Frequently Asked Questions

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.

A secured loan is where the debt is attached to an asset such as a property or a vehicle. If you cannot repay the loan, the lender can repossess the asset to offset the outstanding payment. Alternatively, unsecured loans don't require you to assign the debt against an asset. Your credit rating and current financial situation are the most significant factors for lenders to consider.

Many lenders may still lend to you even if you are self-employed. Check the lender's criteria to ensure you will not be rejected in such a case. Lenders may ask you to prove your income, as you can be seen as higher risk, due to not having the security of an employer behind you and a consistent, regular income.

The usual rules around affordability will still apply. For example, suppose you can only afford to pay yourself £1,000 a month. In that case, you are unlikely to accept a loan with £500 monthly repayments.

In short, a personal loan direct lender will use your credit score to indicate how reliable you may be as a borrower. It's not a guarantee, however. Lenders look at affordability, too, considering your income and regular expenditure. They will also look at any outstanding debt you may have.

Your credit history will show how good (or bad) you are at paying back debts and bills. It will have a history of where you have lived and any financial connections that you may have with other people. Additionally, it will show if there have been any recent "hard" searches on your credit file - due to you trying to apply for credit elsewhere. It's good to regularly check your credit history, look for mistakes, discrepancies or missing data and get these fixed as soon as possible. Your credit score is one of the factors that will help a lender decide whether to lend to you or not.