Yes, you can usually get a secured loan with bad credit if you own your home with equity. Specialist second charge lenders consider missed payments, settled defaults, CCJs and even a past IVA or debt management plan, because the loan is secured on your property. Expect a lower maximum loan to value than a clean-credit applicant, commonly 70% to 80% combined rather than 85% plus, and a higher rate that reflects how recent and how large the issues are. The more time that has passed and the more equity you hold, the closer you get to mainstream terms.
Most homeowners with bad credit who have equity and can afford the payment will find at least one specialist lender willing to consider them. Recent mortgage arrears are the exception that closes most doors.
- Specialist secured loan lenders build their criteria around adverse credit rather than excluding it.
- Defaults, CCJs, IVAs and bankruptcies stay on your credit file for six years, but their weight fades well before that.
- Maximum combined loan to value is usually lower for adverse credit, often 70% to 80% rather than 85% or more.
- Debts being consolidated are normally treated as cleared in the affordability check, which helps.
- Checking your options will not affect your credit score.
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How lenders typically treat it
| What lenders look at | Typical position |
|---|---|
| Missed payments on cards or loans | Widely considered if more than 6 to 12 months old; recent misses reduce the maximum loan to value. |
| Defaults | Considered by most specialist lenders, especially if settled and over 12 months old. Size matters: small utility or phone defaults are treated more leniently. |
| County court judgments (CCJs) | Considered by many lenders once satisfied and usually over 12 months old; some consider unsatisfied CCJs at lower LTV. |
| IVA or debt management plan | Completed arrangements are considered by many lenders; an active IVA needs the insolvency practitioner's consent, an active DMP is considered by some. |
| Bankruptcy | Considered by a smaller group of lenders after discharge, typically three years or more. |
| Mortgage arrears | The hardest issue. Recent arrears are rarely considered; older, cleared arrears with clean conduct since may be considered at low LTV. |
| Maximum combined LTV | Commonly 70% to 80% for adverse credit, against 85% or more for clean credit. |
| Rate | Higher than prime secured loan rates, tiered by how recent and how serious the issues are. |
A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.
What counts as bad credit to a secured loan lender?
Lenders do not work from a single score. They look at specific events on your credit file and ask three questions about each: how long ago it happened, how much money was involved, and how you have managed credit since. The events that matter are late or missed payments, defaults (an account closed because payments stopped), county court judgments, an individual voluntary arrangement, a debt management plan, bankruptcy and mortgage arrears.
Each stays on your file for six years from the date it was registered, but its effect on a lending decision reduces long before it drops off. A default from four years ago that has been settled, followed by clean payments, is a very different proposition from three missed payments in the last quarter. Secured loan lenders formalise this with tiers: the older and smaller the issue, the better the tier, the lower the rate and the higher the loan to value they will allow.
The reason the secured loan market can take this view at all is the security. Because the loan is backed by equity in your home, the lender's risk is lower than an unsecured lender's, so it can consider credit histories that a personal loan provider would decline outright. That is the whole basis of the specialist second charge market, and it is why "bad credit" and "secured loan" so often appear in the same search.
How much can you borrow with bad credit?
Less than a clean-credit applicant against the same property, because lenders cap the combined loan to value lower. Combined LTV is your existing mortgage plus the new secured loan, as a share of your home's value. A clean-credit applicant might be allowed 85% or more; with adverse credit the cap is commonly 70% to 80%, and lower again for recent or serious issues.
Take a home worth £300,000 with a £180,000 mortgage. At an 85% cap the lender could allow total borrowing of £255,000, leaving £75,000 available. At a 75% cap the total falls to £225,000 and the available amount to £45,000. Equity, in other words, is the lever that offsets credit history: the more you hold, the more forgiving a lender can be.
Affordability applies on top. The lender checks that the new payment fits alongside your mortgage and other commitments on your current income, usually removing the debts you are consolidating from the calculation because they will be repaid on completion. Our guide to how much you can borrow works through the calculation in more detail.
What does a bad credit secured loan cost?
More than a prime secured loan, because the lender is pricing for higher risk. How much more depends on the tier: older, settled, smaller issues sit close to prime pricing; recent or unsettled issues sit well above it. Fees are broadly the same as any secured loan, with a lender arrangement fee, a valuation, any broker fee and a small legal or administration charge, usually added to the loan.
Even at a higher rate, consolidating with a secured loan can reduce your monthly outgoings substantially, because credit card and unsecured loan rates are usually higher still. The example below uses the fixed illustrative secured loan rate used across this site. A homeowner with recent adverse credit may well be offered a higher rate than this; the adviser will show you the actual figure before you decide anything.
Illustrative rates: The rates in this example are fictional and used only to show how the numbers work. They are not an offer. Your actual rate may be lower or higher and will depend on your circumstances, your property and the lender. Consolidating debt over a longer term can mean you pay more interest overall, even if your monthly payment falls.
| Position | Amount |
|---|---|
| Current monthly payments (credit cards £12,000 at 24.9% and a personal loan £8,000 at 12.9%) | £532/month |
| New secured loan payment (£20,000 at 7.9% over 15 years) | £190/month |
| Total repayable over the 15-year term | £34,196 |
The monthly outgoing on those debts falls from £532 to £190 in the example, while the total repaid over 15 years is higher than the £20,000 borrowed because it runs for longer than the original debts would have. With a higher adverse credit rate the monthly saving is smaller and the total higher, which is exactly why seeing your real figures matters more when your credit is imperfect.
Which lenders offer secured loans for bad credit?
The specialist second charge lenders, rather than high street banks. Names such as Pepper Money, Norton Home Loans, Evolution Money, Together, United Trust Bank, Equifinance and Spring Finance publish criteria that explicitly cover defaults, CCJs, arrangements and, at some lenders, discharged bankruptcy, each with its own timescales and loan to value limits. Our lender criteria database sets those policies out side by side with the date we last checked them.
Two practical points follow from that. First, most of these lenders only accept applications through a broker, so the route to them is an adviser rather than a website. Second, because each lender draws its tiers differently, a decline from one is not a decline from the market; a broker's job is to match the specific events on your file to the lender whose criteria fit.
What happens if you miss payments on a bad credit secured loan?
The same thing that happens with any secured borrowing, and it is the most important paragraph on this page. The loan is secured on your home. If you fall behind, the lender can add charges, report the arrears to the credit agencies, and, if the arrears continue, apply to the court for possession. A secured loan sits behind your mortgage in the queue, but the consequence of persistent non-payment is the same: your home may be repossessed if you do not keep up the repayments.
That is why the affordability assessment exists, and why an honest one matters more when your credit history already shows strain. If the new payment would only work with nothing going wrong, the right answer is not a secured loan at a higher rate, it is free debt advice. A good adviser will say so.
What improves your chances
- Get your credit reports from Experian, Equifax and TransUnion and correct any errors before applying.
- Bring any account that is behind up to date, and keep every payment on time for as long as possible first.
- Settle or partially settle CCJs and defaults where you can; a satisfied judgment is treated far more favourably.
- Avoid new credit applications in the months before, since each one is a search on your file.
- Have the story ready: a default caused by redundancy or illness, since resolved, reads differently from an unexplained pattern.
- Be completely open with the adviser. Matching you to the right lender depends on an accurate picture of your file.
Alternatives worth considering
A secured loan is not the only route, and with bad credit it is worth ruling the others in or out first. Some adverse credit remortgage lenders will consider consolidation if your mortgage deal has ended, usually at a lower maximum loan to value; our remortgage with bad credit page covers what is realistic. For smaller amounts, a guarantor loan or a specialist unsecured lender may be possible without putting your home at risk. And if the debt is unmanageable rather than just expensive, a debt management plan or an IVA arranged through a free debt charity may be the more honest answer; our comparison with an IVA sets out the differences.
Worried about debt? Get free advice first
If you're struggling, it's worth speaking to a free, impartial debt advice service before you borrow more. They don't sell anything and won't judge your situation.
- MoneyHelper: Free, impartial debt advice backed by government
- StepChange: The UK's largest free debt charity
- Citizens Advice: Free, confidential advice on debt and money
Checking your options with Equiclear will not affect your credit score.
Frequently asked questions
Can I get a secured loan with bad credit?
Usually, yes, if you own your home with equity and can afford the payment. Specialist second charge lenders consider missed payments, defaults, CCJs and past IVAs, at a lower maximum loan to value and a higher rate than clean-credit applicants.
How bad can my credit be and still get a secured loan?
Settled defaults and satisfied CCJs over 12 months old are widely considered. Recent or unsatisfied issues narrow the field and reduce the loan to value. Recent mortgage arrears are the one thing most lenders will not lend around.
Will a secured loan improve my credit score?
It can over time. Clearing cards and loans reduces your credit utilisation, and a new account paid on time every month builds positive history. A missed secured loan payment does the opposite, and is recorded like any other arrears.
Do bad credit secured loans have higher rates?
Yes. Lenders price by tier, so the rate reflects how recent and how serious the issues are. It is still usually below credit card and unsecured loan rates, which is why consolidation can reduce monthly outgoings even at an adverse credit rate.
Can I get a secured loan with a CCJ?
Many specialist lenders consider CCJs, particularly once satisfied and more than a year old. Our secured loans with a CCJ page goes into the detail.
Can I get a secured loan while in an IVA?
Only with your insolvency practitioner's consent, and only from a small group of lenders. After the IVA has completed, more lenders will consider you. See our secured loans and IVAs page.
Does checking my options affect my credit score?
No. Checking your options will not affect your credit score. Equiclear does not search your credit file, and any check the broker makes at this stage is a soft search, which other lenders cannot see. A full application later on is recorded on your file in the normal way.