Loans With Bad Credit
If you’ve had money problems or debt in the past, it may have left you with a poor credit rating. But you may still be able to apply for a bad credit loan. Here, we’ll discuss what they are, why you may have poor credit and the types of loans available.
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A loan offer that’s right for you and your circumstances
What is a bad credit loan?
A bad credit loan is a personal loan product created specifically for people with poor credit. Many people take out loans for bad credit to consolidate debts, where other lenders may be unwilling to lend to them.
Whilst you can get a loan with bad credit, lenders are likely to offer a higher interest rate as they may consider you more of a risk.
What is bad credit, and do I have it?
Bad credit means that your credit history is viewed negatively by lenders. Previous financial problems and past debt can lead to poor credit. These include:
- Late payments on things like credit cards
- Defaulting on payments on credit cards and loans
- County Court Judgements (CCJs)
- Insolvency and debt solutions, like IVAs, DMPs or DROs
- Bankruptcy
- Too many hard searches on your credit history – if you’ve applied for credit multiple times
Sometimes, your credit score may be poor simply because you haven’t demonstrated responsible borrowing. This may be because you’ve never borrowed money, are young or have just moved to the UK. Taking out a credit card and always meeting your monthly payments is a good way to build your credit history and show you can borrow responsibly.
Types of loans for bad credit
Even if you have poor credit, you may still be able to borrow money. Your options for poor credit loans include:
Personal loans: Some personal loans are available with bad credit, but you will likely pay higher interest rates and may not be able to borrow the full amount.
Secured loans: With a secured loan, you put up an asset as a guarantee when you apply for a loan with bad credit. Often, this will be your home. Secured loans offer a way to borrow a fixed amount at a more competitive interest rate when you have poor credit. Just be aware you can lose your home if you default on payments.
Guarantor loans: With a guarantor loan, the lender will ask a friend or family member to agree to take on the loan repayment if you can’t pay it. Guarantor loans for bad credit will help you access money, but may put financial pressure on your friend or family member.
Pros and cons of bad credit loans
Pros
- You can borrow money even if you have bad credit and get the financial help you need.
- You’ll get the money quickly. If you’re accepted for a poor credit loan, the money can be in your bank account almost immediately.
- If you keep up with the loan repayments, a bad credit loan can help you improve your credit score and get it back on track.
Cons
- Bad credit loans often come with higher interest rates over the long term. This means you’ll pay more in interest over the term of your loan.
- If you default on any payments of your bad credit loan, you can damage your credit score further.
- Borrowing money when you have bad credit means you’re increasing your debt even further. This can increase the pressure on your financial situation. If you’re worried you can’t afford the repayments, consider all your options and think carefully about taking out the loan.
How can I improve my credit score?
To improve your credit score, you should:
Pay your bills on time: If you have a credit card, for example, paying your monthly bills in full and on time every month will show that you are a responsible borrower and can be trusted.
Check your credit report for errors: You should regularly check your credit report to see if it is accurate and up to date. Any mistakes can negatively impact your score, so ask for any errors to be removed promptly.
Register for the electoral role: This is simple and easy, and helps boost your credit score by confirming your address for lenders.
Close unused accounts: Leaving unused accounts open can negatively impact your credit score. Close any you aren’t using for a quick boost to your score.
Don’t make too many applications at the same time: Each time you apply for a personal loan, the lender may run a hard search on your credit history. This would then show up on your file. If lenders can see multiple applications in a short space of time, they may be concerned that you are in financial difficulty.
Keep below 50% of your credit limit: It’s best to keep some credit available for unexpected purchases. This shows lenders that you can borrow responsibly.
Poor credit loan alternatives
If you have poor credit, consider the following instead of a loan:
Borrowing from family or friends: Depending on your relationship, you may be able to borrow money from those closest to you. You won’t need a credit check, and they may decide not to charge interest. Consider how borrowing money may impact your relationship, especially if you struggle to meet your monthly repayments. It can be a good idea to draw up a written loan agreement to clarify the amount, terms and repayment schedule.
Credit cards: You may be eligible for a credit card instead of a loan. This is more suited to smaller payments. Taking out a credit card and paying it back on time will also help you boost your credit score.
How Asda Money can help
At Asda Money, we can help you find the right loan at the right rate for your needs without harming your credit score and with no obligation to proceed to a lender. This is possible through our carefully selected panel of trusted UK lenders
All it takes is one eligibility check, and then you can compare loan offers from across our lender panel to find the one that’s right for you. If you have bad credit and want more information on how to manage your finances better, discover the Financial Support at Asda Money.
Top Personal Loans FAQs:
- Why choose a Personal Loan through Asda?
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Customers could access great rates from carefully selected trusted lenders, so you can sit back and let us do the leg work. What’s more, when you search for a personal loan, you’ll only have a soft search on your credit history, which means you can check your eligibility without harming your credit score.
Once your loan is approved, you could receive your funds the same day.
- How does it work?
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Asda is in partnership with Aro which is a trading style of Aro Finance Limited, who are a leading credit broker to offer our customers a different solution to borrowing money and finding a loan. We work alongside Aro so we can provide our customers with the right offer from a panel of handpicked trusted lenders.
With one eligibility check, you can search a panel of carefully selected lenders and provide you with a loan tailored to your needs. Once you have been approved you will receive your funds which could be in your account as quickly as the same day.
So sit back, relax and let us do the hard work.
- Who are your lenders?
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We have carefully selected a number of trusted lenders to be on a panel. You can search the panel to provide you with the very best offer you are eligible for. Find out more about each of our lenders here.
If you have any questions on our lenders, please call our Customer Service Team on 0333 555 0560 and a colleague will be happy to help.
- How much can I borrow?
- Will applying affect my credit rating?
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No. One of the best things about our service is you get access to a panel of trusted lenders with no hard credit footprint left on your credit file. When you apply with us, a soft search is completed which doesn’t harm your credit score.
However, if you do proceed with an offer from your search with us, the lender will complete a hard search. This will show on your credit file.
- What credit score do I need for a bank loan?
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Strictly speaking, there is no minimum credit score for you to be approved for a personal loan. If you have a strong credit score, more lenders may be willing to lend to you with better interest rates on offer. If you have a lower credit score and have had problems borrowing in the past, you may find a smaller pool of lenders are willing to lend to you. You may even have to look for a specialist lender that offers loans for bad credit.
- Can I get a loan with a CCJ?
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If you have a county court judgement (CCJ) against your name, you may struggle to get a personal loan with mainstream lenders. However, you may find specialist lenders that are willing to lend to you.
- Can I borrow money with bad credit?
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If you have bad credit or have had money problems in the past, you may find that some lenders aren’t willing to lend to you. Those that are may only do so with higher interest rates. It’s worth looking at specialist lenders for bad credit loans. Or you can work on your credit score to improve it before applying for a loan.
- Why won’t my bank give me a personal loan?
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Lenders look at a variety of factors when deciding on whether or not to offer you a loan. They each have their own criteria which will take in your credit score, job, monthly income and more. If you have been rejected by a lender, you can always ask them why and hope they will give you some insight into their lending criteria. They may direct you to one of the main three credit bureaus to find out more information.
- Do personal loans look bad on credit?
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When you apply for a personal loan with a lender, this will show up on your credit file. Your credit score may take a very small hit in the short term once you take the loan out. But if you pay your monthly payments on time and in full, this can have a positive impact on your credit score.
- How to get the lowest rate for a personal loan?
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The interest rates offered by lenders depend on a range of factors including how much you’re borrowing and the length of the loan. They will also look at your credit score. To help get a lower rate, you can look to improve your credit score by signing up to the electoral register, closing old accounts, checking for any errors on your report, and paying all your bills on time. You may also consider increasing the length of the loan or borrowing less.
- Can I take out a loan if I already have one?
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Yes, you can. When you apply for a new personal loan, lenders will look at your existing borrowing to see if you can afford the second loan. Many people choose to take out a new loan to consolidate existing borrowing – whether loans or credit cards – into one loan with a single monthly repayment.
Please remember that by consolidating existing borrowing, you may be extending the term of the debt and increasing the total amount you repay.
About our trusted provider, Aro
Asda is in partnership with Aro which is a trading name of Aro Finance Limited. Both Asda Money and Aro are credit brokers, not lenders. We offer our customers a different solution to borrowing money and finding a loan.
We work alongside Aro so we can provide our customers with their very best loan offer from a panel of handpicked trusted lenders.
With one simple eligibility check, our panel of lenders can provide you with a loan tailored to your needs. It’s also a safe way to find a loan without negatively affecting your credit rating.
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ASDA Money is a trading name of Asda Financial Services Ltd who are an Introducer Appointed Representative of Aro which is a trading name of Aro Finance Limited (company number 06297533) of Atlantic House, Atlas Business Park, Simonsway, Manchester, M22 5PR. Aro acts as a credit broker and not as a lender and is authorised and regulated by the Financial Conduct Authority (FRN 662079).
Terms and conditions apply. UK residents aged 18 and over. If you take out a loan, Asda Money and Aro receive a commission payment from the lender. Different amounts of commission are received from different lenders and the amount will be either a fixed amount or a percentage of the amount you borrow and dependent on the lender you select. We will not charge you a fee for our services.