What is an Unsecured Loan for Bad Credit in the UK?
Having bad credit has always been associated with the inability to secure a loan from lenders. It can also be frustrating when you need money urgently but your bad credit is the ultimate obstacle.
Fortunately, some UK lenders offer unsecured loans for bad credit. This is to say a borrower gets a personal loan without putting forward an asset against the loan even though the borrower has bad credit.
These lenders are authorised by the Financial Conduct Authority (FCA) so you can be sure you’re dealing with a legitimate and credible lender.
Unsecured loans for bad credit are usually advanced on the basis of the borrower’s ability to repay the loan (which is not always determined by their credit history).
Not all lenders will advance you with an unsecured loan for bad credit. We understand the complexity of finding such a lender which is why we help borrowers by doing the initial task of searching for lenders matching their needs.
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Representative Example: Rates from 43.1% APR to 1333% APR. Minimum Loan Length is 1 month. Maximum Loan Length is 36 months. Representative Example: £1,200 borrowed for up to 75 days. Total amount repayable is: £1506. Interest charged is 0.34% per day, amounting to £306, annual interest rate of 124% (variable). Representative APR: 49.7% (variable).
Requirements for Unsecured Loans for Bad Credit
Besides credibility checks and other prerequisites required by lenders, there are mandatory requirements that you must meet as a borrower before any lender considers advancing you a loan in the UK. You must be: 18 years or older, a UK resident (proof needed) and be having an income to prove you can repay the loan.
Pros and Cons of an Unsecured Loan in the UK
Unsecured loans for bad credit come with a good number of advantages such as;
- You get the chance of securing a loan within a short period. You can use the loan for whatever purpose—just remember to be responsible.
- Making full repayments within the agreed period can significantly improve your credit score. This would increase your eligibility in the future.
- Borrowers don’t have to secure these loans with assets. As such, they’re less risky although defaulting would put you in problems.
Being wary when taking unsecured loans is wise. Some of the drawbacks associated with unsecured loans include;
- Bad credit would significantly affect your credibility hence, typically getting a small loan.
- There are limited lenders willing to advance unsecured loans for bad credit in the UK.
- Unsecured loans are accompanied by higher interest compared to other loans due to high risk.
|How much can I apply for?||£100 to £5,000||Zero-obligation quote|
|Length of the repayment||1-36 months||Quick payout|
|Interest rates (variable)||49.7%||Zero paperwork|
|Can I apply with poor credit standing?||Yes||Bad/low credit considered|
|Do I have to pay a lump sum?||No||Flexible repayment|
|When am I allowed to apply?||24/7||2-min simple application|
Why Does Bad Credit Make it Difficult to Get a Loan?
Credit history is what every lender primarily relies on to determine a borrower’s creditworthiness. It tells lenders how you have managed to handle credits from other lenders before. Therefore, bad credit translates to bad financial history. As such, lenders remain reluctant to offer you a loan with bad credit.
However, not all lenders use credit history as the major determinant. Those who do might use your current income to determine your creditworthiness and are more likely going to advance you a loan with high interest.
Are Unsecured Loans for Bad Credit Risky?
Unsecured loans can be risky but there is always a way to work around a better solution. Among the many lenders in the UK, some might impose hefty interest rates or even advance your loans with hidden charges.
It’s imperative to understand that these loans can be risky if you default or fail to satisfy any requirement agreed upon prior.
To avoid falling for loan sharks and other unauthorised lenders in the UK, consider making a loan application through a broker. As part of our routine, we help borrowers secure loans from good lenders by advising them accordingly and even checking their eligibility before sending the application to a lender who matches your needs. This increases your chances of getting a loan. Remember we don't perform hard credit searches—we reserve that for the lender.
Alternatives to Unsecured Loans if You Have Bad Credit
In case you have bad credit and unsecured loans don't seem feasible, Here are a few options you might want to consider.
Unsecured personal loan
Personal loans are unsecured loans borrowed from lenders. Lenders may overlook credit history even if it’s poor. If you have a reliable source of income, getting a personal loan is much easier. The amount one can borrow largely varies depending on the lender and the borrower’s eligibility.
In case you have a colleague or a family member who has a good credit history and is willing to co-sign your loan application then you can opt for guarantor loans. Here, the guarantor is legally bound to repay the loan in case the borrower defaults.
If you have a property or asset such as a car and are willing to use it as collateral against a loan then secured loans are for you. Secured loans have a lot of advantages such as the ability to borrow large amounts accompanied by lower interests. In case you default, however, the lender has the right to repossess the property or asset.
Debt consolidation loans
If you have multiple debts that piled up over time and are having bad credit then debt consolidation loans are the perfect option for you. They are loans designed to repay other debts and remain with a single (often huge) debt to repay.
Since debt consolidation loans are typical of large amounts, you need to be wary and confident that you can repay the loan within the agreed period. It’s also important to check if the interest rates are reasonable before you consider getting the loan.
This type of lending mostly occurs online where private investors lend money through their own websites/platforms. Customers can borrow small to large amounts of money. Some UK lenders in the peer-to-peer network can advance loans to borrowers with bad credit.
What can I use an unsecured loan for?
You can use unsecured loans for a wide variety of purposes. It could be paying emergency bills, repairing your house, etc. Just be sure that you will be able to repay the loan when the time comes.
Can I get an unsecured loan with no credit check?
Credit checks are a must for every lender before advancing you with a loan. If you make the application with a broker like UKBadCreditLoans, a soft credit search may be done before addition mandatory hard search is done by the lender.
How long will it take before receiving the unsecured loan?
If you provide the correct information as required and are eligible, you are likely going to receive the loan on the same or the next working day.
Will I pay a higher rate if I get unsecured loans with bad credit?
Yes. Bad credit is associated with high risk on the lender’s side. As such, unsecured loans with bad credit tend to come with higher interest rates although it varies widely depending on the lender.
Can I top up my unsecured loan?
Yes. If you repay your loans on time and satisfy all other agreements then you are likely going to qualify for a top-up in the future.
Unsecured loans for bad credit are a great option for people with bad financial records. To get the most out of unsecured loans for bad credit, consider having a good source of income since it tells lenders you will be able to repay a loan.
Unsecured loans for bad credit are usually small compared to secured loans but they come with a comparatively lower risk. This shouldn't mean you can default or miss payments. Remember any mistake you make is recorded and will appear in your credit history which ultimately affects your future credit undertakings.