Best Bad Credit Loan Providers and Sites in 2020

If you have a less than ideal credit rating, you probably know just how difficult it can be to obtain a loan and other credit services. And even if you are able to get a loan, it’s likely that its interest rates will be sky high in-line with the higher-than-average risks faced by the lender.

It, however, isn’t all doom and gloom for you as there still are a plethora of UK lenders out there willing to advance loans at competitive interest rates to individuals with bad credit and others with non-existent credit history. And in pointing you to the right direction, we’ve created the ultimate guide to the Best Bad Credit Loans of 2024. Here, we not only explain how bad credit loans work but also list 9 of what we consider the best bad credit lenders in the market.

 

The Pros and cons of bad credit loans

How do bad credit loans work? Read our step-by-step guide

The bad credit loan application process works largely the same as any other loan application. However, if you have never applied for a loan before, or you simply want a refresher, be sure to check out the step-by-step guide outlined below.

Step 1: Find a loan provider

First, you will want to find a bad credit loan provider that meets your individual needs. And you can start by scrolling down to the section below and reviewing the three providers that we have recommended.

Step 2: Start the application

Once you have found a suitable lender, head over to their client registration page/portal. In most cases, the application can be completed online or via your mobile phone in a matter of minutes.

Step 3: Enter your personal information

At the next stage of the application process, you will be asked to enter some personal information. At this point ,you will need to provide your full name, home address, previous addresses, date of birth, national insurance number, telephone number, and email address.

Step 4: Enter your financial information

After you have provided your personal information, the lender will then ask you some questions aimed at assessing your financial standing. This will initially include your employment status, how much you earn, how long you have been employed with the company, and how often you receive your salary. You will also need to stipulate whether you are a homeowner or renter as well as your current debt status.

Step 5: Enter your bank account details

If your application is approved, your loan funds will be transferred to your UK bank account. As such, the lender will ask you to enter the name of your bank, account number, and sort code. These are also used to verify your identity and to prevent fraud.

Step 6: Review the lender’s decision and if applicable, loan offer

Once you have entered the above information, the lender will then verify the data against third-party sources – including its preferred credit rating agency. This usually takes no longer than 30-60 seconds, after which you will be informed whether or not your application was successful. In some cases, the lender might require supporting documentation surrounding your identity and/or financial standing.

Nevertheless, if your application is approved on the spot, you will be able to review your loan offer. Known as a pre-approval offer, this will outline how much the lender is willing to lend you, and at what rate of interest. If you are happy with the offer, you can then proceed to the final stage of the application.

Step 7: Sign the digital loan agreement

The final stage of the bad credit loan application will require you to sign the loan application form. As the entire process is completed online, you can sign the agreement digitally. In most cases, the lender will then forward the funds to your specified bank account within 48 hours.

Criteria used to rank the best bad credit loan providers

• Lenders with the most competitive APR rates
• Lenders that allow you to complete the entire application online
• Lenders that are transparent on their fees
• Lenders that consider loan application from borrowers with the lowest credit scores
• Lenders that do not charge high late payment fees

Reviewer’s choice for bad credit loan providers

Best 9 bad credit loan providers

Now that you have a good idea of what bad credit loans are, and how they work. If you’re now ready to make a loan application, but not too sure which lender to go with, we have outlined to best 9 loan providers of 2024.

What is a bad credit loan?

In its most basic form, a bad credit loan is simply a conventional loan that allows UK consumers with bad or non-existent credit history to obtain a loan while those with a good credit profile benefit from the best loan offers that carry attractively low interest rates. In most cases, a bad credit loan will also be characterized by high interest rates. Bad credit loan providers – both direct lenders and loans marketplaces – come in handy in providing an alternative source of finance for bad credit borrowers.

The overarching reason for the high interest is that loan providers are required to take on more risk by lending to those with bad credit borrowers given that the chances of defaulting will be higher when compared to borrowers with a good credit score.

After all, if you do have a bad credit score, it is likely to be because you have previously missed out payments on credit-based products. This doesn’t include loans per-say, but other credit products such as credit cards, store cards, and overdrafts. It is also important to note that bad credit loans are also suitable for those that have no credit profile at all. This might be because you only recently turned 18, or you have never taken out credit before.

How do lenders assess my credit score?

If you have ever interacted with a credit service, whether a loan, credit card debt , or bank overdraft, you certainly left a trail and these lenders have your credit history. These lenders have probably shared this credit repayment history with the three main credit bureaus. In the UK, the three main agencies are Equifax, Experian, and Callcredit. And if you were prompt with your repayments ensuring they were on time, your lenders shared the good news with the bureaus.  Similarly, if you missed payments or failed to pay altogether, the negative reported is also filed with the credit bureau agencies.  As you go through life, these credit agencies will collect more and more data, which subsequently results in what is known as your ‘credit score’.

Here’s an overview of some of the main factors that determine what your credit score looks like.

It is also important to note that your credit profile is used to verify your identity when you apply for a loan. This is crucial, as your application is likely to be rejected if the lender is unable to verify your identity electronically. One of the easiest ways for credit agencies to do this is to check your name against the electoral roll.

Note that credit agencies will also hold data on whether you have any court records against your name that are linked to debt (such as bankruptcies), and whether you have any financial associations with other UK consumers (such as joint mortgages).

Do I have bad credit?

Whether or not lenders deem you to have a bad credit score is ultimately down to the main credit reporting agencies. As we noted in the previous section, your credit profile is dictated by your credit-related actions. On the one hand, just because you have missed a payment in the past doesn’t necessarily mean that you have a bad credit rating and thus require a bad credit loan. A bad credit score is often the result of a consistent history of missed payments or worse – defaulting on loan agreements, then it is likely that this has resulted in a bad credit score.

One of the key problems in this respect is that each credit rating agency will have its own credit rating system. This is different from other countries such as the US, which uses a one-size-fits-all FICO score for consumers. Nevertheless, here are illustrations of how different credit bureaus rate your credit performance:

Equifax – Credit score ranges from 0 to 600

• ?  Very Poor: 0-278
• ?  Poor: 279-366
• ?  Fair 367-419
• ?  Good: 420-466
• ? Excellent: 466+

As you can see from the above, you will typically fall within the remit of ‘bad credit’ if your credit score sits between 0 and 366. In other words, being in possession of a ‘very poor’ or ‘poor’ credit rating will likely require you to obtain a bad credit loan.

Experian – Credit score ranges from 0 to 1,000

• ?  Very Poor: 0-560
• ?  Poor: 561-720
• ?  Fair 721-880
• ?  Good: 881-960
• ? Excellent: 960+

As you can see from the above, Experian has a much wider range when it comes to having less than ideal credit. In other words, having a score of less than 721/1000 will result in a credit score of either ‘very poor’ or ‘poor’.

How much do bad credit loans cost?

In most cases, bad credit lenders don’t a one-size-fits-all interest rate for bad credit borrowers. Rather the APR rate for loans advanced to different individuals will depend on such factors as your specific credit rating, the size of the loan, how long you want to borrow the funds for, and your income.

Ultimately, you won’t know how much you are going to pay on your bad credit loan until you actually make an application. Don’t worry, you won’t be under any obligation to proceed with the loan when you receive your pre-approval offer.

Nevertheless, here’s a breakdown of the factors affecting your credit score.

Glossary of loaning terms

FAQ