If you have very bad credit, it’s understandable that you might worry about your chances of being approved for a loan.
The good news is that a history of bad credit doesn’t always mean that your application for a loan will be turned down. There are a number of lenders in the UK, including several of those on the Growing Power panel, who specialise in loans for people with very bad credit, and they could be willing to consider your application.
What should I think about before applying for a bad credit loan?
Anybody who applies for a loan should think very carefully before doing so, regardless of their credit score.
Here are some of the things you should consider before applying for a bad credit loan:
- Is a bad credit loan the best choice for you at this stage? Have you explored any other available options, such as borrowing funds from a loved one, or taking a step back and saving up the money yourself?
- Can you afford to repay a bad credit loan? You should be able to comfortably repay your loan alongside managing your essential outgoings and any other credit commitments.
- A bad credit loan could come with a higher rate of interest. This will affect the overall cost of the loan and your monthly repayments.
- If you have a very bad credit score, you could face certain restrictions, such as not being able to borrow the amount of money that you need.
- You should bear in mind that a missed or late repayment will cause your credit score to decline. Depending on the lender, you may also be charged a fee.
When might a bad credit loan be useful for my credit score?
If you make your repayments in full and on time each month and clear the balance of the bad credit loan before your repayment term ends, your credit score could increase. Of course, many factors contribute to a credit score, so you’ll need to make sure that you keep on top of your bills and any other existing credit commitments.
Can I get a very bad credit loan from a direct lender?
Growing Power is a credit broker, and we work with a panel of over 30 direct lenders. We only work with lenders who are authorised and regulated by the Financial Conduct Authority (FCA).
Below, we’ll explore the key differences between applying for a bad credit loan with a direct lender and searching with a credit broker.
Direct lender bad credit loans
- When you apply for a very bad credit loan with a direct lender, they will check your eligibility for their product(s) only.
- The lender will carry out a creditworthiness assessment, which will include a hard search or Open Banking.
- A hard search will remain on your credit file for up to 12 months.
- If your bad credit loan application is turned down by a direct lender, you might make further applications with alternative lenders, which could result in multiple hard searches in a short space of time. This will damage your credit score.
Using a credit broker to help you search for a loan for people with very bad credit
- A credit broker is able to scan a large panel of lenders at the same time for a suitable loan for you.
- Growing Power uses soft search technology, which will not impact your credit score.*
- A soft search is only visible on your credit file to you and the company who carried out the check.
- Using a credit broker could save you time, take the guesswork out of applying for a loan, and protect your credit file from multiple hard searches.
*If you’re matched with a loan and make a full application, the lender will complete a creditworthiness assessment which, as discussed, could include a hard search. It’s important to remember that a hard search will be visible on your credit file for up to 12 months, and undergoing multiple hard searches within a short period of time will harm your credit score.
How much money can I apply to borrow if I have bad credit?
With Growing Power, you can search for a loan between £100 and £10,000, although with a history of bad credit, you might not be approved to borrow the amount that you need. It’s possible that you may have to apply for a lower amount.
How long do I have to repay my bad credit loan?
The lenders on the Growing Power panel provide loans with repayment terms from 3 to 60 months. The choice of repayment terms available to you will depend on the amount of money you apply to borrow.
A longer term will give you more time to repay the money you owe, but you’ll be charged more in interest.
A shorter term will cost you less in interest overall, but your monthly repayments will be higher, and you’ll have less time to repay the loan.
How to search for a very bad credit loan with Growing Power
In order to search for a bad credit loan with Growing Power, you’ll need to make sure that you meet our eligibility requirements.
You must:
- Be over the age of 18;
- Be a UK resident;
- Have a UK bank account and valid debit card; and
- Have a regular source of income paid into your bank account.
Any credit score considered.
If you match the above criteria, you can expect the Growing Power journey to look a little like this:
- Our online form takes around five minutes to complete. Tell us how much money you need to borrow and how long you’d like to borrow it for, and provide us with some key information, such as your income and outgoings.
- We’ll complete a soft search and scan our panel of lenders for a loan for you. This stage takes around 60 seconds.
- If we’re able to match you with a lender, you’ll be redirected to their website. If you choose to go ahead and make a full application for a bad credit loan, the lender will carry out a creditworthiness assessment, which will consist of either Open Banking or a hard search.
- If the lender is happy with the outcome of their checks, they will officially offer you the loan and let you know when your bad credit loan will be sent to your bank account.
Important: the lender will send you a credit agreement, which will contain the full details of the loan, as well as your repayment schedule. You should take the time to read through this carefully and make sure you’re happy with everything before you decide whether to sign and return it.
The best loans for people with bad credit
The best bad credit loan will differ from person to person. It’s not so much about finding the ‘best bad credit loan,’ but rather the best bad credit loan for YOU.
Things you may wish to take into account when searching for the best very bad credit loan:
- The loan amount and repayment terms offered by the lender.
- The Annual Percentage Rate (APR). This reflects the annual cost of borrowing, and factors in both interest and any standard fees. The lower the APR, the lower the cost of the loan.
- Any applicable additional fees, such as early or late repayment charges.
- Whether the lender is willing to work with people who have a history of bad credit.
- Whether the lender appears on the FCA register. Any company that is not authorised and regulated by the FCA should be avoided.
- The lender’s customer reviews, which can usually be found on Trustpilot and Feefo.
Bad credit loans with no credit check
‘No credit check bad credit loans’ and ‘guaranteed bad credit loans’ do not exist.
You cannot get any type of loan without undergoing a creditworthiness assessment. This is in line with regulations set by the FCA and ensures that borrowers are treated fairly and responsibly.
A creditworthiness assessment is carried out to help make sure that you can afford to repay the money you’re applying to borrow without leaving you at risk of financial hardship.
I need a very bad credit loan today; when will my money be sent?
Several of the lenders on the Growing Power panel can send your money on the same day as your application is approved, although you should be aware that every lender will have their own payout timescales, and the time it takes for the money to become available in your account will depend on your bank’s policies and procedures.
What happens if I suddenly can’t afford to repay my bad credit loan?
Unfortunately, we can’t control the big changes and events that come our way in life. If your financial situation has changed during the course of your repayment term and you can no longer afford to repay the money you owe, you should contact your lender.
Don’t wait until you’ve missed a repayment; reach out as soon as you feel like you might struggle.
Where can I get free financial advice?
You can get free, confidential and impartial financial advice through charities and organisations such as StepChange,Money Helper, Citizens Advice, and National Debtline.