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Loans for people with bad credit history

Applying for a loan is tenuous enough a process, doing so with a bad credit history can seem like an impossible task.


If you've had a CCJ, default, IVA or similar credit problems in your recent past, you will generally fall into the bad credit category which, should you apply for a loan from a mainstream lender, makes it likely you will be turned down.

There are however, specialist lenders who provide a solution in the form of loans for bad credit ratings:
Below is a list of lenders from whom you can get a loan even if you've been turned down elsewhere.

Provider Representative APR Loan Amount Summary
SaveSimply
Apply for SaveSimply loans 		53% From: £500
To: £25,000 		- Sorts through 100s of lenders to find the right match.
- Poor credit history, past defaults or IVAs welcome.
- Processing fee may apply.
Aspire Money
Go to Aspire website 		62.1% From: £500
To: £7,500 		- Any purpose loans for tenants or homeowners.
- Bad credit, past CCJs, IVAs or defaults.
- No upfront fees.
SHOPACHECK
Shopacheck Loans 		399.7% From: £200
To: £500 		- A cash loan delivered to your home.
- Bad credit welcome, low weekly repayments.
- Applicants must be over 21.
- No upfront fees.


Options
Like normal loans, a bad credit loan can be secured or unsecured, there are differences and advantages to either:

1. Secured loan with bad credit
Secured loans are loans whereby the borrower is required to put up collateral on which the loan is secured; in the UK this is commonly your home, although in instances where the loan amount is small, other assets such as your car can be accepted as collateral.

Collateral provides lenders with a safety net; they know that should you fail to pay back the loan, at least there's a way to recoup their money. This makes things easier for them, if you're a homeowner with equity; a bad credit rating is a less effective disadvantage.

2. Unsecured loans
These are personal loans whereby the lender doesn't require collateral, if you fail to repay the loan, your possessions are not immediately at risk.

In this instance, the lender relies on the trust put in you to pay back the loan, this makes it a risky loan. Having a poor credit history elevates that risk; this is why unsecured bad credit loans typically incur very high interest charges.

    Other disadvantages:
  • Loan amount: lenders prefer to keep unsecured loans at low amounts perhaps because of the risk involved; most UK lenders do not exceed £25000.
  • Although the loan isn't secured, if you default and are referred to collectors, your assets might be repossessed.

Alternatives:

1. Credit cards
If you are unable to get a loan due to a poor credit rating, credit cards for people with bad credit are a viable alternative since approval is relatively easier.

Another advantage of credit cards over loans for bad credit is flexibility; with a loan, you agree to a set repayment period (e.g. 5 years) whereas on a credit card you can pay back the money at any point. The money you've paid back also becomes available credit, which you can re-use should you need it in the future.

2. Payday loans
These are loans that you take out on the promise of paying them back at the end of the month, typically they're only available to people that are currently employed. In most cases there is a credit check, although its influence is not as much as it would be on a loan.

Payday loans are ideal for people that need small amounts of money, typically up to £1000, and can pay it back in a short period of time.

3. Remortgage
If you are a homeowner and have some equity in your property, it might work out better to remortgage rather than take out a loan with bad credit: remortgaging might not substantially change your monthly repayments whereas a loan would create an extra payment to make every month.