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Getting a bad credit loan means you won’t always get the best interest rate available, but it does mean you can still borrow money.

Whilst this is a good thing in an emergency, it’s always worth checking out alternatives such as a short-term loan, overdraft, credit card or secured loan, especially if they would be better suited to your current circumstances. If you’re already looking for an alternative to a bad credit loan, we’ve put together an incredibly useful list of alternatives for you to browse through.

Bad credit loans explained

As the name suggests, a bad credit loan is designed for someone with a poor credit score, offering them an opportunity to still borrow money. Getting a loan with bad credit is therefore possible, but you tend to find these products will have less-than-favourable interest rates and can become expensive to repay over time.

However, the most common loan option provides a workaround if you have a particularly bad credit rating. A guarantor loan allows you to nominate a family member or friend to act as a guarantor on your behalf, as long as they have a more acceptable credit rating than you. It also means that if you fail to repay, your guarantor will become liable.

Alternatives to bad credit loans

Thankfully there are alternative financial products that exist in case you don’t think that a bad credit loan is necessarily the right option for you. They include:

It’s worth exploring all alternatives just in case one might be a little better suited, and it saves you jumping in headfirst and getting into further debt.

Short-term loans

  • Small amount, usually a few hundred pounds
  • Borrowed for a short amount of time, between 2-12 months
  • High interest rate
  • Bad credit score still accepted

Whilst a short-term loan could technically be classed as a bad credit loan as well, it’s on a much smaller scale than most other personal loans. This is definitely an alternative to a standard bad credit loan, but only for those who are happy in borrowing a small amount.

This option is a convenient alternative as it will ensure you can still borrow money, but might not tick all of the boxes in terms of the full amount that you need. Therefore, if you need to borrow more than a few hundred pounds, a short-term loan might not be the best alternative.

Read more about short-term loans below:

Compare Short Term Loans


  • Easy to apply for someone with an existing current account
  • Flexible borrowing, depending on your provider
  • No interest rate but there is usually a charge
  • More suited as a buffer rather than a method for permanent borrowing

Getting an overdraft is possibly the easiest form of borrowing, usually because it is an extension of your current account rather than a completely new financial product with a new lender. There is still an application process where your account provider will judge whether they are happy to give you an overdraft or not.

As much as you can rely on an overdraft for additional funds, it is actually more of a buffer rather than a dedicated form of borrowing, especially as you can receive a daily charge for using it. In this regard, it might not a suitable alternative unless you can pay it back very quickly and avoid the related charges.

Read more about current accounts and overdrafts below:

Compare Overdrafts

Credit builder card

  • Good alternative for someone with bad credit rating
  • Allows you to borrow a small amount - you will need to stay within a credit limit
  • High interest rate for a credit card
  • Added bonus that it will help to improve your credit score

Despite not being able to borrow a large lump sum, a credit builder card can sometimes be a good alternative, especially if you also want to improve your credit score at the same time. It doesn’t necessarily allow you to borrow as much as a bad credit loan, but it does provide give you a credit limit you can spend within.

This is a good alternative for those wanting to actively improve their credit score so they have access to better financial products in the future. It is especially important for those who would be looking at applying for a mortgage in the future too.

Read more about credit builder cards below:

Compare Credit Builder Cards

Secured loan

  • Large amount, usually more than £10,000
  • Borrowed over a much longer period
  • Standard interest rate
  • Higher risk from having to secure the loan against a valuable asset

Whilst this type of loan will be a good alternative for those wanting to borrow a higher amount, the risk is much higher given that it is a secured loan. This means that the loan is ‘secured’ against a valuable asset such as your home, which can result in the asset being repossessed if you fail to keep up with repayments.

If you’re happy with the level of risk, this is actually a viable alternative if you would like to borrow a larger amount, even if you have a bad credit score. However, given that the result of a failure to repay is quite dramatic, you should always look for other unsecured options just in case.

Read more about secured loans below:

Compare Secured Loans

The risks of bad credit loans

There is always a risk when it comes to borrowing money, especially if you struggle to repay the full amount, as you will end up with additional charges and fees. In the case of a guarantor loan, the worst-case scenario is that you will pass on the risk to another person, as they will be liable if you fail to make a repayment.

You should always do your research when borrowing money so you understand what the risk of each loan product really is. This will help you further understand if the product would be best for you, or if you need to search for alternatives instead.

A good place to start is by checking your credit report to confirm your score, before filling out our free online comparison tool, moneymatcher. This will perform a soft search on your credit file, allowing you to find out which products you’re eligible to apply for. The best part is that your credit score will not be impacted, which is especially important for those who already have a poor credit rating.