UK consumer lending for people with bad credit histories

Just because you have bad credit doesn't mean you can't borrow money at all. If your credit is bruised, many creditors may still lend to you. You won't get the most favourable terms, but lenders can be more lenient than you think.

A lender can calculate that the odds are in their favour if they lend to you, despite some problems with your credit history. They might calculate the odds of making their money back if they lend to you and decide it is a gamble in their favour.

The ticket is to have an income. If your income is low or erratic and you have had trouble making payments on time before, you might not be able to borrow money at all. However, if you have a regular income - even if it is fairly low - you may be able to borrow money.

Just because the terms you will get with bad credit are not great doesn't mean you will have to agree to abysmal terms.

Don't assume that you will only be offered a small amount of money at an absurdly high-interest rate. You can get ok terms and interest rates with bad credit, just not the same terms/rates as someone with a great credit history.

Are lenders in the UK lenient?

Yes, the UK is a relatively good place to borrow money with bad credit. They let employed people with low credit scores borrow money.

While there are a lot of consequences for failing to pay back debts in the UK, there are also a lot of laws that protect lenders from creditors.

While borrowing money to buy things while you already have bad credit might not be the best idea, many people do it and get away with it.

If your income is higher or your spending is lower than back when you were missing payments, it might be fine for you to borrow money to buy things.

The bank might let you overdraw

Bank overdrafts are one of the simplest and easiest ways to borrow a small amount of money. Everyone without cash savings runs a little short of money once in a while and might need to put their bank balance below zero.

Most banks will let you drain your account a few hundred pounds below zero without charging you much money.

Bank overdraft is safe enough that you can use it to make purchases. If you want to buy something now rather than later, you might overdraw your bank account to get it.

You should keep your bank account above zero most of the time, but overdrawing your bank account is not a big deal. 

Even if you have bad credit, your bank will probably let you use an overdraft. Overdrawing your bank account is mostly harmless. There might be some fees or interest you have to pay, but you can usually overdraw your bank account without affecting your credit score.

Your bank won't even call you or send you an e-mail or letter saying that your bank account is overdrawn. As long as you are still receiving money into your account and using it, they may let you keep your bank account overdrawn for a long time.

Other banks might have limits on how long you can stay negative for, and while the fees are usually small, keeping a bank account overdrawn for a long time isn't free.

As a whole, bank overdraft is one of your best options. It is an easy, hassle-free, and safe way to borrow a small amount of money.

The only disadvantage is that you usually can't borrow very much. Someone with money problems has usually already overdrawn their account and cannot rely on this method.

Payday loans for bad credit

Payday loans are risky and have a bad reputation, but they can still help you out if you need money fast. They allow you to borrow a small amount of money quickly and then pay it back the next time you get paid.

You can't always get payday loans, but you don't need good credit to get them. As long as you have steady employment, you can get payday loans in the UK.

Payday loans are specifically for those with bad credit. They are short-term loans that you are supposed to pay back over a few months. If someone has a job, has to move to a new place, and cannot afford to move, they might get a payday loan to cover it.

Many people also use payday loans for purchases. If you can easily keep your job and make the money back, you can buy new furniture or anything else with a payday loan, without consequences.

Sometimes, you can get a larger, longer-term payday loan. You might borrow up to £10,000 and pay it off over five years. Most loans are much smaller - people borrow £1,000 or even as little as £100.

Payday loans might not be the best idea if you want to borrow money, but it is relatively easy to get them, even if you have bad credit (more info here). 

Other loans for bad credit

Many UK lenders will let either individuals or businesses borrow money even if they have credit troubles. Larger, longer-term loans are great if you can get them. Usually, you can get a much better interest rate than with a credit card.

Credit cards

Companies are willing to give credit cards to people with poor credit histories. Banks and credit card companies often make their money back if they land to people with poor credit but with decent current income.

Companies offer cards with smaller limits and higher interest rates to people with bad credit, but you can still easily get a credit card.

Some deals are worse than others. If you are getting a credit card for purchases rather than for emergency spending, you might not accept the first deal you are offered.

Look at a few different offers because you might get a much better interest rate this way. Read the terms and conditions. A credit card might have a lot of extra fees that make it worse than a card with a somewhat higher interest rate.

Buy now pay later

This is an increasingly popular way to make purchases you can't pay cash for in the UK. Buy now pay later is available to people with bad credit. Sometimes, there is no deposit and no credit check.

Buy now pay later is for people who have credit cards, with money left on their cards. As long as you have a credit card with some credit left on it, you will probably be approved for buy now pay later credit. Some companies will refuse you for your credit score, but fairly bad credit can be good enough.

With buy now pay later, you might simply delay your payment until a time when you will have the money to pay for it. You can also use buy now pay later to split a purchase into a few instalments. You could split it into 3, 6, 12, or even 24 payments.

A lot of the time, buy now pay later is cheap - there might not even be any interest as long as you make all of your payments on time. However, interest rates can be very high sometimes.

If you want to spread your payments out over a long period of time, a 40% interest rate is possible.