Guarantor loans, where a friend or relative agrees to pay your debts if you can’t, are a popular way for people with a bad credit history to borrow money. However, they’re not the most suitable option for everyone, plus not everyone is lucky enough to have someone willing to be their guarantor.
Thankfully, there are alternatives to guarantor loans if you’re looking to borrow money and have a poor credit score.
Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.
Late repayments can cause you serious money problems. See our debt help guides.
What options do I have if I have bad credit?
Personal loans from “bad credit” lenders. There are many lenders that claim to specialise in offering credit to people with a poor credit score. These companies tend to be a lot more forgiving when assessing your creditworthiness, but terms on these loans aren’t as favourable as those offered by traditional lenders, so you can expect to pay a lot more interest with these providers. Bad-credit personal loans
Credit-builder credit cards. These credit cards allow you to build your credit score while borrowing money. Each repayment made on time will boost your credit score. The eligibility criteria for these cards is looser than most other credit cards, although the interest rates tend to be higher and the credit limits are usually smaller. Credit-builder credit cards
Payday loans. Payday loan companies tend to be extremely forgiving when assessing your creditworthiness. They’re probably the easiest loan to be approved for, but the rates are extremely high. These products are only suitable if you’re looking to borrow a small amount of money for a short amount of time. Even then, they should be treated as a last resort because the interest payments can be crippling. Payday and short-term instalment loans
Secured loans. Another common way to improve your creditworthiness in the eyes of lenders it to offer some personal assets up as collateral. When you do this, the loan is described as “secured” although the lender gets the right to repossess your assets if you fall behind on your repayments. Secured loans
Alternative specialist lenders. There are a few innovative lenders such as Drafty, that offer alternative takes on short term loans, to help people avoid expensive unauthorised overdraft fees.
How to get the best rate on a loan for bad credit with no guarantor
It can be overwhelming trying to compare the various forms of credit. Your best option is to look for the annual percentage rate (APR) of all the products you’re evaluating. This figure, which has to be displayed for all forms of credit, will make it clear what the cheapest product is. finder’s comparison table for bad credit personal loans is a good place to start.
Make sure you check the other terms associated with the loan, including the minimum eligibility criteria. If you don’t meet the criteria, there’s no point applying for the loan, as you’ll automatically be rejected. This will harm your credit score and make it harder to be approved for credit in the future.
If you feel like you may struggle to meet the monthly repayments, choose a product with a longer term. The overall cost of this product will be higher, but it’s important to avoid missed repayments as this will also send your credit score plummeting and may result in extra fees, too.
The key to getting the best rate for your circumstances is to take the time to search all your available options, and select the cheapest overall product that you can comfortably afford to repay each month.
Frequently asked questions
You can check your credit file for free using services from credit reference agencies such as Experian, Equifax and TransUnion (formerly Callcredit). These will give you good clues as to what you’re likely to be approved for.
Some lenders will let you do a “soft search” which will assess your creditworthiness without making an official mark on your credit record. If this service is on offer, take advantage of it.
If you’re denied a loan, you’re free to apply for credit with another lender. However, be aware that a failed credit application will have a negative impact on your credit score. So it’s better to avoid being denied a loan and important not to make lots of applications for credit in a short amount of time.
It is possible to be approved for credit even if you’re already in debt, although this will affect your creditworthiness in the eyes of lenders. Nevertheless, many people use the options listed above to consolidate their debts into one manageable monthly payment.
You can improve your credit score in many ways, for example by registering on the electoral roll, consolidating debt and avoiding county court judgements (CCJs).
How different factors can affect your credit score
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
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