Option 2: Guarantor loan
Guarantor loans from mainstream lenders run 7.5% to 14% APR and can be the cheapest option if you can find a family member or close friend with a strong credit history who is willing to co-sign. The guarantor is on the hook if you miss a payment, so the social cost is real, but the rate is the lowest in the bad-credit market by a wide margin. The loan range is £1,000 to £15,000, and approval is based partly on the guarantor's credit. Buy if you have a willing guarantor and you are confident you can make every payment on time.
Option 3: Bad-credit personal loan
Mainstream personal loans for bad credit (Amigo, Oakbrook, Tymit, Likely Loans) run 25% to 35% representative APR in 2026, with rates at the top end of the range for borrowers with the worst credit. Loan ranges run £1,000 to £15,000, and approval is based on your credit score, income, and existing debt. The right comparison is the rate you are paying now on your existing debts: if your weighted-average rate is above 30%, the consolidation saves money; if it is below 20%, the loan makes things worse. Buy if you cannot find a guarantor and your current weighted-average rate is above 30%.
Option 4: Debt management plan (DMP)
A debt management plan is a free service from a debt charity (StepChange, PayPlan, National Debtline, Christians Against Poverty) that negotiates with your creditors to lower your interest rates, waive fees, and reduce your monthly payment. The creditors agree because they would rather recover something than send the account to collections, and the charity does the negotiating for free. The trade-off is that a DMP stays on your credit file for 6 years, which makes future credit harder to get. Buy if you have more than 5 debts, if you cannot afford the monthly payment on a consolidation loan, or if your credit score is too low for a loan at a rate lower than your current weighted-average rate.
Option 5: StepChange / PayPlan charity advice
The right first step before any of the other options is a free call to StepChange (0800 138 1111) or National Debtline (0808 808 4000) for impartial debt advice. The advisors will look at your full picture, run a budget with you, and recommend a consolidation loan, a DMP, a Debt Relief Order (if your debts are under £50,000 and your disposable income is under £75/month), or bankruptcy. The advice is free regardless of which option you end up choosing, and the advisors are FCA-regulated.
How to pick the right option
Start with a free call to StepChange or National Debtline for a full picture. If you can find a guarantor and your debt is below £15,000, the guarantor loan at 7.5% to 14% APR is the cheapest mainstream option. If you are a credit union member, the credit union loan at 12% to 19% APR is the next best. If your debt is above £15,000 and you can afford the monthly payment, the bad-credit personal loan at 25% to 35% APR is the right pick only if your current weighted-average rate is above 30%. If you cannot afford any loan payment or you have more than 5 debts, the DMP through a free charity is the right path. Avoid doorstep lenders and payday loans at any cost.
Photo: stevepb, Pixabay Content License, via Pixabay (https://pixabay.com/photos/income-tax-calculator-accounting-4097292/)
Fazlur Rahman
