Secured Loans for People With Bad Credit

Are you wondering, 'Can I get a secured loan with bad credit?' You're in the right place!

In this easy-to-follow guide, we’ll cover:

• What a secured loan is.
• How a secured loan works.
• The possible dangers if you fail to pay back the loan on time.
• The difference between secured and unsecured loans.
• How to get a secured loan if you have bad credit.

We know that you might be worried about the risks of a secured loan. Perhaps you are already in debt and need some help. We’re here to help you with clear, simple advice.

Let’s explore secured loans together.

Can you get turned down for a loan?

You can be rejected for a secure loan if you do not meet the lender’s affordability checks or because you have a bad credit history. People with poor credit history may still be able to get a secured loan, with some lenders even offering secured loans for bad credit. 

Naturally, you will not be able to take out a secured loan without an asset to list as collateral or without a relevant asset. For example, a home equity loan requires the applicant to have sufficient home equity. 

Is a credit score check required?

A regulated mortgage lender must assess affordability and relevant credit information. It may use its own scoring system and credit-reference data; there is no single public score that all lenders use for every loan.

There is no fixed credit score that you require to be approved by any lender. Each lender can set different benchmarks for approval, but they’ll also need to consider wider factors, not least an affordability check. 

Can I get it with bad credit?

If you prove you can afford the loan comfortably, the lender may still approve your loan even if you have bad credit. Having bad credit can make you a greater lending risk in the eyes of the lender, but they’ll consider all components of your application before making a decision. 

That being said, if your credit score is too low, the lender may still reject your offer even when you can afford the loan repayments. Or they might offer a loan with much higher interest. It all comes down to personal circumstances. 

This forum user on MoneySavingExpert wants to know whether you can get a secured loan with bad credit and whether they are likely to be accepted for one – something many others also want to know.

Where can I get one?

Security may change the lender’s risk assessment, but it does not guarantee acceptance. Your home is at risk if you cannot keep up repayments.

A specialist broker may help identify appropriate lenders. Verify permissions, panel coverage and fees, and avoid repeated full applications.

Enquire about a secured loan through Loans Warehouse, a credit broker, not a lender. Approval and terms depend on checks. Compare the full cost before applying. MoneyNerd may receive a referral fee. Your home may be repossessed if you do not keep up repayments on a loan secured against it.

Rebuilding Your Credit Score

If you are able to wait to apply for a secured loan when you have bad credit or if you get turned down for a loan, it can be a good idea to try and improve your credit score as much as you can before you apply for a loan or apply again.

You can do this by making timely bill payments and using credit cards responsibly. You should also maintain a healthy debt-to-credit ratio, avoid making frequent credit applications and check your credit report from a UK-based credit reference agency like TransUnion.

A Loans Warehouse customer’s experience

Individual experiences vary. Compare the total cost, fees, repayment term and risks before applying. Securing borrowing against your home puts it at risk if you cannot keep up repayments.

Polly

“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”

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Reviews shown are for Loans Warehouse. Search powered by Loans Warehouse.

Can you borrow against your house?

There are many types of secured loans that use property and property equity as collateral within the credit agreement. The most obvious examples are first charge mortgages, second charge mortgages and secured homeowner loans that are usually taken out to complete home improvements. 

Borrowing against your house or home equity is still possible with bad credit. The fact you’re willing to secure the loan with such a valuable asset will reduce perceived lending risk. However, those doing so may still have to pay higher interest compared to securing a loan against your home with good or excellent credit. 

A lender may decline because of credit history, affordability, property or other criteria; a decline is not based on the score alone.

Affordability checks

Affordability checks are in place to make sure you can comfortably afford the loan you wish to take out. These tests take into consideration the applicant’s income and any existing debts, such as a mortgage or an ongoing loan elsewhere. 

The lender will want to know what percentage of the applicant’s income can cover all existing debt and the proposed secured loan repayments. It is not just a matter of having greater income than debt because the lender wants to make sure you can comfortably afford all other essential living expenses. 

Does it affect your credit score?

A full application may involve a hard search, and opening a secured-loan account can affect your credit profile even if you make payments on time. See related guidance.

Consistent repayments may help over time, but no loan guarantees a higher credit score or future acceptance.

Searches, new balances and accounts, utilisation, missed payments and defaults can all affect your credit profile. Do not borrow solely to try to improve a score.