Last reviewed on 15th November 2023 by Martin Alexander (Mortgage Advisor)

Getting a loan is challenging when you have bad credit. However, secured loans can be easier, as you’re giving lenders security for the loan. While this minimises a lender’s risk, it increases yours.

This guide will cover everything you need to know about getting a secured loan with bad credit.

Can I get a secured loan with bad credit?

You can get a secured loan with bad credit, and it’s often easier than other loan types. This is because you’d be using your home as security, which protects lenders if the loan isn’t repaid.

With credit issues, you’ll likely pay higher rates and fees to get a secured loan. Furthermore, you’re taking a huge risk by using your home as security for a loan.

Which credit issues can I get a secured loan with?

Secured loans are possible with the following credit issues:

• Late payments
• Defaults
• CCJs
• IVAs
• Debt management plans
• Bankruptcy
• Repossession

Credit issues recorded in the past 12 months will make it more difficult to get a secure loan.

How do lenders assess secured loans with bad credit?

If you have bad credit, lenders will assess your loan application using the following factors:

• Your property value
• The amount of equity you have
• Details of any other secured loans on your home
• Your income and outgoings
• Whether the loan is to be secured on a residential or buy to let property
• The severity of your credit issues and when they took place

How much can I borrow on a secured loan with a bad credit score?

The most significant factor in the amount you can borrow will depend on the equity in your property and not just your credit history.

You can’t borrow more than the equity you have in your home. Lenders need to be sure that your property has enough equity to secure a loan against it.

If you already have a mortgage, your existing lender has a legal right to any capital before other lenders. For this reason, lenders that offer secured loans need to check that a loan is viable by assessing the amount of equity you have.

Your income will also be a factor in how much you can borrow. However, it’s still limited to the equity you have in your home.

What are the pros and cons of a secured loan with poor credit?

You’ll need to consider several factors before taking a secured loan.

Alternatives to secured loans if you have bad credit

Before you apply for a secured loan, there are alternatives to consider.

Remortgaging

It may be easier to remortgage with bad credit rather than get a secured loan. The only downside is that the rates offered may be higher than your current mortgage.

Read more: How to remortgage with bad credit.

Credit cards

Borrowing on a credit card can be cheaper if you repay your monthly balance. Doing so can also help your credit score.

On the other hand, failing to repay your credit card can result in very high fees and cause your credit score to fall further.

Savings

You keep the savings you have as a safety net. However, using savings can be much cheaper overall, as you won’t have a loan to repay.

The downside to using savings is that you won’t have any emergency funds. Savings can be ideal for unexpected costs and help with monthly cash flow.

FAQs for bad credit secured loans