Can I get a payday loan with bad credit?

When used responsibly, payday loans can help provide access to quick cash, allowing you to cover unexpected expenses without delay. But can you get a payday loan with bad credit? And if so, is it the right option for you?

In this guide, we explore the eligibility criteria surrounding payday loans, including how your credit score can impact your chances of approval. We also share some helpful tips for boosting your credit score over time.

In this guide: 

• Can I get a payday loan with bad credit? 
• What is a bad credit loan? 
• How to get a payday loan with bad credit 
• Tips for improving your credit score
• Where can I get further support?

Can I get a payday loan with bad credit?

Having a bad credit score doesn’t automatically stop you from getting a payday loan, but it can affect whether you’re approved, as well as the terms you may be offered.

Lenders in the UK must be authorised by the Financial Conduct Authority (FCA), which outlines lending practices. This means they can only lend money to people who meet specific criteria, including:

• Being 18 or over
• Living in the UK
• Having a valid UK bank account

On top of this, lenders will also assess your creditworthiness, or in other words, how reliable you are at handling and repaying credit. A credit check is carried out to ensure you don’t have a history of serious financial difficulties,  and that you’re not taking on more debt than you can manage.

Many short-term lenders are willing to consider applications from those with less-than-ideal credit histories, provided they can demonstrate affordability. If approved, you might be offered smaller loan amounts or higher interest rates to lessen the risk to the lender.

What is a bad credit loan?

A bad credit loan is designed for people with poor or limited credit histories who might struggle to be approved for traditional credit. Payday loans are one example, but other types include:

• Short-term instalment loans: These can be repaid over a few months in fixed amounts.
• Guarantor loans: Where someone else with a good credit score agrees to make the repayments if you can’t.
• Secured loans: Typically backed by an asset like a car or property.

Each loan type comes with its own advantages and risks, so it’s important to carefully consider what’s best suited to you.

Potential benefits of payday loans

When used responsibly, bad credit payday loans can help offer short-term financial help. They provide fast access to funds, with some lenders even offering same-day or next-day approval.

With regular repayments, they can also provide an opportunity for you to work towards rebuilding your score. This is because borrowing and repaying responsibly can help signal to future lenders that you can be trusted with credit.

Payday loan considerations

While you might be accepted for a payday loan, this doesn’t necessarily mean it’s the right option for you.

With payday loans, interest rates are typically higher than other forms of borrowing, and if repayments are missed, costs can quickly add up. It’s important to always check the total repayment amount and make sure that this fits comfortably into your budget.

How to get a payday loan with bad credit

Wondering how to get a payday loan with bad credit in the UK? Well, if you’ve weighed up your options and you’re confident that it’s the right route for you, here’s how to improve your chances:

• Only borrow what you need: Smaller loan amounts are easier to manage and therefore more likely to be approved.
• Show evidence of affordability: Lenders will be keen to see proof of income to confirm you’ll be able to meet the repayments.
• Avoid multiple applications in a short space of time: Submitting several applications can negatively impact your score and reduce your chances of approval.

Top tips for improving your credit score

If your credit score is currently limiting your options, you can take small steps to improve it over time. With this in mind, here are some tips for working towards a good credit score:

1. Register on the electoral roll: Being registered on the electoral roll helps lenders verify your identity.
2. Pay off outstanding balances: Before applying for new credit, make sure any existing outstanding balances are cleared.
3. Make all repayments on time: Missed payments can negatively impact your score, so you’ll need to stay on top of things with reminders and direct debits.
4. Check for errors: It’s equally important to thoroughly check your report for errors or fraudulent activity. Review your file with each of the main credit reference agencies (Experian, Equifax, and TransUnion), then report any mistakes.

While you won’t notice significant changes overnight, your score should improve with steady, responsible habits. And if you’re looking for more tips, our full guide on how to improve your credit rating is filled with everything you’ll need.

Where can I get further support?

If you’re struggling with debt or are looking for advice, there’s always support available to help you through it. Contact one of the following third-party support charities and organisations for guidance:

• MoneyHelper: A government-backed service offering guidance on money management, budgeting, pensions, and debt.
• StepChange: A UK charity offering personalised debt solutions and advice.
• Citizens Advice: Provides free help with debt, housing, employment, benefits and more.

Discover more helpful resources

While it’s possible to get a payday loan with bad credit, it’s important to weigh up the pros and cons carefully. Before applying, make sure to explore all of your options, understand the full costs of the loan, and don’t be afraid to ask for advice if you’re ever unsure.

For more tips and insights, why not head over to the Moneyboat blog? There you can read about open banking and payday loans or explore some payday loan alternatives to help you stay informed.