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What is a Bad Credit Loan?

What is a Bad Credit Loan?
Bad Credit Loan Pros and Cons
Bad Credit Loans FAQs

What is a Bad Credit Loan?

Bad credit loans are unsecured loans designed for people with a bad credit history and who struggle to obtain credit from high street lenders. They are much like any other loan in that you borrow a set amount a repay it over a specified period. Where these types of loans differ from other loans, however, is in the interest level.

You can expect to pay anything from 30% APR up to 182% APR or even higher depending on the lender. Bad Credit Loans are meant for your short term financial needs and should not be used a regular lending source. Prolonged use can result in severe financial difficulty.

What can I use it for?

Some people use Bad Credit Loans just to get them through to the next payday. Here is a typical example of what you could expect to pay on a loan with an APR of 182%.

Loan amount: £300
57 Weekly repayments of: £9
Total amount payable: £513

How do I apply for a Bad Credit Loan?

To apply for a Bad Credit Loan you must be at least 18 years old and have been in a job for at least 3 months, although the criteria will vary depending on the lender. You should try an online service and compare different companies. Remember to check all terms and conditions and/or any small print carefully before signing any agreements. This is usually where you will find any catches.

What are the plus points?

Whether it’s an Unsecured Loan, Secured Loan, Credit Card or Bad Credit Loan, Borrowing can have its plus points. By making sure you meet your repayments on time will have a positive effect on your credit rating and your score will begin to increase. You will be deemed less of a risk by lenders and you will find it easier to obtain credit.

What are the alternatives?

There are other solutions available to help you get out of debt without having to borrow a penny. If you owe over £15,000, are in full time employment and can afford at least £200 towards your debt each month then you may qualify for an IVA.
An IVA can get you one lower monthly payment and have you debt free in as little as 60 months.

Another ‘non loan’ solution would be a Debt Management Plan. If you have at least £2,000 of debts, have an income, whether employment or benefits, can afford at least £100 towards your repayments then a Debt Management Plan might be a good solution for you.

For free help and advice on Bad Credit Loans or to find out which is the right debt help solution for you, call our friendly team at the UK Debt Advisor on 0800 043 2027 or use our free call back service.