Secured personal loans with bad credit: If you have a poor credit history and are considering a secured personal loan – sometimes referred to as a homeowner loan or second charge mortgage – there are important factors to keep in mind.
In this section, we explain how bad credit can affect your ability to borrow, what lenders typically assess when reviewing an application, and where you can seek expert guidance.
Can you get a secured loan with bad credit?
Yes – it is often possible if you apply through the right lenders. Unlike some other forms of borrowing, secured loans can be easier to obtain with bad credit because you are offering an asset, such as your property, as collateral. This reduces the lender’s risk.
However, not all providers will be prepared to offer competitive rates or flexible terms, so it is important to compare options carefully or seek advice from a specialist adviser.
Bad credit issues you can get approved with
Each lender will have its own criteria for the types of adverse credit it is willing to accept. Below are some examples of issues that can sometimes be overcome:
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Low or limited credit history – Some lenders will consider applications from borrowers with little or no established credit record, or a low credit score.
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High credit utilisation – The proportion of your available credit you are currently using can be a factor, but lenders set their own limits on acceptable levels.
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Missed or late payments – Certain lenders may still approve a secured loan if you have a history of late payments on credit cards, loans or utility bills.
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Defaults – Previous defaults do not automatically rule out approval, although acceptance may depend on how long ago the default occurred.
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County Court Judgments (CCJs) – A secured loan may still be possible if you have CCJs, depending on when they were registered and whether they have been satisfied.
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Individual Voluntary Arrangements (IVAs) – While an IVA can reduce disposable income, some lenders will focus more on the security you provide (e.g. your property) than on income alone.
- Bankruptcy – Although options are very limited, a small number of lenders may consider an application once you have been discharged from bankruptcy, typically after 12 months.
It’s worth keeping in mind this isn’t a definitive list and each lender’s appetite for risk can shift depending on market conditions. So it’s often best to get some expert advice to see exactly what they will or won’t accept at a given time.
Lending criteria for secured loans with bad credit
When applying for a secured personal loan with bad credit, lenders will take several factors into account, including:
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Type and age of credit issue – Not all lenders will accept applicants with adverse credit. The nature of the issue and how long ago it occurred can both influence whether you are approved.
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Collateral – The type and value of the asset you are offering as security will affect your options. It is usually easier to obtain a secured loan against property, although in some cases other assets, such as a vehicle, may be used.
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Loan amount and loan-to-value (LTV) – Lenders typically set maximum LTV ratios, which combine your existing mortgage with the new secured loan. This is often capped around 85%. The limit may be stricter if you have bad credit, although not always.
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Current income – While income is less significant than with unsecured borrowing, some lenders may still impose minimum income requirements, particularly for applicants with a poor credit history.
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Debt-to-income (DTI) ratio – Lenders will calculate your DTI by dividing your monthly debt commitments by your gross monthly income. As a rule of thumb, most prefer this to be below 40%.
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Purpose of the loan – Lenders will want to know how you intend to use the funds. Some specialise in particular areas and may vary their terms accordingly. For example, if the purpose is debt consolidation, certain lenders may be cautious, while others may be willing to proceed.
How to get a homeowner loan with bad credit
Here are some straightforward steps to follow if you want to get a secured loan with bad credit:
1. Gather your details
Before applying, make sure you have all the necessary documentation ready. This typically includes proof of identity, proof of address, and at least three months’ worth of payslips and bank statements. You should also collect information about your credit history and any existing debts, along with key details relating to your property. Having a clear, realistic plan for how you intend to use the secured loan will also strengthen your application.
2. Seek expert advice
Consulting a specialist bad credit adviser can make a significant difference. They will review your credit history, current finances, existing debts, and property details in depth. Based on this assessment, an experienced adviser can explain the options available to you and guide you towards the most suitable lenders for a bad credit secured loan.
3. Apply for the loan
One of the key advantages of working with a broker is their ability to match you with specialist bad credit lenders suited to your particular circumstances. This not only helps maximise the amount you may be able to borrow but also reduces the risk of unnecessary rejections or additional marks appearing on your credit file.
If you want to speak to an experienced broker who specialises in bad credit secured loans, get in touch for a free, no obligation chat.
Bad credit secured loan lenders
Some high street banks, such as NatWest and Santander, may consider secured loan applications where the credit issues are relatively minor. Approval usually depends on the type, age and severity of the adverse credit, and in many cases you must already hold a mortgage with the lender, which can limit your options.
For most borrowers with a poor credit history, specialist bad credit lenders are often a better route. Providers such as United Trust Bank and Together Money tend to be more flexible, particularly if your credit issues have occurred within the last 12 months.
The most effective way to explore all your options is to consult an experienced adviser. They can review your individual circumstances in detail and introduce you to the lenders best suited to your situation and goals.
How much higher will the rates be?
If you apply through mainstream lenders or major banks, you may be offered higher interest rates on a secured loan if you have a poor credit rating. In contrast, specialist bad credit lenders are often more flexible and may not penalise you for certain types of adverse credit.
With these lenders, the value and quality of the asset you are using as security can carry more weight than your credit history. If the rest of your application is strong, it is possible to obtain a competitive rate on a secured personal loan despite having bad credit.
Frequently Asked Questions
Yes – secured loans can sometimes be a useful way to manage bad credit. For example, they may be used to consolidate multiple high-interest debts into a single, more manageable monthly repayment.
That said, each lender has its own criteria, and not all will approve secured loans for debt consolidation where bad credit is involved. Others are more flexible, so it is important to approach the right lender for your circumstances – often with the help of a specialist broker.