How to avoid bad credit loans

How to avoid bad credit loans
Stacey Corrin

avoid bad credit loans

How to avoid bad credit loans. UK households have never been more indebted. As of 2017, the average household owed a record £12,887 – a figure that doesn’t even account for mortgage debt. It’s clear that for the many UK consumers debt is a very real everyday reality, for whom bad credit loans are often the only solution to short term cash flow problems or emergency situations.

In some instances, there are both strategies to avoid bad credit loans, as well as ensuring that, should you use a bad credit loan, you avoid future use of loans that serve only to worsen your financial situation.  

What is the truth about bad credit loans?

Bad credit loans (in particular payday loans) have been subject to much bad publicity. Following accusations of unfair treatment of customers, the Financial Conduct Authority introduced new guidelines and pay caps that all bad credit loans must adhere to.

These guidelines now mean that bad credit loans needn’t worsen your financial situations, and in fact may be the only solution when emergency funds are sought. When used responsibly, they can bridge a financial shortfall and ultimately leave a positive marker of a debt successfully repaid on your credit file.


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The nature of bad credit loans

Bad credit loans are suited to consumers who have a less than perfect credit file, which could have occurred due to any number of reasons. The Money Charity sheds light on how common a situation this may be. In the UK, the level of unsecured debt stands at £199.7 billion, with the average debt of the UK household equating to £56,731, while the average individual’s debt is £29,698.

Sudden and unavoidable reasons that lead to a bad credit loan include:

  • A fall or loss in income
  • An accident that prevents employment
  • An unexpected outgoing
  • An expensive emergency
  • Divorce
  • Underemployment

Poor financial management reasons that lead to a bad credit loan (and the reasons that can be redressed with proper financial management) include:

  • Fees on late payments
  • Poor budgeting
  • Ignoring your debts
  • Repeatedly using credit to pay off other credit
  • Spending more than you earn month in, month out

Tips for better financial management to avoid bad credit loans

Tips for better financial management to avoid bad credit loans

Get professional help

There are many impartial charities, government bodies and organisations that you can speak to if you’re struggling with your debts. Here are some of the most well-known:

Should you contact an organisation, not on our list, be wary of those with vested interests, such as companies that deal in Individual Voluntary Agreements (IVAs).

These agreements, for those struggling with debts above £12,000, can restrict your right to a debit bank account, affect your credit record further and oblige you to meet budgetary constraints.

Create a budget and stick to it

To achieve better financial management and to avoid bad credit loans, you need to understand exactly how your money is spent. Use the template below to get to grips with your income versus your outgoings.


Wages/salary (partner)£
Money from other people ££


Second mortgage/secured loan£
Ground rent/service charges£
Buildings/contents insurance£
Life insurance/endowment£
Council tax£
TV licence/rental£
Prescriptions/health costs£


Total income  – Total outgoings = £______ for repayments

If your expenditure is more than your income you need to study your outgoings and cut your costs. Ask yourself:

  • Can you switch some of your utilities, your phone or internet to cheaper providers?
  • Can you make simple switches with your grocery shopping to save on regular purchases?
  • Are there purchases considered as luxuries that can be reduced? Such as take aways, days out etc.
  • Can you speak with your lenders to negotiate lower repayments to avoid further fees?

The charities and organisations listed above can provide further advice and tips for cutting corners when financial times are tough.

Gain an understanding of your credit history

Credit Reference Agencies provide free reporting tools for consumers to understand their credit history and what they can do to improve their score. Callcredit offers a tool called Noddle, while Experian offer CreditExpert and Equifax offer ClearScore.

For more guidance on financial management, read our guide on ‘How to Avoid Debt’.

What if all else fails and you cannot avoid bad credit loans?

Most if not all bad credit loan users take out this form of finance as it is the only medium available to them for short term cash. It should also be remembered that completing a loan successfully, with all repayments made on time, can be the first step towards repairing your credit.

However, above all else, you need to use a responsible lender, and in turn, use the bad credit loan responsibly. This means:

  • Ensuring that you can afford the repayments
  • Not borrowing more than you can afford to pay each month with your outgoings considered
  • Meeting your financial obligations for each payment up until the end date
  • Contacting your lender immediately should you be unable to pay an instalment

Having a less than perfect credit history makes each financial choice in the future all the more important to get right. If you’re still wondering whether a bad credit loan is right for you, or you should avoid bad credit loans get in touch with the CashLady team. We can be contacted using the email below, or spoken to via our live chat feature – for fast answers to your questions.

If your loan application is declined, you may be interested in considering loan alternatives.


CashLady Bad Credit Loans

Stacey Corrin

Stacey Corrin

Stacey can be described as a serial blogger having created and maintained many successful blogs on topics ranging from social media and marketing to interior design and self-improvement. Along the way, she developed a great love of writing and graphic design, which caught the attention of the Cash Lady team. Now, Stacey uses her expertise on blogging and Social Media to manage Cash Lady's blog, helping to develop and polish many of the money saving articles and guides you'll find here. She's also Cash Lady's voice on Social Media and is always open for a chat on your favourite platform. Find out more about Stacey on Google+
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