If your credit file is very poor, a loan will cost more, and some of the places that say yes cost far more than others. The aim isn't to find the lender that approves everyone. It is to find the cheapest borrowing you can afford to repay without needing another loan to do it.
Start with the cheapest options
- A credit union. Credit unions are not-for-profit, often accept people turned down elsewhere, and are legally capped at 42.6% APR (3% a month) in England, Scotland and Wales, and 12.68% APR (1% a month) in Northern Ireland. Many charge less. You need to be a member and may need some savings with them
- Interest-free help from the DWP. If you receive certain benefits, you may be able to get a Budgeting Loan or Budgeting Advance, repaid from your benefit
- A guarantor loan. Someone else agrees to repay if you can't. The guarantor is legally liable, so only consider this if they fully understand the risk
- Family or a hardship fund. A council or charity fund may help with essentials
Bad credit loans with a low APR: what to expect
For loans for very bad credit, a genuinely low APR is rare. Representative APRs at mainstream bad-credit lenders are well above those for good credit, and a representative APR only means that at least 51% of the people accepted get that rate or better, so you may be offered more. If you are comparing bad credit loans low APR offers, use an eligibility checker that does a soft search first, because each formal application leaves a mark on your file.
Best personal loans for bad credit: what makes one safer
- The lender is FCA-authorised. Check the FCA Register
- You can see the APR and the total you will repay before you sign
- There is no fee to pay upfront. Never pay anyone to secure a loan
- You can repay early, and you know what that costs
- The lender checks affordability. A lender that doesn't ask about your income and outgoings is a warning sign
Borrowing to avoid
- Payday loans. Charges are capped at 0.8% a day, with late fees of no more than £15 and total costs capped at 100% of what you borrowed, but they are still expensive. Borrowing £100 for 30 days can cost up to £24 in interest
- Logbook loans, doorstep lenders and rent-to-own stores, which usually cost far more than a credit union
- Illegal lenders. Loan sharks have no authorisation. In England, you can report them to Stop Loan Sharks
If you are borrowing to cope
If the loan is to pay other debts or bills, stop and get free advice first. A debt charity can look at the whole picture, and there may be better routes than new borrowing. See our guides to the Debt Relief Order and other options and to negotiating a debt settlement yourself. If you want a card to rebuild your file once things are stable, see credit cards for bad credit in the UK.