Frequently Asked Questions

A secured personal loan is where you borrow money against the value of an asset, such as your home or car. In the case of a secure business loan, assets can include property, machinery, materials and furniture. Because of the risks involved, you should think very carefully before choosing to apply for one. If you fail to keep up with payments on a secured loan, the lender can apply to sell your asset or assets to pay back the loan. Secured loans are often for higher amounts than unsecured loan (upwards of £25,000), with the money being borrowed over a longer period of time (usually from 5 to 25 years).

You should contact your lender as soon as possible and ideally before failing or delaying any of your repayments. They may rearrange your payments to make the debt more manageable for you.

Before you apply for a short term loan or any credit for that matter, you should be confident that you can afford the repayments. Failing to pay back a short term loan on time can damage your credit score and potentially affect your ability to get credit in the future, and cause you unneeded stress.

If you are still struggling or need help, you can contact Citizens Advice, Step Change, and The Money Advice Service.

An unsecured loan lets you borrow money without having to provide any assets (such as your home) as collateral (something you offer as security if you fail repayments). Unsecured loans are usually available to persons with fairly good credit scores, which will reduce the risk to the lender. The decision made by the lender as to whether or not to agree to the loan is based on their assessment of the customer’s ability to pay back the loan. Generally the better your credit rating, the more likely you are to be approved for an unsecured loan.

Firstly, try understand exactly why your loan application was declined. Reasons for being refused a loan can include your income, previous defaults, excessive debt, CCJ’s or even mistakes on credit reports. If your application was rejected, you can ask the lender why. Although you may not get a very detailed answer, the information they provide may offer you insight on where you need to improve.

Before applying for a loan, you should check your credit report , most credit report providers will show if your credit score is good, average or bad. Also avoid making many applications in one go, as some lenders may see this as a sign that you are experiencing financial difficulties.

You will be more likely to succeed in being approved for a loan if you first work on improving your credit score. If your credit score needs boosting – take a look at our guide to improving your credit score in ten simple steps.

Guarantor loans are increasingly popular amongst people with bad credit histories. A guarantor loan can make it possible for you to borrow money, with the help of a trusted third party - often a family member who acts as a guarantor. The lender will expect the guarantor to make repayments on your behalf if you are unable to keep up repayments on your loan. This reduces the risk to the lender, which increases the likelihood of you being approved for a loan if your credit rating is low. However, your guarantor will need to have a good credit rating themselves and be willing to take over your loan repayments if you fail to make repayments.

Most lenders will allow you to pay back early. Some may charges apply, so it’s always best to ask your lender, and request an early settlement amount if applicable.

While getting a personal loan with bad credit isn't impossible, it is harder and more expensive. Traditionally, payday loan and short-term loan lenders were known to lend to persons with less favourable credit scores. However, this is an expensive form of lending due to the high-interest rates.

It may be best to improve your credit score first before applying to borrow money. This can take time, but remember that you may get a better deal with a good credit history.