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Have you been turned down for a loan? Can't get a credit card? Finding it difficult to change energy suppliers? It may well be you have a poor credit history.
A poor credit history or, to put it another way, a low credit rating can often prevent you from getting loans from high street banks or building societies. If this is the case, you might feel your only option is a bad credit loan.
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Why do people need bad credit loans?
If you can’t get a loan or any other type of credit from high street lenders, it can make things very difficult when an emergency arises. What do you do if your car fails its MOT and you can't get to work? You’re in the catch-22 situation of not being able to afford the repairs, but not being able to get to work to earn the money to pay for them.
What happens if your pet needs emergency treatment, but you don't have any insurance or spare cash in the bank? Or you might receive an unexpected bill you haven’t budgeted for and it needs to be paid straight away.
It’s situations like this that prompt people to consider bad credit loans, also referred to as poor credit loans. This type of finance is designed for anyone facing an emergency, but who is unable to obtain credit from mainstream lenders due to poor credit history.
Why is it difficult to get a loan with bad credit history?
If you’ve found it difficult to get credit, whether it’s a loan, a credit card or even a phone contract, it’s highly likely you have a low credit rating.
When you apply for credit from a bank or similar provider, the lender will use your credit history to calculate the risk of granting you credit. If the risk is too high or, in other words, they think there’s a good chance you won’t be able to keep up with the repayments, your loan application will be refused.
Lenders base their decisions on the contents of your credit file, which they request from one of the UK’s three credit reference agencies.
Although the lender will take many factors into account while making their decision, the most influential will be your credit history and current credit score. A poor credit history or low credit score will make it extremely unlikely for your application to be approved, although every lender differs in terms of the criteria they use.
Do Satsuma offer bad or poor credit loans?
Yes, we do in the sense we provide loans for people with poor credit. However, unlike many lenders, we don't charge a premium or add extra fees to our loans.
Unlike high street lenders, the most important criteria we consider while looking at a loan application is the customer’s ability to afford the repayments. It doesn’t help either side to burden a customer with a debt they can't afford.
Bad credit loans do get poor press, but this is usually because of the difficulties people get into after taking a loan that is beyond their means to repay.
Satsuma bad credit loans are an affordable alternative to other high-cost credit and applications will be considered even if you have a poor credit history.
What is a bad credit history and why do I have one?
Having a poor credit history simply means that, at some point in the past, you’ve had difficulties repaying a loan, credit card or other form of credit. Perhaps you missed some car repayments or couldn't manage the water bill, only to wind up with a county court judgement (CCJ). It could even be that you’ve made one too many applications for credit in the past, which can raise red flags for lenders.
All the details of your credit history, for better or worse, are held in your credit file.
What is a credit file?
When a lender receives an application for a loan, they request a copy of the borrower’s credit file from one or more of the UK’s credit reference agencies. You may have heard of Experian; CallCredit and Equifax also compile their own reports.
Though each report may differ slightly, they each contain personal information, such as your date of birth and previous addresses, as well as a record of all the credit cards and loans you’ve had. The file also contains details of your repayment history, including any payments you’ve missed, along with other financial information, such as CCJs. All this data is aggregated into a credit score.
What is a credit score?
Your credit score is the rating used to determine whether you’re a good or bad risk when it comes to credit. What you may not realise is just how important your credit score can be to your everyday life.
Not only will it determine whether you can get a loan, it can influence whether you’re able to rent a new home, which energy company you’re able to use and even whether you’re able to get yourself the latest iPhone.
Your credit score is calculated by the credit reference agencies mentioned earlier and the higher it is, the better. Unfortunately, there’s no set formula you can use to calculate your own score, though it is easy to make certain assumptions.
If you make regular payments on all your debt, it’s fair to assume your credit score will be reasonably high. However, if you regularly miss payments and have county court judgements against you, your score is likely to be low.
Fortunately, there is no need to guess your credit score as it can easily be checked by requesting a copy of your credit file.
How to check your credit score and credit history
We’re all entitled to see our credit file and you don’t necessarily have to pay to do so.
You can go online and check your credit report whenever you wish. There are several free websites that allow you to access parts of your report. You may have seen them advertised on TV.
However, to see your full file, you must open an account with one of the credit reference agencies. Each has their own payment plan, but Experian offers a free service where you can access your credit score and it’s updated every month.
If you don't want to sign up to Experian's subscription service, or those offered by CallCredit and Equifax, you can obtain a copy of your Statutory Credit Report from each credit reference agency for a fixed fee of £2.
The report you receive shows your full credit history, along with your public information, such as your addresses. The data in your statutory report is exactly the same as the data you’d see if you signed up for Experian's monthly service. You can order it online or by post.
It is highly recommended you order a copy of your credit file from at least one of the three credit reference agencies. When you receive the report, don't just look at the credit score figure. You should also check the report carefully for any errors, such as missing payments or settled debts that are showing as being in arrears.
What do I do if I find an error in my credit report?
Mistakes are rare but, when they do happen, they can have far-reaching consequences. An error, such as a missing payment, can make a big difference to your credit score. It could even be the reason you’ve been denied credit in the past.
If you do find an error in your credit report, you should contact the original lender and ask them to amend the information they’ve sent to the credit reference agency. If they don't respond, you should then contact the agency directly and they’ll conduct their own investigation.
Even if you have a good credit history, you should regularly check your credit file for mistakes; especially in this age of identity theft and online fraud. You may be totally unaware that criminals have used your identity to obtain credit until you check your report.
In any event, it is good practice to monitor your credit score and ensure your repayments are being logged correctly.
All well and good, but I haven't had credit in the past and I still can't get a loan
It often comes as an unpleasant surprise to people when they learn that a lack of credit history can almost be as bad as a poor credit history. This is because you have what is known as a ‘thin credit file’.
What is a thin credit file?
When someone doesn’t have much in the way of credit history, they are said to have a thin credit file. This lack of credit activity can result in a low credit score.
Lenders want to see a history of debt being taken out and being consistently repaid. This reassures them you’re likely to repay their money as you have a good record of doing so in the past.
If they see no record of past repayments, they have no data on which to make a decision. Therefore, they are likely to turn down your application.
Even though you may have paid rent for many years, or saved up and paid cash for big ticket items like a car, this will not show on your credit report.
Does my low credit score mean I can't get a loan?
Not necessarily. There are many companies offering bad credit loans, but they are often expensive and usually come with very high fees. You should avoid these types of lenders if you want to avoid paying back significantly more than you’ve borrowed.
There are other options. Even if you have a poor credit history, you still might be able to get a loan from Satsuma.
Are bad credit cards the same as bad credit loans?
You may have seen adverts for credit cards you can apply for whatever your credit history.
These cards are different from those issued by traditional lenders like high street banks in three ways:
- They have a lower barrier to entry
- They usually have a lower borrowing limit
- They charge higher interest rates
If you’re struggling to obtain credit because of poor credit history, these cards can seem like a quick way to access funds. However, a credit card is very different to a loan.
With a loan, you receive a single lump sum that needs to be repaid in full, either as a single payment (in the case of a payday loan) or over a fixed period in weekly or, more often, monthly instalments. The debt is cleared when the final instalment is repaid.
A credit card, on the other hand, can be borrowed against as often as you like, provided you stay within your credit limit. When you make your monthly payment, the amount (minus the interest charged) is deducted from your balance and is available to spend again.
This effectively makes credit card debt open-ended, meaning it can take years to repay. The rate of interest when viewed across the entire life of the card can be significantly more than you would pay had you taken out and repaid a short term loan.
Bad credit loans from Satsuma
Even though you may have had problems in the past and have a poor credit history, you may still be able to get a loan from Satsuma. We look at your individual circumstances and do all we can to help you. Your ability to repay a loan is more important to us than any difficulties you may have had previously.
With our bad credit loans (we just call them short term loans), you can borrow a lump sum of up to £1,000 even if you’re a new customer. The loan can be repaid in affordable instalments over a period of up to a year and we won't ask you for a guarantor. Even more importantly, we won’t hit you with any hidden fees. We don’t do late payment charges either. All you pay back is your loan amount, plus the interest we agree upfront. Simple.
We also offer flexible repayment options. You can repay your loan by either monthly or weekly instalments; whichever suits you best. This flexibility can help you manage your repayments and schedule them to match the day your wages are paid to help your cash flow.
Satsuma short term loans - an alternative to bad credit loans
The last thing we want is for our customers to take on debt they can't afford. Whatever your credit history looks like, we’ll do our best to make sure the loan you take from us can be paid back in manageable, affordable instalments.
What really makes us stand out from the rest is our view on fees, especially nasty hidden ones. We don’t like them. We don’t charge them. You only ever pay the interest we agree when you complete your application. Before you take a loan from us, you’ll know exactly how much you owe and this figure will never change. We believe in being totally transparent. It’s better for us and it’s better for you.
This is just one of the reasons why a Satsuma loan really is an affordable bad credit loans alternative. You can apply here.
How safe are Satsuma loans?
Many of the companies offering bad or poor credit loans have only been around a few years. Satsuma, on the other hand, has a proud heritage reaching right back to 1880. We’re pleased to be part of the Provident Financial Group who have been lending our customers a helping hand when others don't for well over a century. We know our stuff and we know our customers. In return, our customers trust us to provide an ethical and friendly service.
If you ever need help or feel you’re having difficulties with your Satsuma loan, our Customer Care is only a phone call away. Call them on 0800 694 0004 and they’ll do whatever they can to assist you.
* Approval for a Satsuma Loan is subject to successful completion of affordability, fraud, identity and money laundering checks. Satsuma Loans are only available to UK residents who are at least 18 years old and have a valid UK bank account and debit card.