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How It Works

A clear, responsible overview of how bad credit loan applications are assessed

Applying for a loan when you have bad credit can feel uncertain. Our aim is to explain the process clearly and calmly, so you know what to expect before deciding whether to proceed.

This page explains:

  • what happens when you apply
  • how affordability and credit checks work
  • why applications may be approved or declined
  • how customer protection is built into the process

For full details on eligibility, costs, and risks, please also see our main page on bad credit loans in the UK.

Step 1: You provide your details

If you choose to apply, you’ll be asked to provide information about:

  • your identity and contact details
  • your income and essential living costs
  • existing financial commitments

This information is used to understand whether lending may be affordable and appropriate.

Providing accurate information is important. Decisions are based on what you tell us, alongside
verification checks.

Step 2: Affordability and creditworthiness are assessed

UK lending rules require lenders to assess whether credit can be repaid without causing financial harm.

This assessment may include:

  • reviewing income and expenditure
  • checking existing credit commitments
  • using information from credit reference agencies
  • verifying details where needed

Having bad credit does not automatically result in a decline. However, affordability always comes first.

Step 3: Credit checks are carried out proportionately

The Financial Conduct Authority does not require lenders to run a hard credit check at the start of every application.
Instead, lenders must carry out a reasonable and proportionate assessment, as set out in FCA CONC 5.2A.

In practice:

  • initial checks focus on eligibility and affordability
  • a hard credit search is only used if needed to complete a formal application
  • we aim to avoid unnecessary impact on your credit file

You will be informed before any hard credit search is carried out.

You can read the FCA guidance here: https://www.handbook.fca.org.uk/handbook/CONC/5/2A.html

Step 4: You receive a clear outcome

After assessment, one of the following will happen:

If we can make an offer

  • the loan terms are shown clearly
  • you can review costs, repayments, and conditions
  • you decide whether to proceed

There is no obligation to accept an offer.

If we cannot make an offer

  • this does not mean you have done anything wrong
  • borrowing may not be affordable in your circumstances
  • where appropriate, and only with your consent, we may offer the option to explore alternatives through trusted,
    FCA-authorised partners

This does not guarantee approval and does not bypass affordability checks.

Step 5: If you accept an offer

If you decide to proceed:

  • you review the loan agreement carefully
  • the agreement is signed electronically
  • funds are sent once all checks are complete

Timescales vary depending on verification requirements and your bank.

Repayments and early settlement

If a loan is taken:

  • repayments are made according to the agreed schedule
  • early repayment is allowed and can reduce interest costs
  • missed payments can lead to additional charges and financial difficulty

Borrowing should only be undertaken if repayments are manageable for the full term.

When applying may not be the right choice

A loan may not be suitable if:

  • repayments would leave you short for essential living costs
  • you are already struggling with existing debts
  • borrowing would be used to cover ongoing financial shortfalls

In these situations, free debt advice may be a safer first step.

Support and customer protection

As an FCA-regulated lender, we are required to:

  • treat customers fairly
  • assess affordability responsibly
  • provide clear information about risks and costs
  • support customers who may be vulnerable

If you experience financial difficulty, help is available from independent organisations such as
moneyhelper.org.uk.

Learn more before deciding

Before applying, we encourage you to review our main page on bad credit loans in the UK, which explains:

  • who these loans are for
  • typical costs and repayment structures
  • credit checks and your credit file
  • risks, downsides, and alternatives

Taking time to understand your options is part of making a responsible decision.

Important reminder: Late repayment can cause serious money problems. For help, go to moneyhelper.org.uk.