How to get a loan with bad credit

How to get a loan with bad credit

author: Holly

By Holly

If you’ve struggled to keep up with your repayments in the past, you may find it more of a challenge to get accepted for a loan.


This is because lenders can see you’ve had difficulties borrowing before, so are likely to see you as a risky borrower.

But each lender’s criteria is different. And being turned away by one doesn’t mean you’ll be turned away by them all.

Some lenders and brokers, like Ocean, specialise in lending to those who’ve had problems with managing credit in the past.

What can help my application?

Before applying for a loan, ask yourself whether it’s a suitable option for you right now.

If you’ve previously found it difficult to keep up with you repayments, you should make sure your circumstances have changed to avoid running into further financial trouble.

With this in mind, sit down and work out whether you can realistically include the loan repayments within your current budget.

One way of doing this is by using a loan calculator, like this one from Ocean. By including how much you want to borrow, the interest rate and the term of the loan, it can tell you what your monthly payments are likely to be.

Once you’ve done this, check your credit history. When you apply for a loan, lenders will check this to see whether you’ve been a responsible borrower in the past.

This is why it’s important to make sure everything is correct on your file. After all, any mistakes could hinder your loan application. 

Any mistakes on your credit history could hinder your loan application.

Search without leaving a mark

If a loan is something you can afford, the next step is to use a price comparison site or see whether lenders offer a soft search tool. This lets you shop around for loans you’re likely to be eligible for without the search leaving a footprint on your credit history.

Why’s this important? Well, every time you apply for a loan - regardless of whether you’re accepted or rejected by the lender – it’s recorded on your credit history.

A spurt of applications could give lenders the impression that you’re desperate to borrow cash. As a result, they may turn your application down. This is where a soft search tool can work in your favour.

You can find loans you’re likely to be accepted for by looking at credit checking services like CreditMatcher. Check out our previous blog for more information on this.

You can find loans you’re likely to be accepted for by looking at credit checking services.

Things to consider  

If you have bad credit, lenders may be more willing to offer you a homeowner loan rather than a personal loan. The reason for this is that a homeowner loan is secured against your property.

So what does this mean for the lender? Well, if you fail to make your repayments, they have the right to recoup the debt by repossessing your property. This minimises their risk of losing money – but obviously, it presents a greater risk to you.  

If you’d prefer to take out a personal loan that isn’t secured to anything, this could still be an option if you have a poor credit history.

Just be aware that you may be offered a higher interest rate than you’ve seen advertised, as this reduces the risk to the lender.

Before taking out a homeowner loan, think whether you can afford the repayments.

Is there an alternative to a loan?

Remember that lenders will take into account a number of factors when you apply for a loan, including your employment status, income and details of how much you want to borrow.

Having a poor credit history is always a major factor in whether you’ll be accepted, but it’s not the only thing they’ll consider.    

If you’re turned down for a loan because of your credit history, don’t worry - there are things you can do to increase your chances of being accepted in the future.

For example, you could consider a credit card, which, if you’re accepted and use it responsibly, you can use to gradually improve your credit history.

For ways on how to improve your credit history, head here

Disclaimer: All information and links are correct at the time of publishing.

author: Holly

By Holly

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