Can I get a homeowner loan with bad credit?

Yes, it is possible to get a homeowner loan with a poor credit history. This is because your home acts as security for the lender. Whether you get approved depends on your individual circumstances and the lender’s criteria.

7 min read
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Who are homeowner loans suitable for?  

Homeowner loans are suitable for homeowners with a mortgage and equity in their property. Equity refers to how much of your home you own outright. You can estimate this by deducting your mortgage balance (and any outstanding secured loans) from your current house value.

If you’ve already paid off your mortgage in full, then a homeowner loan won’t be an option. Instead, you might want to consider other forms of borrowing, such as a credit card, personal loan, or remortgaging. 

What can I use a homeowner loan for?  

Homeowner loans can be used for a range of purposes, which the lender will likely ask you to specify during the application. They tend to be used for:

Please note, if you consolidate your existing borrowing, you may be extending the term and increasing the amount you repay in total.  

What do lenders look for? 

While lenders do consider your credit history when applying for a loan secured against your property, they may place less weight on it. This is because your home acts as security. 

Secured lenders tend to focus more on factors such as:  

  • Your affordability (whether you can cover the loan payments)
  • The current value of your house
  • Your equity (i.e., the difference between the current market value of your property minus what you owe against it) 

Can I get a homeowner loan if I’ve defaulted? 

If you’ve defaulted on a credit agreement in the past, lenders may be wary about offering you credit.  

However, with a homeowner loan, as your property is used as security, it reduces the risk to the lender, meaning you could still be approved.

This said, a default may mean you don’t get the most competitive rates. It could also affect the amount you are able to borrow. If you take out a homeowner loan and default on the payments, your property could be at risk.

There is always the option of building up your credit history before you apply, or waiting until the default drops off your credit report (six years after registration).

Can you get a secured homeowner loan with a CCJ or IVA? 


If you have a County Court Judgment (CCJ) registered on your credit report, you might be able to get a homeowner loan, but it could put some lenders off. They might not want to take the risk in case you fall into further financial difficulty and are unable to repay the loan.  

Having said that, the older the CCJ is, the less likely it’ll affect the lender’s decision. Plus, there are some lenders that specialise in loans for bad credit, though higher interest rates may apply. 


Whether you can get a homeowner loan on top of your Individual Voluntary Arrangement (IVA) depends on your insolvency practitioner. You’d need to get their written permission first. It might be difficult to obtain this, as taking out a loan could affect the affordability of your IVA.

Read on to find out whether you can get a loan if you’ve been bankrupt

Can I get a homeowner loan with mortgage arrears? 

It’s unlikely you would be approved for a loan if you have mortgage arrears, but it depends on the lender’s criteria. If the homeowner loan is used for debt consolidation, it’s possible that your monthly credit commitments (including your mortgage) would be made more affordable. This is something the lender would take into account when assessing your application.  

How to get a homeowner loan with bad credit  

To boost your chances of approval, you can work on improving your credit score. Below are some simple steps you can take to do this.

  • Register on the electoral roll - Registering to vote helps the lender to verify your identity. It’s free to sign up, and only takes five minutes online.
  • Make sure your report is up to date - Any mistakes on your credit report can cause delays and affect your chances of approval. Check your credit report for accuracy, and if there is an issue, be sure to fix it before you apply.
  • Set up Direct Debits – To ensure you don’t miss any payments, you can set up Direct Debits for them. Paying your bills on time, every time, will help you gradually build up your credit score.
  • Be careful with your credit applications - When you apply for a loan, the lender will conduct a hard check on your credit report which shows up on your file and causes your credit score to dip temporarily. Multiple attempts in a short period of time (e.g., within a few months) can be considered negative as they suggest you may be too reliant on credit.  
  • Use an eligibility checker - Where possible, use an eligibility checker before applying to see how likely you are to be accepted. As this involves only a soft search of your credit report, it won’t affect your credit score.

Read on for more tips on how to improve your credit score. 

What are the benefits of a homeowner loan? 

The main benefits include: 

  • You can borrow more - Ocean Secured Loans go up to £500,000 (whereas personal loans go up to £15,000) 
  • You can spread the repayments – between 3 to 30 years
  • You may be eligible with poor credit – as your home is used as security 
  • Homeowner loans usually come with lower interest rates than unsecured loans 

Read on to find out about the advantages and disadvantages of secured loans. 

What should I consider before applying for a homeowner loan?  

It’s a big commitment to get any kind of loan, especially if it’s secured to your home. So, it’s important to consider whether it’s the right option for you before you apply. Ask yourself these questions: 

Can I afford the repayments? 

Create a list of your income and outgoings, and check if you have enough money left over in your budget each month. If you can’t afford the payments, then it isn’t worth it – you could end up putting your home at risk. 

Is a homeowner loan the best option for me? 

If you have a bad credit history, a homeowner loan may feel like the only option, but that isn’t the case. There are other options available, such as unsecured bad credit loans or credit cards for bad credit, for example. Explore all the options and weigh up their pros and cons before diving in. 

Is the total cost of the loan worth it? 

The total cost of a secured loan is represented by the APRC (annual percentage rate of charge). This is shown as a percentage and includes all interest rates and charges applied over the full loan term, making it useful for comparison. It is always sensible to consider how much you will have to pay in total, not least so you can weigh up the pros and cons of taking out the loan.  

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