How to get a loan with bad credit

Discover how to get a loan with bad credit. Learn about the options available to you, the risks involved, and alternatives to taking out bad credit loans.

Written by Hayley Bevan and Victoria Smith

Published: 14/05/25Published on May 14th, 2025

Last reviewed: 14/05/25Last reviewed on May 14th, 2025

6 mins read

Although it can be difficult to get a loan with bad credit, it’s not impossible. Whenever you apply for a loan, lenders will look at your credit score and credit history to assess how responsible you are with money. The lower the score, the less likely it is you’ll be approved.

But even if you have a ‘poor’ credit score, there are options to explore before you park the possibility of securing a loan. In this guide, we’ll share how to get a loan with bad credit, types of loans for bad credit, and what to watch out for with bad credit loans.

What is a bad credit loan?

A bad credit loan is designed for those with a lower-than-average credit score, or for those with little or no credit history. To help lenders reduce risk, a bad credit loan typically comes with greater restrictions, fewer benefits, and higher interest rates.

Provided they’re managed responsibly, a bad credit loan can be a useful tool to help you improve your credit score and restore financial control. But should you fall short on repayments, the associated late fees and interest rates can cause greater financial difficulty.

Can you get a loan with bad credit?

It’s possible to get a loan with bad credit, though it usually comes with higher interest rates and more restrictions to reflect the risk to lenders. What’s also important to note is bad credit loans are rarely advertised as ‘bad credit loans’ and may be promoted as something more appealing, such as a ‘personal loan’.

Before you take out a loan, it’s wise to fully explore every option available to you. As well as shortlisting options where you are likely to get accepted, you should also choose a loan where you can comfortably meet the conditions of repayment.

How to get a loan with bad credit?

A smart starting point for getting a loan with bad credit is to work out your budget. By taking the time to calculate what you can comfortably afford to repay each month, there's a greater opportunity to improve your credit score and regain control of your finances.

Once you’ve got a figure in mind, compare loans from different lenders to shortlist options that fit your financial situation. As part of the search, you should also prioritise loans where you’re more likely to get accepted. Each application records a hard search on your credit report which can impact your credit score.

Before you apply for a loan, it can be helpful to check your eligibility. It’s a quick and easy way to assess the likelihood of being accepted, without the risk of impacting your credit rating.

Best loans for bad credit

Even if you have bad credit, there are multiple ways to secure a loan and get back on track with your finances. Here are the most common options:

Personal loan

Personal loans are a popular borrowing option for those wanting to consolidate high-interest debt, pay a substantial bill, or maybe start a business. They can be a relatively quick and flexible way to secure additional funds, which often come with short- to moderate-term repayment options.

While a personal loan can be more appealing than other types of loans, they’re likely to come with more fees, higher interest rates, and lower loan amounts. So before you agree to a personal loan, make sure you know what you’re signing up to.

Guarantor loan

A guarantor loan gives you the opportunity to borrow money with the support of a guarantor. Should you fall short on repayments, a third party (such as a family member or close friend) acts as a ‘guarantee’ to cover any payments you’ve missed.

Depending on your chosen lender, it might be the case that the guarantor receives the loan in the first instance. Provided they’re happy with the agreement, you’ll receive a predetermined lump sum which you’ll need to pay back as per the terms of your loan.

Secured loan

Otherwise known as a ‘home loan’, ‘homeowner loan’, or ‘second-charge mortgages’, a secured loan allows you to borrow money while using your home as collateral. It’s a common option for people who want to borrow a substantial amount of money, or for those with bad credit.

Should you fail to meet the conditions of repayment, a lender has the legal right to take possession of your home and sell it as a way of getting their money back. In some instances, you may be able to negotiate an agreement with the lender if you’re struggling to meet your repayments.

Risks of taking out a bad credit loan

The risks associated with bad credit loans can often outweigh what you’d typically expect with standard alternatives. So before you sign anything, here’s what to watch out for:

Personal

If you don’t keep up with repayments on a personal loan, you can accumulate fixed or variable interest on the outstanding amount you owe the lender. With any type of personal loan, it’s best to clear your balance in the shortest time possible to reduce the chance of paying back more than you need to.

Guarantor

Similar to personal loans, a guarantor loan often comes with higher interest rates than other types of loans. Due to the nature of this loan, the risk sits with your guarantor rather than yourself. If you fail to make repayments, the responsibility falls to your family member, close friend, or whoever agreed to act as your guarantor.

Secured

The risks attached to a secured loan are probably the most significant. If you default on your payments, it could lead to a lender legally repossessing your home to pay off any outstanding balance. As such, the ‘security’ of a secured loan sits with the borrower rather than the lender.

Alternatives to bad credit loans

Although a bad credit loan allows you to borrow money, it’s worth checking if there are other options that better suit your financial circumstances.

For example, you might decide to focus on improving your credit score instead of taking out a high-interest loan. With a higher score and healthier credit history, you might be eligible for loans with lower interest rates and a higher lending amount.

What a healthy credit score looks like will depend on the credit reference agency. But to give you an idea, Experian consider a ‘good’ score to be anywhere between 881 and 960. Whereas TransUnion indicate it’s anywhere between 661 and 780.

If you decide to prioritise your credit score over a bad credit loan, there are several actions you can take to start heading in the right direction, such as:

• Paying off debt to show you’re financially responsible
• Planning your spending by sticking to a monthly budget
• Checking your credit history and raising any concerns with your credit reference agency (e.g. Experian).

Another way to improve your score is with a credit-builder card from Aqua. Not only does it give you access to funds, but it can also help you build better credit – all with added tips, tools, and support to help you grow a healthier relationship with your finances.

Representative 34.9% APR (variable) on Aqua Classic

An Aqua credit card gives you the power to improve your credit score. You’ll also get access to Aqua Coach, our free credit-building tool designed to help Aqua customers get better at credit management.

Powered by TransUnion, Aqua Coach provides you with detailed information on your credit score, what factors have the biggest impact, and what areas you can improve on.

Contributors

Hayley Bevan

Hayley is an editor at Aqua.

Victoria Smith

Victoria is an editor at Aqua.