Have existing debt but still need a loan? In 2025, there are still options – but it’s important to understand the risks, limits, and rules. This guide helps you make informed decisions before applying.
Why People in Debt Still Apply for New Loans
Due to inflation, rising energy costs, and everyday living expenses, many UK households are under financial pressure. Even those with active debt often look for new loans — either to consolidate existing credit or to cover urgent needs. While this path may seem risky, for many it’s the only perceived option in the short term.
Who Might Still Qualify for a Loan with Debt
Not everyone with a poor credit history is automatically rejected. In some cases, lenders will consider applications from people with a stable income, no active bankruptcy proceedings, and a UK address. These are often categorised as bad credit loans, and they usually involve higher interest rates, a guarantor, or secured collateral. Responsible lenders will carry out affordability checks in line with FCA regulations.
What Limitations Apply in 2025
UK lenders are legally required to assess whether a borrower can reasonably repay a loan. A poor credit score (from Experian, Equifax, or TransUnion) often results in rejection from banks. However, certain specialist or non-traditional lenders may still approve loans — up to £30,000 — under specific conditions. These loans typically involve shorter terms, higher APR, and stricter repayment structures.
Risks You Should Consider Before Applying
Taking out a new loan while already in debt can worsen your financial situation. It's vital to read the terms carefully: interest rate (APR), late payment penalties, additional fees, and early repayment charges. You should also make sure the lender is authorised and regulated by the Financial Conduct Authority (FCA). Avoid unlicensed or unverified loan providers.
Safer Alternatives to Taking Another Loan
In 2025, many individuals with poor credit turn to debt consolidation, where multiple repayments are combined into one manageable plan. Additionally, free debt advice services (such as StepChange or Citizens Advice) can help you renegotiate existing loans or request payment holidays. These alternatives can often reduce stress without taking on new financial risks.