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How to Get a Loan with Bad Credit in the UK (2026 Guide)

Having bad credit can make borrowing money feel stressful, but it does not mean you have no options. In the UK, there are several legitimate ways to get a loan with bad credit — if you understand how lenders assess risk and where to apply.


This guide explains how bad credit affects loan applications, what options are available in the UK, and how to improve your chances of approval while avoiding costly mistakes.


What Is Considered Bad Credit in the UK?


Bad credit usually means you have a low credit score with one or more UK credit reference agencies:

  • Experian

  • Equifax

  • TransUnion

Common reasons for bad credit include:

  • Missed or late payments

  • Defaults or CCJs

  • Debt management plans or IVAs

  • Bankruptcy (current or discharged)

  • High credit utilisation

Each lender uses its own criteria, so being rejected by one does not mean you’ll be rejected by all.


Can You Get a Loan with Bad Credit?

Yes — many UK lenders specialise in bad credit loans. These loans usually come with:

  • Higher interest rates

  • Lower borrowing limits

  • Shorter repayment terms

The key is finding a loan that is affordable, regulated, and suited to your situation.


Types of Loans Available for Bad Credit in the UK

1. Bad Credit Personal Loans


These are unsecured loans offered by specialist lenders. They don’t require collateral, but interest rates are higher to reflect risk.


Best for: Consolidating debt, covering one-off expenses. Typical APR: Higher than mainstream banksTip: Always check the representative APR before applying


2. Guarantor Loans

A guarantor loan involves a friend or family member agreeing to cover repayments if you can’t.

Pros:

  • Higher chance of approval

  • Lower interest than some bad credit loans

Cons:

  • Your guarantor’s credit and finances are at risk


3. Secured Loans

These loans are secured against an asset, usually your home.

Best for: Larger loan amounts. Risk: You could lose your property if you fail to repay. Important: Seek independent financial advice before applying


4. Credit Union Loans


UK credit unions offer affordable loans to members, even with poor credit.

Advantages:

  • Lower interest rates

  • Ethical, community-based lenders

Downside: You usually need to be a member first


How to Improve Your Chances of Approval


Before applying for any loan, take these steps:


✔ Check Your Credit Report

Use free services to review your credit file and correct errors.

✔ Use an Eligibility Checker

Soft-search tools show your likelihood of approval without affecting your credit score.

✔ Borrow Only What You Need

Lower loan amounts are easier to approve and more affordable.

✔ Show Stable Income

Lenders value regular income, even if your credit history isn’t perfect.


Loans to Avoid


Be cautious of:

  • Payday loans with extremely high APRs

  • Lenders not authorised by the Financial Conduct Authority (FCA)

  • “Guaranteed approval” claims — these are often misleading

Always check the FCA Register before applying.


Can a Bad Credit Loan Help Rebuild Credit?


Yes — if managed responsibly.


Making repayments on time and in full can:

  • Improve your credit score

  • Show positive payment history

  • Make future borrowing cheaper

Missing payments, however, will make your credit worse — so affordability is crucial.


Alternatives to Taking a Loan


If a loan isn’t right for you, consider:

  • Speaking to a free debt advice charity (e.g. StepChange)

  • Asking creditors for temporary payment plans

  • Budgeting tools to manage short-term cash flow


Final Thoughts


Getting a loan with bad credit in the UK is possible, but it requires care. Focus on:


The best loan isn’t the fastest one — it’s the one that helps you move forward without creating more financial stress.


 
 
 
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