Our Guide to Loans Which Accept People With Bad Credit History

Flexy Loans Guide to loans which accept people with bad credit
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Trying to find a loan if you have bad credit can feel like you’re caught in a Catch-22 situation.

You can’t get credit because of your bad rating, but there’s no chance for you to improve that rating without taking out a new loan!

Even if you’re not on a quest to boost your credit rating, having a bad credit score can create headaches when it comes to borrowing extra cash, whether to help tide you through a tight spot or fund a personal project

Fortunately, even if many lenders shy away from people with bad credit, there are still plenty of loans which are available to people with a patchy credit history.

In this article, we talk about what causes bad credit in the first place and line up some of the best loan options if you find that your credit score has taken a tumble.

What Causes Bad Credit?

Your credit file is a snapshot of your financial history. It is a record of all the debt and accounts you have held for the last six years. Lenders use it to assess how well you have managed your debts in the past, and decide whether or not they should lend you money.

There are five things which directly contribute to your credit rating. In order of importance, these are:

  • Payment history: the most influential factor on your credit rating is how well you manage payments. Missed payments or accounts in arrears will have a strong negative effect on your credit.
  • Total debt & debt utilisation: another important factor is how much debt you hold in total and how much of the credit available to you is being used at any one time. If you are using all of the available balance on your loans and credit cards, it is taken as a sign that you are unable to pay off your current debts. This has a negative effect on your credit rating.
  • Age of accounts: The longer you have held your accounts for, the better. By having your debt accounts open for a long time, lenders can see that you are able to commit to paying back the debt over the long term.
  • Inquiries: When a lender looks at your credit file, this is recorded on the report. If a lender sees that there have been lots of inquiries into your file over a short period of time, they can assume that you are desperate for credit. As far as they are concerned, this is a red flag.
  • Range of credit products: Lenders like to see a range of credit products on a credit report. This shows them that you have previous experience managing various types of debt.

The factors which are most likely to be responsible for a bad credit ratings are the first two on the list. If you are in arrears on your accounts or miss payments often, this will have a serious effect on your rating.

Likewise, if you’re maxed out on all of your credit cards, this will knock your score down by a good number of points.

If you can manage to pay your debts on time or reduce some of your debts before you apply, that’s great. However, even if you need the cash right away there are still plenty of borrowing options available for people with less-than-perfect credit.

Loans That Accept People With Bad Credit

Guarantor Loan

How It Works

A guarantor loan is a kind of personal loan, in which someone else with a good credit score and regular income co-signs your loan contract and promises to repay your debt in case you default. This person is known as a guarantor, and must be over 21 years old and have both a regular income and good credit score.

Bypassing ultimate responsibility for the loan to a third party, the lender gets assurance against the risk of taking on a bad credit borrower. As a result, it is possible to access better interest rates and borrow more money that you would be able to if you applied by yourself.

Guarantor loans are available from both traditional and online lenders and can be a great route to access credit if you have a patchy history.


Interest is charged on your debt and included in a fixed monthly instalment which you pay to the lender for the duration of the loan.

If you fall behind, your guarantor’s credit score will be harmed, and if you stop paying altogether, then the guarantor is liable for the rest of the balance- which is the major risk of guarantor loans.  

The Bottom Line

This can be a great way to get an affordable loan if you have bad credit, but if you don’t keep up with payments then your guarantor’s credit file and income could be at risk- to say nothing of your relationship.

Short Term Loans

How It Works

Short term loan offers easy, almost instant access to cash for people with low income and bad credit ratings. This type of loan encompasses a range of products, including payday loans.

All of these loans have certain things in common. They all need to be repaid over a short period of time (normally 1-6 months), and they tend to have extremely high-interest rates.

Many short term loan lenders advertise very high acceptance rates and may agree to lend you money without conducting an in-depth credit check.

It is possible to borrow from £100 up to several thousand with most short term loan lenders.


With payday loans, you repay the amount you borrowed in full with interest on your next payday, however longer short-term loans could last for several months.

If you are late to make a repayment, you could be charged penalty fees and asked to ‘rollover’ your debt. This is when you agree to take out a new loan to cover the unpaid costs from the old one and usually involves administration fees.

Many contracts involve regular repayments of fixed amounts, but some lenders use balloon payment contracts. This is where most of your payments are very low and only contribute to the interest on your loan.

The very last payment- the one needed to close the account- is for the amount you originally borrowed and so is much larger. If you get caught out by the large final payment, your account may rollover.

The Bottom Line

Although short term loans offer the allure of easy-access cash, they can be very expensive loan products, and it is easy to get trapped in a cycle of debt due to the unusually short loan period.

Credit-Builder Credit Card

How It Works

Credit builder credit cards allow are a good option if you only need to borrow a small amount. They are offered by mainstream lenders and work in the same way as normal credit cards, but have smaller limits and higher interest rates which are designed to help people with bad credit repair their credit score.

Most credit-builder cards have a limit between £250-£1000, but the exact amount is determined by your income and just how bad your credit rating is. However, even if you’re only given access to a small limit when you start out, after a few months of making timely payments, you could find that your lender is willing to increase your credit.


Interest is charged on your outstanding balance at the end of every month. Because the interest rate on credit-builder cards tends to be quite high, you should aim to pay off your balance in full every month to avoid charges. This will also help improve your credit score.

The Bottom Line

If you can pay off your balance each month and avoid the temptation to max out your balance, a credit-builder card can be a great tool for long-term, flexible borrowing and getting your credit score on the mend.

Peer-to-Peer Loans

How It Works

Peer-to-peer loans are like crowdfunding for individuals. These online-only platforms pair up people who are looking for a loan with investors who are ready to lend. Because each individual investor decides how much risk they are willing to take on, it is possible to find loans even if you have a bad credit score.

To compensate the investor for taking on a ‘high risk’ loan, you may have to pay a high-interest rate; but this is still likely to be lower than equivalent rates charged by payday lenders or even high street banks.

One reason for this is that peer-to-peer companies make savings by only operating online, and can pass this on to customers.  


Repayment can be spread over several months to several years and takes the form of a regular monthly instalment which includes your interest. You may either pay through deposit or direct debit.

If you are late or stop making payments, you could be subject to penalty fees and the lender may decide to sell your loan on to a debt collection agency.  

The Bottom Line

Peer-to-peer lending can be a great option for borrowing money over a longer-term at slightly lower rates than you might be able to get with high street lenders.

The risk with this form of credit is almost all on the lender’s side, which makes this one of the safest bad credit borrowing options out there.

Homeowners Loans

How It Works

If you are a homeowner, you could offer your property as security against a personal loan to improve your access to credit or help lower the interest rate a lender is willing to offer you.

It is possible to borrow up to 80% of the equity in your home with a homeowners loan, although if your credit rating is not very high, your limit may be much lower than this.

Because the loan is secured against an asset, the interest rates on this kind of loan tend to be much lower than unsecured borrowing options such as credit cards and ordinary personal loans.

If you still have money left on your mortgage, you can still apply for a homeowners loan, although the lender will only take into account the portion of your home which you own outright when considering how much you can borrow.

For example, with a property worth £300,000 with £100,000 left on the mortgage, a lender would only take into account the £200,00 owned outright by the borrower when calculating how much to lend them.


Homeowners loans resemble mortgages in terms of repayment. They may have fixed interest rates, which means your monthly repayment will always stay the same; or variable interest rates, meaning that your monthly payment can go up or down depending on the state of the wider economy.

The repayment term can be many years in length, but the shorter you borrow for, the less interest you will pay if you don’t keep up with repayments your home could be repossessed. 

The Bottom Line

If you have a poor credit rating but need to borrow a large sum of money, a homeowners loan may well be one of the very few options available to you. However, it is a risky form of credit due to the possibility of repossession if you default.

Logbook Loans

How Does It Work

A logbook loan allows you to borrow money secured against your vehicle. You may borrow up to 50% of the value of your vehicle and continue to use it throughout the course of the loan. It is possible to get a logbook loan online or via a high street lender.  


Logbook loans tend to have fairly high-interest rates, which are usually rolled into regular repayments to the lender.

Some contracts use ‘balloon payments’, which is where you only pay interest for most of the loan and then pay one large lump sum of everything you owe at the end to regain access to your vehicle.

If you default on your loan or are late for successive repayments, the lender has the right to tow away your vehicle and sell it to recover their money.

The Bottom Line

Logbook loans provide easy access to cash, but they can be an expensive way to borrow.

They are also risky, especially if you depend on your vehicle for work, due to the possibility of repossession.

How Can Flexy Loans Help?

Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.

They have already helped thousands of people get loans already, and they can do the same for you.

Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you.  All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.

To apply and see what loan is available to you, click on the below and answer the question

Team Flexy Loans
Team Flexy Loans
This article was written by multiple writers from team Flexy Loans. Our team of writers is made up of financial specialist with a combined 45 years experience of writing about finance.
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