improve it.

What information does my credit report show?

You may want to find out what information your credit report shows. Whilst it’s expected that information about your debts and used credit may show up, there are a few other things you can expect to see on your credit report. This also means that potential lenders will be able to see these things too, so it’s always important to be honest about your finances. You may be committing fraud if you lie about your finances, which is something you naturally want to avoid.

The following details will be shown on your credit report:

Your personal details, such as your full name, address and date of birth
Whether you are registered on the electoral register, and any information relating to that
How much money you owe to your lenders, including joint loans, mortgages and overdrafts
Any County Court Judgements (CCJs) you have
Any late or missed payments owed to credit agencies
Whether your house has ever been repossessed
Whether you have ever been declared bankrupt

Most of this information will be wiped after a few years (usually after a period of six years), so as long as you continue to build up good credit, your score should start to improve.

There are some things that should not be listed on your credit report, including:

Your income, as well as the amount of money you have – whether in a savings account or a current account
Personal information, such as your race, religion or ethnicity
Information about your student loans
Late/missed council tax payments
Parking or driving fines, such as speeding tickets
Your medical history and criminal record

It may make you feel a little better knowing that personal loan lenders aren’t able to see any of the information in this latter section.

What factors contribute to having bad credit?

Multiple factors contribute to having bad credit, and some make a more significant dent in your credit history than others. Overall, these are the most common factors that can weigh down your credit:

Late or missed payments: Having missed payments on credit cards, loans, mortgages, or other bills can negatively impact your credit score. The more missed or late payments, the more it affects it – to avoid this, we recommend borrowing only what you can afford.
Lack of credit history: Limited or no credit history makes it challenging for lenders to assess your creditworthiness, resulting in a lower credit score.
High credit utilisation: In other words, being too close to your credit limit can and will impact your credit score – a good amount of credit to use is at most 25% of your monthly credit limit. If you’re spending more than that, increase your credit limit (if you can afford it) or try to lessen your spending.
Defaults and CCJs: Defaults occur when you fail to repay a debt as agreed, while County Court Judgements (CCJs) are issued against you for unpaid debts. Both will severely damage your credit history and score.
Bankruptcy: Declaring bankruptcy will reflect on your credit score and impact it for a long time.
Multiple loan applications: Making numerous loan applications within a short period can raise concerns for lenders and potentially lower your credit score.
Financial associations: Being financially linked to someone with a poor credit history, such as a partner or family member, can impact your own credit rating and decrease it over time.
Frequently setting up new accounts: This might be a surprising one, but yes, opening new bank accounts will lower your credit score temporarily, but if you do it very often, your credit score doesn’t have time to recover.

In any of these situations, recovering financially and fixing your credit score is still possible. If any of the above has impacted your credit score, it is easy to be discouraged and feel stuck. We are here to help you and provide complete, bias-free, transparent information so you can make an informed decision.

How can I get a credit score if I don’t have one?

Most people have some form of credit, even if it’s classed as bad credit. However, in rare situations, there are some people who don’t have any credit at all. This is usually because they’ve never used credit or borrowed money from a lender. It’s common for new school leavers to be lacking in credit, as your credit report only becomes available at the age of 18.

Some other reasons why you might not have a credit score include:

If you’ve never used credit – For example, if you’ve never had a credit card, paid for something on finance, taken out a phone contract or don’t have any bills, as all these things contribute to your annual credit report.
If your credit history is too old – Believe it or not, if you haven’t used credit for a long period of time, it’s possible for your credit score to disappear from the record. Past instances of credit being used are usually recorded for a total of six years, so it’s likely your entire credit score will be wiped if you haven’t used credit within the last six years.
If you’ve recently moved to the UK – Whilst other countries may have their own credit systems, you will not have a credit rating within the UK if you have recently moved here. Even if you have excellent credit elsewhere, it will usually not count towards any credit checks within the UK. However, your debt can still follow you across borders, so you need to be aware of this.

University students may also find that they don’t have any credit, as housing is often provided through the university itself, especially in the first year. Even if you’ve been to university and have been granted a student loan, it won’t be logged on your credit report. This is because student loans don’t have an impact on your credit profile – the money you owe is also repaid based on your income, instead of the overall amount that you’ve borrowed.

Can I get a student loan with bad credit?

If you’re considering enrolling in university but you have a bad credit history, you may find yourself wondering whether you’re eligible for a student loan. Luckily, student loans are counted as separate from regular loans, and your credit history isn’t taken into account.

The Students Loans Company is a non-profit government organisation that has the ability to administer grants and loans to students at universities and colleges within the United Kingdom. You can apply for loans for both your tuition fees and your living expenses – you may also receive grants to live on if you can prove that you don’t have a regular source of income.

However, if you live with your parents, your tuition fees will still be covered by your student loan, but you may get a reduced living cost loan/grant. This is because these loans/grants are means tested and are usually based on your parent’s income (unless you’re a mature student and/or you live on your own).

If you have a limited credit history, or you don’t have any credit at all, you may find it difficult to apply for credit, including personal loans. This is because you may be considered to be a higher risk than someone with a good credit score. However, there are several ways you can build up your credit – these tips will also have a positive impact if you have a bad credit score:

Apply for a credit card – You may not be eligible for most credit cards, but there is such a thing as a ‘credit builder credit card’. These cards are specifically designed for people with either no credit or low credit, allowing you to build up your credit score the more you use your card. You’ll usually have a lower limit but this is a good thing, as it will ensure you don’t spend more than you can afford. If you want to get a new credit card, you should ensure you only spend what you can afford to pay off, and you should always make sure the balance is paid off in full before the deadline.
Register to vote – This may surprise some people, but registering to vote can have a positive impact on your credit score. Joining the electoral register means that future lenders can view your details and confirm your identity, as well as helping to fight fraud. You can register to vote through the official government website.
Repay your debts and credit on time – One way to improve an adverse credit score is to pay your debts on time, including any credit you’ve used in the past. This shows personal loan lenders that you are reliable and responsible, making them more likely to trust you with a loan.
Put your name on some of your household bills – If you have the funds available to pay them, you should consider putting your name on some of your household bills, or your phone contract. If you pay your bills on time, then this will have a positive effect on your credit score, as it shows that you are responsible enough to pay your bills regularly.

Building up a good credit score takes time, so it’s important to be patient and not worry too much. As long as you’re following these steps and you don’t use more credit than you can afford, you should be able to improve your credit within a short period of time.

You can keep checking your credit score with the three main credit companies (Experian, Equifax and TransUnion) to see how your credit report is changing. These checks will usually be carried out as a soft credit search, meaning it won’t have a negative impact on your overall credit score.

What is worse to lenders: bad credit or no credit history?

Although both present challenges, having bad credit is worse for most lenders when getting a loan. Of course, it depends on the lenders and their risk tolerance.

Having no credit history, or having a ‘thin file’ as it is known, means that there needs to be more information regarding your credit behaviour. Lenders may view a lack of credit history as an unknown risk since no credit behaviour exists to assess.

Why is bad credit considered worse?

Bad credit is generally seen as a red flag to lenders; there is a higher level of credit risk, indicating a history of struggling to meet obligations. That’s why it is seen as a more significant concern to lenders than having no credit.

In both cases, building or rebuilding a positive credit history is essential. For those with no credit history, establishing credit by obtaining a secured credit card or becoming an authorised user of someone else’s credit account can help build a favourable credit profile.

Who can apply for a bad credit loan?

Anyone that doesn’t qualify for a traditional personal loan can consider applying. Bad credit loans are designed for individuals with a less-than-perfect credit history or poor credit scores. You can have bad credit history for a range of reasons; it can even be that you are a young person with no credit history and don’t qualify for a different type of loan.

How much can I borrow with a bad credit loan?

There is no standard of how much you can borrow with bad credit loans – it will always depend on the lender’s policies, your circumstances, the type of loan you’re applying for, and whether it’s secured or unsecured.

Secured bad credit loans

If you are willing to offer collateral, such as a property or a vehicle, lenders may be more inclined to lend you a considerable amount. Secured loans generally allow for higher borrowing limits, even with bad credit, potentially ranging from a few thousand pounds to several hundred thousand pounds, depending on the value of the collateral.

Unsecured bad credit loans

Unsecured loans do not require collateral, but they may be more challenging to obtain with bad credit. The borrowing limits for unsecured bad credit loans are typically lower than for secured loans. You can borrow anywhere from a few hundred pounds up to £25,000, although the exact amount will depend on your circumstances and the lender’s policies.

Payday loans

Payday loans are short-term loans typically designed to cover small, emergency expenses until your next payday. The borrowing limits for payday loans are generally lower, often ranging from £100 to £1,000, depending on the lender.

To find out how much you can borrow, check out this loan calculator that can help you determine how much you could borrow and how long you want to pay it over with a neat feature that allows you to select your credit history.

How can I improve my chances of getting approved for a bad credit loan?

The higher your credit score, the higher your chances are of getting approved for any loan – including bad credit loans. To increase your chances of getting approved for a loan, you can start by understanding your credit history and any instances of bad credit.

Check and improve your credit report: Obtain a copy of your credit report from credit reference agencies. The main ones in the UK are Experian, Equifax, and TransUnion. Review the report for errors or inaccuracies that may negatively impact your credit score. If you find any discrepancies, report them to the respective credit agency to have them corrected.
Start small with things you can control: Registering to vote, registering bills in your name and paying them on time are all things that can improve your credit score.
Assess and reduce your debt: Lenders consider your debt-to-income ratio when evaluating your creditworthiness. Lowering your debt levels can demonstrate your ability to manage your finances responsibly. Create a budget and consider debt repayment strategies such as debt consolidation or negotiation to reduce your outstanding debts.
Build a positive payment history: You may not be able to change the past, but you can work towards the future; this can look like making consistent, on-time payments, demonstrating your commitment to meeting your financial obligations. Knowledge is vital when making good financial choices, and having unbiased financial advice is crucial so you can make informed decisions about your finances. If you’re struggling, it’s okay to reach out and ask for help – there are government-funded schemes that can help you.
Consider a guarantor: Having a guarantor or co-signer with a good credit history may increase your chances of loan approval. If you default, this person agrees to be responsible for the loan, providing an additional layer of security for the lender.
Consider secured loans: Offering collateral can increase your chances of loan approval, as it provides security for the lender. Secured loans, such as home equity loans or secured personal loans, may be more accessible for borrowers with bad credit but require collateral (house, car, any asset).

Remember, rebuilding your credit takes time and effort. Be patient and proactive in managing your finances and credit; you will achieve your financial goals before you know it.

What is the typical interest rate for bad credit loans?

Yes, interest rates for bad credit loans tend to be higher than traditional loans offered to borrowers with good credit. The specific interest rate you can expect will depend on the severity of your credit issues and the loan amount.

Secured loans: Since secured loans are backed by collateral, lenders may be more willing to offer lower interest rates than unsecured loans. However, with bad credit, you can still expect higher rates, often ranging from 5% to 25% or more, depending on the lender and your credit profile.
Unsecured loans: Unsecured loans typically carry higher interest rates due to the increased risk for the lender. The interest rates for bad credit unsecured loans can vary significantly but often fall within the range of 25% to 100% APR (annual percentage rate) or even higher in some cases.
Payday loans: These are known for their high-interest rates, primarily due to their short-term nature and accessibility to borrowers with poor credit. The interest rates for payday loans can be extremely high, often exceeding 1,000% APR.

Are there alternatives to bad credit loans?

Yes, if taking out a bad credit loan is not suitable to your needs, there are a few alternatives to taking out a bad credit loan, such as peer-to-peer lending, lending from family or opting to improve your credit score. Let’s break down what your options are:

Improve your credit score: Instead of immediately applying for a bad credit loan, you could focus on improving your credit score. You can do this by making timely payments on your existing debts, reducing your credit utilisation, and addressing any errors or inaccuracies on your credit report.
Secured loans: If you have assets like a car, home, or savings account, consider applying for a secured loan. With a secured loan, you use the asset as collateral, which reduces the lender’s risk and may increase your chances of approval. Secured loans often have lower interest rates compared to unsecured loans.
Peer-to-peer lending: Peer-to-peer (P2P) lending platforms connect borrowers directly with individual lenders. These platforms may have a more flexible lending criteria and be more willing to consider borrowers with lower credit scores. P2P lending often involves higher interest rates than traditional loans, but the rates can still be more competitive than bad credit loans.
Credit Unions: Credit unions are nonprofit financial institutions that may offer more favourable loan terms than traditional banks. They often have community-focused lending programs and may be more willing to work with individuals with lower credit scores.
Borrowing from family or friends: Consider asking family or friends for a loan. However, it’s essential to approach these arrangements with caution and establish clear repayment terms to avoid straining personal relationships.
Alternative income sources: If your need for funds is temporary or relatively small, you could explore alternative income sources to cover your expenses. This could include freelancing, part-time work, or selling unwanted items.

Will applying for a bad credit loan affect my credit score?

Yes, applying for a bad credit loan can affect your credit score but only temporarily. When you apply for any loan or credit, including bad credit loans, lenders typically perform a credit check as part of their assessment process. This credit check is a “hard inquiry” or “hard credit check.”.

Applying for a loan has an initial impact; it shows up on your credit history and is visible to other lenders. A single hard inquiry has minor and temporary effects.

This is different from multiple applications in a short time which can have a significant impact on your credit score. Your credit needs more time to recover from the inquiries and can’t. Multiple hard inquiries may suggest to lenders that you are actively seeking credit, which is viewed as a potential risk.

Researching and comparing lenders before submitting loan applications is generally advisable to minimise the impact on your credit score. Applying only to lenders likely to approve your application can help reduce the hard inquiries on your credit report.

How long does it take to get approved for a bad credit loan?

With specialist lenders, such as the ones required for a bad credit loan, there are also more streamlined processes to accommodate borrowers with lower credit scores. So typically, it is faster than traditional banks – you may receive a decision for a bad credit loan within a few hours to a few days.

Online applications can streamline the process and provide faster responses. Initial approval or pre-qualification decisions can be received within minutes or hours.

The approval process with traditional banks and credit unions takes longer than the above options, taking 1 to 10 working days for initial approval. But the overall process of finalising the loan can take a few weeks.

Can I use a bad credit loan to consolidate my existing debts?

Yes, using a bad credit loan to consolidate existing debts is a common financial strategy – a debt consolidation loan. It involves taking out a new loan to pay off multiple debts, such as credit card balances, personal loans, or other outstanding obligations. Having only one payment can help you pay off your debt in a more organised way.

What benefits can I expect with a debt consolidation loan?

Simplified repayment: By consolidating your debts with a bad credit loan, you can simplify your repayment process. Instead of managing multiple payments to different creditors, you make a single monthly payment toward the consolidation loan.
Potential lower interest rate: Depending on the terms of the bad credit loan, it may offer a lower interest rate than some of your existing debts. This can save you money on interest charges over the life of the loan.
Extended repayment period: Consolidation loans may provide a longer repayment period than some of your existing debts. While this can lower your monthly payment, keep in mind that extending the repayment period may result in paying more interest over time.
Improved financial organisation: Consolidating your debts can help you gain better control over your financial situation. You can easily track your progress and manage your debt more effectively with a single loan and payment.

How does a debt consolidation loan affect my credit score?

If you make consistent, on-time payments on your consolidation loan, it can positively impact your credit score over time. It demonstrates your ability to manage your debts responsibly.

Can I get a bad credit loan if I have bankruptcy on my record?

Yes, getting a bad credit loan is possible even if you have bankruptcy on your record. However, having a bankruptcy in your credit history can significantly impact your creditworthiness and may limit your options. The main factor is time – how long has it been since your declared bankruptcy? As time passes, lenders may view your financial situation as more stable and be more willing to consider your loan application.

Like any bad credit loan, interest rates can be higher if you have a bankruptcy in your credit history. Lenders typically charge higher rates to offset the perceived risk of lending to someone with a bankruptcy on their credit record.

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

Yes, it is possible to get a loan if you have a County Court Judgment (CCJ) on your credit record, but it may be more challenging. A CCJ is a legal ruling issued by a county court when you fail to repay a debt. But not every CCJ is the same; just like every situation is different. So, what factors contribute to whether you can get a loan with a CCJ?

Lenders’ policies: Each lender has its own criteria for evaluating loan applications. Some lenders may have strict policies against lending to individuals with a CCJ, while others may be more lenient.
Time since CCJ: Lenders may be more willing to approve a loan if the CCJ is older and has been satisfied (repaid) or settled. The longer the time since the CCJ, the less impact it may have on your loan application.

Can lenders see a CCJ after six years?

County Court Judgments (CCJs) remain on your credit file for six years from the date they are issued, per the Credit Reference Agency (CRA) guidelines. After this period, the CCJ should no longer be visible to lenders when they check your credit report.

However, even after six years, certain exceptions exist where CCJs can still be seen by lenders or other parties:

Unsatisfied or unsettled CCJs: If you have not satisfied (repaid) or settled the CCJ within six years, it will continue appearing on your credit file until it is marked as satisfied. Unsatisfied CCJs can negatively impact your creditworthiness and make it more challenging to obtain credit.
High-value CCJs: CCJs with higher monetary values, usually over £5,000, can remain on your credit file for over six years, as they are of significant importance. These CCJs can severely impact your creditworthiness, even if the six-year period has passed.
Re-registration of CCJs: In some cases, a CCJ may be re-registered on your credit file if the creditor takes specific actions within six years. This can occur if the creditor obtains a new court order or applies for judgement enforcement action, effectively extending the visibility of the CCJ on your credit report.

How long does bad credit last?

Bad credit can have a lasting impact on your credit history, but it is not permanent. Most instances of bad credit only stay on your credit report for up to six years, with very few exceptions.

Late payments: Late payments on credit accounts, such as loans or credit cards, can stay on your credit report for up to six years from the missed payment date.
County court judgments (CCJs): CCJs can also remain on your credit report for up to six years from the date they are issued. Satisfying or settling the CCJ does not remove it from your credit report right away; it’s marked as satisfied or settled.
Bankruptcies: Bankruptcy stays on your credit report for up to six years from the bankruptcy order date.
Individual voluntary arrangements (IVAs): IVAs, which are a form of debt repayment plan, are typically recorded on your credit report for six years from the start date of the arrangement.
Debt management plans (DMPs): DMPs, informal agreements to repay debt, are not listed as separate entries on your credit report. However, the accounts included in the DMP may show late payments or defaults, impacting your credit score.

How do I recover from a bad credit score?

It is possible to recover from a bad credit score; it requires time and effort as you can’t quickly clear it, but here are some of the strategies we recommend, aside from clearing your debt and reducing credit usage:

Maintain credit accounts: Keeping active credit accounts in good standing can help build a positive credit history. This can include credit cards, loans, or other forms of credit. Use credit responsibly and not take on more debt than you can comfortably manage.
Avoid excessive credit applications: Submitting multiple credit applications within a short period can signal financial distress to lenders and may negatively impact your credit score. Only apply for credit when necessary, and do your research to ensure you meet the eligibility criteria before applying.
Register to vote: If you haven’t already, register to vote at your current address, as this can positively impact your credit score. Lenders often use this information to verify your identity and address.
Use credit-building tools: Consider using credit-building tools designed to help individuals with limited or poor credit history. For example, credit builder cards or secured credit cards can provide an opportunity to rebuild credit when used responsibly.
Pay your bills on time: An often overlooked element, but consistently making timely payments to your utilities and phone is one of the most important steps in improving your credit score. It’s not just about your credit monthly payments, but other regular payments like utilities and rent can also impact your credit history. Consider setting up automatic payments or reminders to help you stay on track.
Build a positive credit history: You can build a positive credit history through careful and strategic credit usage. Using credit responsibly indicates to lenders that they can trust you with loans. How can you use your credit card responsibly? By making small purchases and paying off the balance in full each month. Only spend money you know you will have at the end of the month.
Be patient and persistent: Rebuilding your credit score takes time, requiring consistent effort and responsible financial behaviour. Be patient and persistent in your efforts, knowing that positive changes will be reflected in your credit history.

Rebuilding your credit score is a gradual process; improvement will not happen overnight. Stay committed to responsible financial habits, monitor your credit report regularly, and celebrate the small victories along the way. Over time, your efforts will help you recover from a bad credit score and improve your overall financial well-being.

What is a hardship loan?

A hardship loan, or an emergency or crisis loan, is specifically designed to provide financial assistance to individuals or families facing temporary financial difficulties or unexpected hardships. It is intended to help individuals bridge a financial gap during challenging times.

How is it different from a bad credit loan?

The difference is in the purpose of the loan. A bad credit loan is a personal loan for individuals with poor credit history. A hardship loan is an emergency loan intended to assist individuals facing unexpected financial difficulties. Here are some key features of a hardship loan:

Purpose: Hardship loans typically cover immediate and essential expenses during financial hardship. These may include medical expenses, emergency repairs, utility bills, rent or mortgage payments, or other urgent financial needs.
Availability: Hardship loans can be offered by various sources, including banks, credit unions, nonprofit organisations, and government agencies. Some employers may also provide employee assistance programs that offer hardship loans or grants.
Eligibility: Eligibility criteria for hardship loans can vary depending on the lender or program. Generally, lenders will consider factors such as income, credit history, and the nature of the financial hardship. Some programs may have specific eligibility requirements based on income level, employment status, or geographic location.
Loan amount: The loan amount for hardship loans is typically smaller than traditional loans or bad credit loans. Repayment terms may also vary, but they are often structured to be more flexible and manageable for borrowers facing financial difficulties. Some loans may have lower interest rates or deferred repayment options.
Application process: Applying for a hardship loan usually involves completing an application form and providing supporting documentation to demonstrate the financial hardship or emergency. Lenders may request proof of income, expenses, and any relevant documentation related to the hardship.

If you are experiencing financial hardship, you should contact local resources, government agencies, or nonprofit organisations such as Turn2Us that specialise in providing financial assistance during challenging times. They can guide you through available options and help you navigate the process of obtaining the necessary support.

Can I refinance a bad credit loan?

Yes, refinancing a bad credit loan is possible, but it may be more challenging than refinancing a loan with good credit. Refinancing involves replacing an existing loan with a new one with more favourable terms, such as a lower interest rate or an extended repayment period.

How can I find reputable lenders that offer bad credit loans?

Finding a reputable lender may seem difficult, especially with so many choices online – how do you decide what is best for you?

Before committing to a new loan, you need to ensure you’ve read through all the terms and conditions in full. You also need to find out how much your repayments are and when they are due, so you’re able to pay them properly. Otherwise, you may end up in more debt and your credit score may drop even further.

At Finance Rate, we’re here to help you find the best lender for your financial situation. It may be difficult, but there are some steps you can take to make the process easier.

Step 1: Research online – conduct an online search for lenders specialising in bad credit loans. Look through our website for helpful information on loans to help you decide. A range of reliable sources on the internet, such as MoneySavingExperts, MoneySupermarket, Unbiased, and Investopedia, can provide honest opinions written by industry experts. Alternatively, you can look at online forums such as Reddit, where people share their personal finance tips, their chosen lenders, and their experience with financial struggles. Unbiased platforms are an excellent place to research as people usually share their personal experiences, and together with researching lenders and reading their policies, will give you the well-rounded knowledge you need.

Step 2: Read customer reviews – Read reviews and testimonials on Trustpilot from other borrowers to gain insights into their experiences with specific lenders. Look for lenders that have positive feedback regarding their customer service, transparency, and loan terms.

Step 3: Check accreditation – Verify if relevant industry associations or regulatory bodies accredit the lenders you’re considering. In the UK, lenders must be authorised and regulated by the Financial Conduct Authority (FCA). This accreditation ensures the lender operates within legal guidelines and meets specific standards.

Step 4: Seek Recommendations – Ask for recommendations from friends, family, or trusted financial professionals who may have experience with bad credit loans or know reputable lenders. Their personal experiences can provide valuable insights and help you narrow down your options.

Step 5: Compare Loan Terms – Once you have a list of potential lenders, compare the loan terms, interest rates, fees, and repayment options they offer. Look for lenders that provide clear and transparent information about their loan products.

Step 6: Read the Fine Print – Carefully review the terms and conditions of the loans you’re considering. Pay attention to hidden fees, prepayment penalties, or other terms that may impact your borrowing experience.

You also want to stay away from loan sharks. Loan sharks are illegal lenders who work outside of the confines of the law. They usually work from home, instead of an official office, and charge huge amounts of interest. You may find it hard to pay this interest off, which will then put you into even more debt.

If you are unable to pay a loan shark, they will usually take illegal action to collect money from you, such as stealing your belongings or behaving violently. If this happens, you need to call the police immediately. You can also find out how to report a loan shark on the official government website.

Why is it better to get a bad credit loan from a direct lender?

Getting a bad credit loan from a direct lender can offer multiple advantages compared to going through a loan broker or intermediary – it can offer better, more direct communication as it eliminates the intermediary. You’ll often get a prompt response when addressing any questions or concerns you may have.

With a direct lender, there is a faster loan processing time than applying through a broker. Building a relationship with a direct lender can be beneficial for future or current borrowing needs. If you demonstrate responsible borrowing behaviour and make timely repayments, the lender may be more willing to work with you in the future, offering better loan terms or higher borrowing limits.

Not all direct lenders are reputable or have the same level of customer service; that’s why you should carry out your research and decide what’s best for your decision.

Rebuild your future with Finance Rate

Taking out a loan can be difficult at the best of times, but it’s a lot harder when you have a less-than-perfect credit score. You may find that some credit providers won’t allow you to take out a loan with them when your credit score is lower than expected. However, this doesn’t mean that there aren’t ways of getting around this initial problem.

At Finance Rate, we aim to give you a comprehensive guide for all your financial matters. It’s important that you read through all the information laid out on our website, so that you can make the right decision for your budgeting needs. As well as bad credit loans, we also cover several other financial fields, such as:

Whatever financial advice you need, we’ve got you covered!