Personal Loans for Bad Credit: Your 2025 UK Guide to Getting Approved

A well-managed bad credit loan can help rebuild your credit score and open doors to better financial opportunities later.

Take Updraft as an example. If traditional banks have turned you down, Updraft offers personal loans from £1,000 to £20,000 with repayment terms of 1 to 5 years. These unsecured loans provide financial flexibility without needing collateral. While the costs are higher than standard loans —  they can be a lifeline when used wisely (see representative example at bottom of article)

🔎 Understanding Bad Credit and Its Impact

Credit scores show lenders how trustworthy you are. Here’s how UK agencies score you:

• Experian: Poor = 561-720, Very Poor = below 561 (out of 999)
  
• Equifax: Poor = 280-379, Very Poor = below 280 (out of 1000)
  
• TransUnion: Poor = below 566 (out of 710)

👉 You can check your credit score for free by installing the Updraft app.

Your credit might be considered bad if you have:

• Late or missed payments
• Defaults on loans or credit cards
  
• County Court Judgments (CCJs)
  
• Bankruptcy or Individual Voluntary Arrangements (IVAs)
• Too many hard credit checks in a short time
• Limited or no credit history

🪙 How Bad Credit Affects Your Loan Options

• Higher Interest Rates: Bad credit often leads to significantly higher rates.
  
• Lower Borrowing Limits: You may be offered less money.
  
• Shorter Repayment Terms: Payments could be larger.
  
• Need for a Guarantor or Security: Some lenders require added assurance.
  
• Fewer Product Choices: Options may be limited to specialised lenders.

Homeowners and those with guarantors generally have better chances of approval.

📅 Preparing to Apply for a Personal Loan

1. Check Your Credit Report Access your FREE TransUnion credit report through the Updraft app. Spot and correct any errors like wrong late payments or accounts you don’t recognise.
2. Set a Realistic Borrowing Goal Borrow only what you truly need. Use loan calculators to find a balance between affordable repayments and the overall cost.
3. Understand Your Repayment Capacity Create a budget to know what you can afford monthly. Your debt-to-income (DTI) ratio is key: lower is better.
4. Consider Using a Guarantor A family member or friend with good credit could strengthen your application.

📈 Exploring Personal Loan Options for Bad Credit

💼 What Updraft Offers

Updraft is a FCA regulated UK-based app that helps you manage borrowing and reduce debt with smart Open Banking insights. We offer loans from £1,000 to £20,000 over 1-5 years, at a representative APR of 25.9%. There’s no early repayment penalty, making it easier to clear your debt faster. Updraft’s solution helps you replace expensive credit card debts and overdrafts with a single, manageable payment.

💼 Benefits of Unsecured Personal Loans for Bad Credit

• No collateral needed
• Opportunity to improve your credit score with on-time payments
• Protection of personal assets

🧹 Direct Lender vs Broker

• Direct Lender: You deal with the lender directly (like Updraft). The process is simpler and often cheaper.
  
• Broker: They connect you to lenders, which might involve additional fees or lead to your information being shared with multiple parties.

🔄 How to Improve Your Approval Odds

• Reduce Existing Debts: Pay down what you owe before applying.
• Choose the Right Loan Type: Consider secured or guarantor loans if suitable.
• Avoid Multiple Applications: Space out credit applications by at least three months.

📆 Managing Your Loan Responsibly After Approval

• Set Up Direct Debits: Ensure on-time payments automatically.
• Monitor Your Credit Score: Watch for improvements and errors.
• Plan for Early Repayment: Updraft allows early repayment without fees, saving you money.