Koyo Loans
Apply now

Where to get a small personal loan with bad credit?

Written byKoyo Loans
First published9th November 2022
  • Introduction
  • Where to get a small personal loan with bad credit?
  • Are personal loans taxable?
  • Does refinancing a personal loan hurt your credit?
  • What is a finance charge on a personal loan?
  • Does a personal loan reduce credit score?
  • What is the standard rate of interest on a personal loan?
  • What’s a good rate for a personal loan?
  • Conclusion

In 30 seconds…

When you’re applying for a personal loan, it’s always important to do your research. Personal loans are available to people with contrasting credit histories, but the APR offered will depend on the strength of your credit score. Borrowers with higher credit scores will receive lower interest rates, and the converse is true. The APR encompasses all charges and interest payments and is indicative of how much it will cost you to borrow money.


When you’re applying for a personal loan, there’s a lot to consider. After all, there are plenty of different credit options out there, so it’s always crucial to ensure that a personal loan is right for your unique financial circumstances. With that in mind, we answer some key questions relating to the structure and use of financial loans, to give you a much clearer idea of whether this form of credit is ideal for you.

Where to get a small personal loan with bad credit?

If you have a poor credit score, applying for loans can be tricky, but it’s not impossible. There are several lenders that specialise in providing loans to people with bad credit, but they are often characterised by extremely high-interest rates.

For instance, payday loans are available to people with bad credit, but they come with astronomical interest rates – the average APR of payday loans in the UK is 1500%. As such, they’re not a viable loan option for most people, and they don’t do your credit file any good in the long run.

Another option is to look for a personal loan from an Open Banking lender, such as Koyo Loans. Rather than relying solely on your credit score, Open Banking lenders fairly consider your current financial circumstances, which may improve your chances of approval. Use our loan calculator today to find out how much you could potentially borrow and what the interest rate could be.

Are personal loans taxable?

In most cases, personal loans aren’t taxable. This is because they’re not regarded as income by HMRC, and you’re not required to disclose details of any personal loans that you have on your annual tax return.

The reason why personal loans aren’t taxable is that you have to pay the money back. When you earn a salary or make money on your investments, you keep the money for yourself, which is why it’s taxed. So, given that you’re required to pay a personal loan back, you aren’t taxed on it as income.

A personal loan isn’t taxable, whether it’s a secured or unsecured loan, so you don’t need to worry about which type of personal loan you’ve applied for. As is the case with any issues regarding your tax return, you should consult a qualified accountant if you’re worried about what you are required to disclose on your return.

Does refinancing a personal loan hurt your credit?

Refinancing a personal loan might lead to a minor, short-term drop in your credit score. This is because the process requires you to take out a new loan to pay off your current loan, which could negatively affect your credit rating in the short term.

However, refinancing a personal loan could help you in the long term, as it can lower your monthly repayments, save you money on interest, and make it much easier to manage your finances. This results in an improvement in your financial health overall, which is good news for your credit score.

Another thing to note is that if you regularly make your loan repayments, you’re unlikely to see a significant drop in your credit rating when you refinance your personal loan, so it’s nothing to be too concerned about. For most people, refinancing personal loans is an effective way to improve your financial management. We always recommended that you think carefully about any refinance options and make sure it’s right for your personal circumstances.

What is a finance charge on a personal loan?

A finance charge is essentially the cost of borrowing money. On a personal loan, the finance charge may encompass interest and other associated fees. It is usually calculated over the entire life of the personal loan.

Sometimes the finance charge is expressed as a percentage, while other times it is given as a flat fee. Understanding finance fees is important, as you need to be mindful of the actual cost of borrowing money. Some people simply look at the interest rate of a loan but fail to account for the various other charges stipulated by the lender.

If you can’t see the finance charge expressed by a lender on its website, contact them directly and ask them how much it will cost to borrow money from them. Online lenders regulated by the FCA are required to provide you with this information, and it’s vitally important you know what you’re getting yourself in for before agreeing to borrow money.

Does a personal loan reduce credit score?

Depending on how you manage them, personal loans can help or hinder your credit score. If you’re timely and consistent with your repayments, a personal loan will help you build a payment history, which can increase your credit score.

However, if you regularly miss repayments on your loan, your credit score will be negatively affected. You should also be mindful that when you apply for a personal loan, lenders carry out a hard inquiry into your credit file. This has a negative impact on your credit score, but it typically only lasts a few months. But performing several hard inquiries in a short space of time is damaging to your credit file, so be mindful of this when researching your loan options.

Ultimately, the practice of applying for a personal loan isn’t necessarily good or bad for your credit score. While the hard inquiry will result in a short term dip in your score, you can build your score back up by consistently meeting the stipulated repayments on your loan. So, provided you take out a personal loan that you can afford to repay, it shouldn’t negatively affect your credit score over the long run.

What is the standard rate of interest on a personal loan?

According to data from Experian, the national average interest on a personal loan is 9.41%. However, you are likely to be offered a rate of interest between 6% and 36% on a personal loan, and, for many lenders, it largely depends on your credit history.

The majority of lenders use your credit score to determine the interest rate that you will be required to pay on a personal loan. Borrowers with higher scores issued by the UK’s three credit bureaus – Equifax, Experian, and TransUnion – are more likely to receive lower interest rates, while borrowers with fair or poor credit scores will be subjected to higher interest rates.

This is because higher credit scores correlate to less risk in the eyes of lenders. If you have a proven track record of paying back money that you have borrowed, then you’re less likely to default on your new personal loan. This is why lenders are more likely to offer you a better rate of interest over the course of your personal loan, so it certainly pays to keep on top of your repayments. Despite this, some online lenders, such as Koyo Loans, also use Open Banking data to fairly assess your current financial situation, on top of a credit score. 24.9% APR Representative.

What’s a good rate for a personal loan?

Given that the national average for interest on a personal loan currently sits at 9.41%, it’s fair to say that a good interest rate for a personal loan is anything below this figure. However, you should bear in mind that most lenders detail their rates as an APR – annual percentage rating – so it’s important to consider more than just the stipulated rate of interest.

APR is an indication of the total interest payable, plus all other fees associated with borrowing money. Many lenders display a representative APR, as it is subject to change based upon your credit history and financial circumstances.

At Koyo Loans, we provide competitive personal loans with a representative APR of 24.9%. You can also use our loan calculator to find out how much you can borrow and how long you have to pay it back. Our goal is to help borrowers access credit quickly and fairly, and we typically make a decision on your eligibility for credit within one working day. Once approved, the funds will be in your account within 48 hours of the submission of your application.


When you’re looking to borrow money, there’s plenty that you need to get your head around. Although personal loans are a straightforward method of borrowing money, you still need to ensure you know what you’re signing up for.

Koyo Loans is the trading name of BETR Technology Ltd. Company No. 11483187. Registered Office: Huckletree Soho, Ingestre Court, Ingestre Place, London, W1f 0JL

Key Takeaways

While it’s possible to apply for a personal loan if you have a poor credit score, you will probably be offered a loan with high-interest rates. Therefore, it’s a good idea to work on your credit score before submitting a personal loan application, as you want to be eligible for a reasonable APR. The act of applying for a personal loan is likely to cause your score to dip slightly in the short term, but it will pick up again if you make your repayments on time.

Most borrowers will be offered a rate of interest between 6% and 36% on a personal loan, and the rate that you’re offered will predominantly be determined by your credit score. This is why it’s so crucial to work on your score before applying for a loan.

Ultimately, your credit history and score will determine your ability to borrow money. Although you might be offered a personal loan with a poor credit score, it will likely come with a high rate of interest, making it expensive for you to borrow money over the period of your loan.

Related Articles