Credit Score Basics > How bad credit loans work for the UK Armed Forces

How bad credit loans work for the UK Armed Forces

Wollit Team2 minute read · Updated 30th June 2024

If you’re a member of the UK Armed Forces, getting a loan can be challenging, especially if you have a poor credit history.

However, there are several options available that cater specifically to the needs of military personnel, even if you have bad credit.

Let’s have a look at how bad credit loans work for the Armed Forces in the UK, the benefits they offer, and how to apply for them.

What are bad credit loans for the Armed Forces?

Bad credit loans for the UK Armed Forces are loans meant for personnel, veterans, and also their families who may have a less-than-perfect credit score.

These loans are usually offered by credit unions and specialist lenders who understand the unique circumstances of military life and are willing to consider applications from those with a history of financial difficulties.

What are some of the advantages of loans meant specifically for the Armed Forces?

The loans that are meant to serve the needs of the members of the UK Armed Forces and their families have some unique advantages:

Repayments are taken directly from your Armed Forces pay, making it easier to manage your finances and avoid missed payments.
Bad credit loans for the Armed Forces often offer much lower interest rates compared to traditional "bad credit" lenders, with some starting from as low as 4.5% APR.
Many lenders also do not penalise you for paying off your loan early, and are transparent about their fees and charges.

Which lenders offer credit loans for members of the Armed Forces with bad credit?

There are some specialised lenders who offer loans to Armed Forces personnel, even if they have bad credit:

Forces Finance, a partnership between London Mutual Credit Union and the Ministry of Defence, offers loans at affordable rates from just 4.5% APR. They serve over 33,000 members across the Armed Forces, the NHS, and local governments.
Serve and Protect is another specialised lender that partners with the MOD. They offer loans of up to £25,000 with an APR of 7.9%, and serve not only members of the Armed Forces, but also of the Police and the NHS.
First Defence Finance, a part of the Plane Saver Credit Union, currently serves over 26,000 members and partners with the MOD as well. They offer up to £25,000 and only charge an APR of 7.1%.

All of these are registered non-profit credit unions, which explains why their interest charges are so low – profit is not a priority.

How can I improve my credit score if I’m in the Armed Forces?

Dedicated loans for the Armed Forces can be a valuable financial lifeline for serving personnel, veterans, and their families, even if they have bad credit.

In fact, with competitive interest rates, no early repayment fees, and repayments deducted directly from your salary, these loans offer a much more affordable and convenient alternative to the very high-interest loans that are usually only offered by payday lenders.

However, you need to keep two things in mind:

These credit unions do not offer mortgages.
They also do not offer credit cards.
And most importantly, these loans are only available while you’re in the Armed Forces.

This means that you’ll need a clear plan on building credit for when you’ll be out of the Armed Forces and settling down into civilian life.

One of the best ways to do this is to download a specialised credit-building app like 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 credit reference agencies (Experian, Equifax, and TransUnion).

This directly builds your credit history, the main thing that matters for your credit score. In time, this will make you eligible not only for Armed Forces loans but also the best “civilian” loans like bank accounts with generous overdraft limits, credit cards with rewards, and mortgages with high LTV ratios.