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 relates to the portion of your home that you own outright. You can estimate how much equity you have by deducting your mortgage balance from your current house value. 

If you’ve already paid off your mortgage in full, then a homeowner loan isn’t a suitable 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 any purpose (except for gambling or illegal activity, of course). 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. 

Are homeowner loans easy to get? 

Homeowner loans are generally considered to be easier to get than unsecured personal loans - even if you don’t have a good credit score. This is because, from the lender’s perspective, your home is used as security. This means if you fall behind with your repayments, they could sell your home to claim back owed funds (in the worst-case scenario).  

So, with your property as collateral, lenders may be more willing to lend you a larger sum at a lower interest rate.  

Here at Ocean, secured homeowner loans go up to £500,000. You can check your eligibility and get a quote before you apply - without affecting your credit score. 

Read on to find out more about the differences between secured and unsecured loan. 

What do lenders look for? 

While lenders do consider your credit history when you apply for a secured loan, 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 repayments) 
  • 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 more credit.  

However, with a homeowner loan, your property is used as security, which helps to balance out the risk to the lender. So, it is still possible to get approved for a secured loan, even if you’ve missed payments and defaulted in the past.  

Just bear in mind that you might not qualify for the most competitive interest rates or be able to borrow as much as someone with a good credit history. If you take out a homeowner loan and default on the repayments, then your property could be put at risk. 

You always have 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). This could help you get a lower interest rate.   

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


If you have a County Court Judgement (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 if you can get a loan if you’ve been bankrupt. 

Can I get a homeowner loan with mortgage arrears? 

You’re probably going to struggle to get approved for a loan if you have mortgage arrears, as there’s a high risk that you won’t be able to pay your loan back on top of your mortgage.  

Remember, if you fall behind with your mortgage or homeowner loan payments, then your home may be at risk of repossession. 

How to get a homeowner loan with bad credit  

To boost your chances of approval, the best thing to do is to try to get your credit score in ship shape. Although it can take a while to improve a damaged credit score, there are some steps you can take to get the ball rolling.

Register on the electoral roll

When you apply for a homeowner loan, the lender will check the electoral roll to see if you appear. Registering to vote helps the lender to verify your identity. 

It’s free to sign up, and only takes five minutes online. Plus, it can add around 50 points to your credit score. 

Make sure your report is up to date

Any mistakes on your credit report can cause delays and affect your chances of approval. Before you apply for a loan, check your credit report and make sure that all the information is correct. If it isn’t, be sure to fix it before you apply. This will help to boost your credit score and your chances of approval. 

Set up direct debits

Paying your bills on time, every time, will help you gradually build up your credit score. So, to ensure you don’t miss any payments, we recommend that you set up direct debits or standing orders. That way, the payments will come out of your bank account each month, without you having to set yourself payment reminders.  

Be careful with your credit applications

When you apply for a loan, the lender will conduct a hard check on your credit report. Each credit application you make will show up on your credit file and cause it to dip temporarily. So, lenders will be able to see if you apply for lots of credit in a short space of time. This is likely to be seen as a negative by lenders, and it may reduce your chances of getting a loan.  

So, it’s always best to space out credit applications and use an eligibility checker before you apply. Eligibility checkers perform a soft search on your credit report, so they don't affect your credit score. They'll show you the likelihood of acceptance for a loan, to help you identify the deals you’re eligible for. 

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 repayments, 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.