Should I get a loan or credit card if I have bad credit?

Choosing between a loan or a credit card for bad credit is a personal decision, it’ll depend on your circumstances, how much you want to borrow and what’s available to you.

6 min read
Loans vs. credit cards for bad credit

Compare the pros and cons of each here:

  • Loan
  • Credit Card


  • How quickly can you access funds?

    With some personal loans the money can be transferred on the same day - sometimes within 15 minutes.
  • How much are the monthly repayments?

    The monthly repayment will be fixed over the term agreed.
  • What’s the likelihood of approval?

    It all depends on personal circumstances, but there are many loan options available for those with poor credit. If you own your home, you’re also eligible to apply for a secured loan.
  • How much can you borrow?

    You can often borrow more with a loan, especially a secured loan.

Credit Card

  • How quickly can you access funds?

    It can generally take up to 10 working days for your credit card to arrive, but sometimes you can access the credit account online sooner.
  • How much are the monthly repayments?

    The minimum repayment will vary and decrease dependant on the amount of money you owe. You will be able to pay back anywhere between the minimum payment and the full balance each month.
  • What’s the likelihood of approval?

    It all depends on your personal circumstances, but there are plenty of options for bad credit credit cards.
  • How much can you borrow?

    With credit cards for bad credit, the limits tend to be relatively low.

Is a loan or credit card cheaper?

This completely depends on the lender and the APR you’re offered.

The APR you’re offered on either product will depend largely on your credit score and your personal financial situation. You also need to consider the amount you want to borrow when looking at your options. Generally speaking, you can borrow more with a personal loan than a credit card - and if you own your own home, secured loans can offer even more. These do often have lower interest rates too, as the lender has the security of your property in case you’re unable to pay.

Credit cards with interest-free periods can also be one of the cheapest ways to borrow if you’re confident you can repay in full before the interest-free period ends. However, interest-free cards are often reserved for higher credit scores, so if you have bad credit, you may not be eligible.

You can use eligibility checkers (also known as soft search tools) to have a look at both options, before committing to an application.

Consider how much you need to borrow

The amount you need to borrow will also have an impact on your choices. If you’ve got a bad credit history, it’s likely your credit card limit will be relatively low. All lenders are different, but at Ocean Finance we offer the following for people with bad credit:

  • The Ocean Credit Card - credit limit up to £1500
  • Personal loans from £1,000-£15,000
  • Secured loans from £10,000-£100,000

Ocean Finance acts as a broker in this instance, with the Ocean credit card supplied by Capital One. For both personal and secured loans we work with multiple loan providers and find you the best deal for your circumstances.

Improve your credit rating with Ocean Finance

  • Up to £1,500 credit limit
  • Quickcheck won't impact your credit rating
  • Check your eligibility in 60 seconds
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39.9% APR
Representative (variable)

Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender

Getting a loan with bad credit

There are both personal (unsecured) and homeowner (secured) loans available for people with bad credit, so depending on your circumstances, you could be in a position to consider either option.

Securing your loan against your house can often mean you’ll get a better interest rate than a personal loan, which will make it cheaper. It will also increase the amount you are likely to be able to borrow, as well as the time with which you can pay it back. However, it comes with added risk, as your house may be repossessed if you don’t keep up with your repayments.

Will I be accepted for a loan?

This depends entirely on your personal circumstances and credit history. There are plenty of providers who specialise in offering loans for people with bad credit, so these are a good place to start. You can often see your loan options first with a soft search, before you submit an application. This can give you an idea of your choices without committing and it won’t affect your credit score.

Getting a credit card with poor credit

As credit cards aren’t secured against property or guarantors, your eligibility is based purely on your own ability to pay and your previous history with credit. If this is less than ideal, you will probably find that many lenders may limit your options.

Despite that, there’s a lot of lenders who specialise in credit cards for those with poor credit. These are also solid options for you to borrow in the interim whilst you are building your credit history, as borrowing manageable amounts of money and repaying regularly and on time will improve your credit score.

Will I be accepted for a credit card?

Because lenders have their own criteria for lending - which may vary even across their own products - there are no hard or fast rules about whether you’ll be accepted. A lender will look at your credit score and report to decide if you’re eligible, but don’t despair if you’re rejected - there are other options you can consider.

If I am rejected for one, can I apply for the other?

Nothing is stopping you making a second application for credit elsewhere, but your chances of being accepted may have declined due to your rejection. This is because every complete credit application you do shows up on your file, and lenders may view multiple applications as evidence that you have a desperate need for credit. Experian recommends you make no more than one application every three months.

It’s probably a good idea to use soft checking facilities (eligibility checkers) for both credit cards and loans, so you can have a better idea of whether you are eligible. This way you can apply for the one most likely to help you out.

What happens if I am refused for both?

If you’ve been turned down for both credit cards and loans this can leave you feeling very frustrated. You are able to ask the lenders for the reason you’ve been turned down if you think this will help.

If your reasons for borrowing aren’t urgent, it’s probably best to work out a plan to start improving your credit score. This way you can healthily improve your score without getting into more debt and increase your chances of eligibility.

If the matter is more pressing, it could be time to explore speaking to a financial advisor. You can get free and impartial advice from charities such as Citizens Advice, StepChange and the Debt Advice Foundation, who will help you figure out how to move forward.