Credit Building > Where to get low APR bad credit loans in the UK

Where to get low APR bad credit loans in the UK

Wollit Team4 minute read · Updated 3rd July 2024

Bad credit loans are loans for people who have had trouble with debt in the past and as a result now have a low credit score.

While these loans can give you a chance to borrow money even though your credit isn't great, they usually have much higher interest rates and fees than regular loans.

This being said, some bad credit loans have lower APRs than others. Let’s look at the best bad credit loans in terms of low interest rates, and see if they’re the right ones for you.

What are bad credit loans?

Bad credit loans are for people who have a low credit score, which is a credit score that usually falls in the “Poor” or “Very Poor” credit score bands.

These loans are offered by special lenders who look at more things than just your credit history when deciding whether to lend you money.

Lenders who specialise in bad credit loans will care more about your income, your job stability, and your overall debt when deciding whether you're risky or not. They will also charge you quite a bit in terms of interest rates and fees because you are still riskier than regular borrowers.

An important thing to keep in mind is that bad credit loans can be secured or unsecured.

Secured loans are backed by something you own, like a house or car, and as a result they usually have lower interest rates. The lender can always take your collateral if you don’t repay the loan.

Unsecured loans, on the other hand, don't require collateral and because of this have much higher interest rates because they are riskier for the lender.

How do I know if I have bad credit?

In the UK, there are three main companies that keep track of people's credit: Equifax, Experian, and TransUnion. These are also called credit reference agencies or CRAs. Because of this, you don’t have one universal credit score in the UK, but three credit scores, one for each CRA.

If you don't know if you have bad credit or not, then you need to check your credit score.

You can find out your credit score in two ways:

By signing up directly with the CRAs (in the case of Experian or Equifax),
Or by using third-party online credit monitoring services that let you see your credit score and report for free: ClearScore for your Equifax score or Credit Karma, MoneySuperMarket, and MoneySavingExpert for your TransUnion score.

If you have bad credit your credit score will usually be in the “Poor” or “Very poor” band. This means that your credit score will be under 720 on the Experian scale, under 438 on the Equifax scale, or under 565 if you’re looking at the TransUnion score.

Knowing your credit score is important because it helps you understand your financial situation and find ways to improve it.

It also lets you know just what kind of loans you can qualify for. If your score is under the thresholds above, then you’ll be refused by most traditional lenders. Your only option will be lenders who specialise in bad credit loans.

Unfortunately, these loans also come with some of the highest interest rates in the UK, with the average representative APR often above 1,000% per year.

Which lenders offer low APR interest rates?

Several lenders in the UK offer bad credit loans with competitive interest rates (for a bad credit loan, that is). Here are some of the largest ones:

Everyday Loans. This is a direct lender that offers loans from £1,000 to £15,000 over 18 months to 5 years, with interest rates starting at 71.3% APR.
Badger Loans. This is a credit broker who partners with a panel of up to 30 lenders to provide low-cost loans. They offer loans up to £25,000 with interest rates starting at 41.2% APR, with a representative APR of 79.5%.
118 118 Money. 118 118 Money offers bad credit loans with interest rates starting at 41.2% APR.
New Horizons. They offer fast 3 to 36 month online loans for amounts ranging from £50 to £5,000. Their representative APR is 49.9%. Ocean Finance: Ocean Finance offers a range of bad credit loans, including secured loans, debt consolidation loans, and personal loans. They work with a panel of lenders to find the best rates for their clients.
Finio Loans: Finio Loans offers personal loans for bad credit for amounts of up to £5,000 and with a representative APR of 39.9%.

Keep in mind, however, that the APRs we mentioned are “representative”, meaning it’s what more than half of the applicants get in their loan offer. If your credit score is particularly bad then you might get a much higher APR. Badger Loans, for example, mention that their APRs range from 12.9% to 1,625.5% per year.

How can I get a low APR if I have bad credit?

If you have bad credit, then your options to reduce how much you pay in interest and fees are quite limited.

The first option is to use the eligibility checker that all of the lenders we mentioned above have on their websites. See what you qualify for.

The second option is to get a guarantor. Some lenders who specialise in bad credit accept guarantors, a person who will become responsible for paying back the loan if you can't. This can be a good option if you have a family or close friend with a good credit score and who is willing to guarantee the loan for you.

The third option is to get a secured loan. Most secured bad credit loans use your home as collateral, which means that if you can't pay back the loan, your home could be at risk. These loans often have lower interest rates, but they're only suitable for homeowners.

The fourth and best option, though, is to improve your credit rating.

Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three main credit reference agencies (Experian, Equifax, and TransUnion).

This builds your credit history and helps you improve your credit score. Eventually, a better credit history will increase your approval chances not only for personal loans, but also for other financial products, including insurance, credit cards, and mortgages.