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Secured loans for bad credit

If you're a homeowner with a poor credit history, you could still find secured loans for bad credit, often known as a second charge mortgages, with one of these lenders.

Think carefully before securing other debts against your home. You home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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Overall representative example

Based on borrowing£18,000 over 120 monthsThe overall cost of comparison9.1% APRC representative
Borrowing rate6.5% per annum for the first 60 months, followed by 60 months at the lender’s standard variable borrowing rate of 4.95% above Bank of England Base Rate. There would be 60 monthly instalments of £227.38 followed by 60 instalments of £221.71Broker fee£1,530
Lender fee£495Total amount payable£26,945.40 comprised of a loan amount of £18,000 and interest of £6,920.40

Last updated: 7 April, 2021

How get a secured loan with bad credit?

If you have bad credit, it is still possible that some lenders would be willing to offer you a secured loan. In fact, you may be able to get a secured loan even if you have:

  • Mortgage arrears

  • County Court Judgements (CCJs)

  • Other missed repayments

Find out out more about how your credit record affects your loan application

Do you have to use a broker?

Using a broker can be useful to get a secured loan for bad credit, as they can give you an indication of whether your application will be accepted before you apply.

In fact, you'll find that most lenders no longer offer secured loans directly to borrowers, and instead only work through brokers.

A good broker will also assess your circumstances before you apply, including any credit problems, and help you find a suitable loan that meets your needs.

How to find the right secured loan for bad credit for you

Before you apply for a secured loan for bad credit, you need to ask yourself some key questions:

  • Does it offer you the amount of money you need

  • Does it give you enough time to pay back what you owe

  • Will it accept your application even if you have bad credit

  • Does it have the lowest interest rate that you can find

What are the pros and cons of taking out a secured loan with bad credit?

Getting a loan can sometimes become necessary, but it isn't something to be taken lightly. This is especially true if you have bad credit. Consider the following pros and cons to help you decide:

Pros

  • Quick access to cash: Many lenders will transfer funds in 24 hours
  • May allow you to borrow more: The loans are secured to your property, so banks may be willing to lend you more than otherwise would.
  • May improve your credit: If you stay on top of repayments, it can help improve your credit record

Cons

  • High interest rates: Lenders are likely to charge you a higher interest rate because of your poor credit history. Thus your loan will cost you more overall.
  • You're putting your home at risk: Your loan is secure against your property, so if something goes wrong and you're unable to keep up with repayments, you could lose your home.

How much can you borrow with a secured loan?

The amount you can borrow will depend on depend on your property value, income, and financial circumstances, but secured loans can be for anywhere between £1,000 and £2.5 million.

But if you have bad credit, it's likely that you won't be able to borrow as much as could with a good credit score.

This is why, unless you need the money urgently, it's worth working on improving your credit before getting a secured loan with bad credit.

Things to know before you apply for a secured loan for bad credit

As mentioned earlier, taking out a bad credit secured loan is a serious commitment, especially considering that you're already financially vulnerable due to your poor credit history.

This is why it's important that you:

  • only borrow as much as you need

  • know how much time you need to pay it back

  • can afford the monthly payments in addition to your regular outgoings

It is also worth checking that your credit record is accurate and up to date before you look at secured loans for poor credit, even if you know you have not had issues in the past.

Writing a budget, can also be a helpful exercise to know exactly how much you can afford to pay towards any new loan. This can reduce the chances of missing any payments in the future.

Here is how to improve your credit record

What are the risks of getting a secured loan with bad credit

As mentioned before, the main risk of getting a secured loan when you have bad credit is that you could be putting your home at risk, if you're unable to keep up with repayments.

If you default in the loan, the lender could repossess your home in order to sell it and recoup the loan.

Secured loans for bad credit FAQs

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