Can I get a loan with bad credit?

Your credit score impacts how likely you are to be accepted for a loan. A good credit score opens up more options for lower-interest loans because it shows lenders you can manage credit well. 

Interest is the cost of borrowing money. When you repay your loan, you’ll be charged the amount you borrowed plus any interest or fees. Loans for people with poor credit often have higher interest rates because there’s more risk to the lender. 

Because the interest is usually higher, borrowing money can be more expensive if you have a low credit score. 

If you do decide to borrow money, work out a repayment plan to make sure you can comfortably make the monthly repayments. This should account for any possible increases to your mortgage, rent, or bills, and for any changes to your pay.

A secured loan is backed by an asset, or ‘security’. An asset is something you could trade for cash if needed, like your home or car. If you fail to repay a secured loan, the lender can take your assets instead. 

Having assets can make you seem less risky to lenders. Secured loans can offer higher values, longer repayment periods, and lower interest rates than unsecured loans. You’ll make set monthly repayments plus any interest or fees to cover what you owe. 

While you may be able to get a secured loan with a low credit score, it’s important to consider whether you can make the agreed repayments. Remember, failing to make your repayments can mean losing your assets. 

You can find out more in our guide to Secured and unsecured borrowing.

Unsecured personal loans involve borrowing money from banks or other lenders. These aren’t secured against any assets, so they can be more attractive to borrowers. 

Personal loans let you borrow money at a fixed rate and pay it back in monthly instalments over an agreed period. You need to repay on time and pay back any interest to avoid being charged extra. Missed payments are recorded on your credit report. 

Unsecured loans can be riskier for lenders because they aren’t backed by an asset. If you have a poor credit score, you may be offered higher interest rates with an unsecured loan.

Find out whether an unsecured loan is right for you in our guide to personal loans.

Guarantor loans are another way lenders can reduce their risk. A guarantor is a trusted family member or close friend with a good credit history. If you can’t make a payment on time, your guarantor ‘guarantees’ they’ll cover it for you. 

If you make your repayments on time, your guarantor won’t need to do anything. 

Guarantor loans can be a good solution for people with very poor credit scores. Like secured loans, they’re less risky for lenders. However, they can be more expensive than some other types of borrowing because they often have higher interest rates.

Think carefully and be honest with your guarantor before applying to make sure they understand the risks involved. Guarantor loans can be riskier for your friend or family member than they are for you. 

If you can’t make your payments on time, your guarantor is expected to cover your loan repayments and interest. Missed payments can negatively affect both your credit score and your guarantor’s. If the loan is secured with your guarantor’s assets, it could also put them at risk of losing their home.

If you need help talking to friends and relatives about your finances, read our guide on How to have a conversation about money. 

You can improve your chances of being accepted for a loan when you: 

• improve your credit score – having a good credit score means you’re more likely to qualify for loans; you can learn how to make credit work for you in our guide to managing credit

• only borrow what you need – lenders are less likely to offer large loans to risky borrowers; only asking for what you need can help

• apply for the right type of loan for your situation – consider whether a personal, secured, or guarantor loan is right for you, then shop around and compare deals.

If you have a low credit score or don’t want to take out a loan, there are other ways to borrow money. 

Credit builder cards are credit cards for people with low credit scores or little or no credit history. Using the card responsibly can help build your credit score and show lenders you can manage credit well. This improves your chances of being approved for other credit products later, including personal loans. 

Because they’re designed for people with poor or limited credit history, they credit builder cards often have higher interest rates and lower credit limits. This means you have less credit to spend and makes repayments more manageable.

Borrowing from friends and family can be an option for those with poor credit. Friends and family might be willing to lend you money without interest and more flexible repayment plans. This can be more appealing than high-interest loans for bad credit, such as payday loans.

Before you borrow, it’s important to understand how much and when you can comfortably repay the debt. Then, you and the lender can draw up a clear and achievable repayment plan.

You can read our guide for advice on Borrowing money from or lending to friends or people you know. 

If you’re struggling with missed payments, you can get free, confidential advice using our Debt advice locator tool.