Bad Credit Personal Loans UK 2025 | Complete Borrowing Guide

Table of Contents

• Introduction

• What Does “Bad Credit” Mean in the UK?

  • Credit reference agencies

  • Score ranges and thresholds

  • Common causes of bad credit

• Can You Get a Personal Loan with Bad Credit?

• Which Lenders Offer Bad Credit Loans?

  • High street banks

  • Specialist online lenders

  • Credit unions

  • Guarantor loan providers

• Interest Rates and APR Ranges You Can Expect

• How Lenders Assess Risk

• Alternatives to Bad Credit Personal Loans

  • Secured loans

  • Credit builder credit cards

  • Debt consolidation loans

  • Debt advice and management plans

• Pros and Cons of Bad Credit Personal Loans

• Steps to Improve Your Credit Before Applying

• Frequently Asked Questions

• Conclusion

What Does “Bad Credit” Mean in the UK?

In the UK, your financial history is tracked by three main credit reference agencies: Experian, Equifax, and TransUnion. Each assigns you a score based on how you’ve managed credit in the past. The ranges differ, but generally:

• Experian: 0–999 (bad is usually below 560)

• Equifax: 0–1000 (bad is usually below 420)

• TransUnion: 0–710 (bad is usually below 566)

A “bad” credit score indicates that you’ve had problems such as:

• Late or missed repayments

• Defaults registered on loans or credit cards

• County Court Judgments (CCJs)

• Very high credit card utilisation (close to your limits)

• Frequent applications for credit in a short time

• A thin credit file (not much history to assess)

Although a low score reduces your options, it doesn’t automatically disqualify you from getting a loan. Each lender has its own criteria, and some specialise in helping borrowers with weaker profiles.

For context, if you want to see how mainstream lending works, you might find our guide to unsecured personal loans in the UK useful as a comparison.

Can You Get a Personal Loan with Bad Credit?

Yes, it is possible. The reality is that your choice of lenders will be narrower and the rates will be higher, but bad credit does not mean no credit.

Lenders will look at a wider picture of your finances, including:

• Whether your income is stable and sufficient to cover repayments

• How much other debt you already carry

• How consistent you are with housing and employment history

• Whether you can demonstrate affordability through bank statements

Some lenders may automatically decline people with recent defaults or CCJs, but others will consider applications on a case-by-case basis.

A growing number of providers now offer soft search eligibility checks, allowing you to see if you’re likely to be approved before you formally apply. These checks don’t harm your credit file, so they’re a safe way to test your chances.

Which Lenders Offer Bad Credit Loans in the UK?

There are four main categories of lenders who may provide personal loans to people with bad credit:

High street banks

Mainstream banks like Lloyds, Barclays, and HSBC rarely lend to people with recent serious issues such as defaults or CCJs. However, if your problems are minor and you’ve maintained a long-standing current account relationship, you may still be considered.

Specialist online lenders

This sector has grown rapidly in recent years. Companies such as Likely Loans, Everyday Loans, and Lendable focus on borrowers with weaker credit profiles. They tend to offer smaller sums (from £500 upwards) with higher interest rates, but they often provide quick approvals and same-day funding.

Credit unions

Community-based and not-for-profit, credit unions are one of the most affordable routes for bad credit borrowers. Their rates are capped at 42.6% APR, with many charging far less, typically around 12%–20%. They’re particularly useful for smaller loans under £5,000. You can find your nearest one through the Association of British Credit Unions (ABCUL).

Guarantor loan providers

With guarantor loans, a trusted friend or family member co-signs your application and agrees to make repayments if you fail to. This dramatically increases your chance of being approved, but the risk is high for your guarantor. APRs are usually between 30% and 50%.

Interest Rates and APR Ranges You Can Expect

Bad credit loans cost more because lenders are taking on additional risk. Here’s what you might typically see in 2025:

For example, if you borrowed £3,000 over three years at 39.9% APR, your monthly repayment would be around £142. That means paying back £5,112 in total — £2,112 more than you originally borrowed.

How Lenders Assess Risk

Credit score is only part of the picture. When you apply for a loan, lenders also consider:

• Income and expenditure: They want to see that you have disposable income each month after essential bills.

• Employment status: Being in stable employment increases your chances, although some lenders accept applicants on benefits or self-employed.

• Housing situation: Homeowners may be viewed as more stable, but tenants can still apply.

• Banking behaviour: Regular salary deposits and sensible account management count in your favour.

This is why improving affordability by reducing other debts before applying can make a big difference.

Alternatives to Bad Credit Personal Loans

Sometimes, borrowing isn’t the best option. Before applying, consider alternatives such as:

• Secured loans: Larger sums and lower interest, but your home or car is at risk if you default.

• Credit builder credit cards: Designed for poor credit, with higher APRs. If you pay off the balance in full each month, you avoid interest and rebuild your score.

• Debt consolidation loans: Roll multiple debts into one. For details, see our guide to personal loan debt consolidation in the UK.

• Debt advice and management plans: Free support is available from StepChange, National Debtline, and Citizens Advice.

Pros and Cons of Bad Credit Personal Loans

Like any financial product, bad credit loans come with trade-offs.

Pros

• Provides access to funds when other routes are closed

• Can be used to consolidate expensive credit card debt

• Helps rebuild your credit record if repayments are made on time

Cons

• Interest rates are significantly higher

• Missed payments make your situation worse

• Guarantor loans risk damaging personal relationships

• Limited choice compared to mainstream borrowing

Steps to Improve Your Credit Before Applying

Improving your score even slightly can unlock lower rates or make approval more likely.

• Check your credit file with Experian, Equifax, and TransUnion

• Correct errors such as outdated defaults or incorrect addresses

• Register to vote at your current address

• Reduce existing balances to lower your credit utilisation

• Avoid making multiple applications in a short time

• Consider a credit builder card and clear it in full each month

• Maintain stability in employment and address

You can also learn more from our advice on how to compare unsecured personal loans effectively.

Frequently Asked Questions

Can I get approved the same day?
Yes. Some online lenders offer near-instant decisions and same-day funding, though the APRs are high.

Will applying harm my credit?
Only if the lender performs a hard search. Using soft-search tools first avoids damage.

Do I need a guarantor?
Not always. But if your credit is very poor, having a guarantor can increase approval chances.

What’s the maximum I can borrow with bad credit?
Most bad credit personal loans range between £500 and £10,000. Secured loans can be larger but carry more risk.

Conclusion

A poor credit history doesn’t have to mean financial exclusion. In 2025, UK borrowers with defaults, CCJs, or limited history still have access to loans through specialist lenders, guarantor products, and credit unions.

The important thing is to borrow wisely. Compare lenders carefully, use soft search eligibility tools, and never borrow more than you can comfortably afford. Treat a bad credit loan not just as a source of funds but as part of a long-term plan to rebuild your credit. With responsible repayment and a strategic approach, you can move back towards mainstream finance and lower-cost borrowing in the future.