Bad Credit Personal Loans

* Enquiring will not affect your credit score
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Bad credit personal loans are a type of personal loan product offered by specialist lenders in Australia. They will often have shorter terms, higher fees, and higher rates than other types of personal finance to reflect the increased risk to the lender.

What is a bad credit personal loan?
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How do they work?

A bad credit personal loan works in a similar way to other types of personal loan. You can apply for finance with specialist lenders, who will agree to lend an amount of money that you repay over a specified time. 

Bad credit personal loans are different from other loans in three main ways:

  • Higher interest rates — up to a maximum of 48%. 
  • Shorter loan terms — from 9 weeks to two years. 
  • Higher fees — establishment and ongoing fees.

Bad credit loan repayments will include interest accrued on the principal amount, and any fees included in your loan agreement. The rates and fees applied to your bad credit loan will be determined by your lender during the approval and agreement process.

What is bad credit?

What is bad credit?

Your credit history is a report that lists all the debts you’ve had in the past. Lenders use your credit history to assess your suitability for a loan and determine whether or not you’ll be able to make repayments. In Australia, there are three different credit bureaus:

  • Equifax 
  • Experian 
  • (Illion, formerly known as Dun and Bradstreet) 

You can check your credit rating and history by contacting one of the credit bureaus in Australia. This is a good first step before applying for a bad credit personal loan, as it will allow you to view and understand your credit history, and correct any inaccuracies — if there are any.

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Enquiring about a personal loan may not affect your credit score. However, applying for a loan can affect your credit score — speak to a financial adviser or personal loan broker to ensure your application is successful.

How to qualify for a bad credit personal loan

Qualifying for a loan with a low credit score

A credit report is often distilled into a score from 0 to 1,000 or 1,200. Each Australian credit agency ranks credit slightly differently, however if your score is under 500 or 550, you are generally considered to have a low credit score — or ‘bad’ credit. 

Negative credit events are listed in your credit history, and too many may cause a lender to classify you as a high-risk borrower. Negatives credit events include:

  • Missed debt payments or late payments
  • Too many credit applications over a short period of time
  • Current or previous bankruptcy or a Part IX debt agreement in your credit history 
  • History of applications for credit being declined

However, your credit history and score also take into account positive events. This means you may be able to repair your credit score over time if you:

  • Make loan repayments on time, every time
  • Fully pay off credit
  • Ensure you’re able to manage your debts

If you can, it's a good idea to take some time to repair your credit score before applying for a personal loan. The better your credit score, the lower your risk profile will be when lenders are assessing your application.

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Limiting the risk you pose as a lender can help secure lower personal loan interest rates and lower fees.

How to get a bad credit personal loan

How to get a bad credit personal loan

If you’re applying for a loan and have a poor credit rating, it’s crucial that you strengthen your application as much as possible — the more reassurance you can offer a lender that you are a stable applicant, the more likely you are to be approved, and receive better rates. 

To get a bad credit personal loan, you will need to:

  • Submit an application to a lender 
  • Meet the lender’s approval criteria 
  • Sign a loan contract and agree to the terms of the loan  

You can ensure your application is processed faster by preparing supporting documents before applying, including:

  • Proof of identity — e.g. passport or driver licence 
  • Proof of income — e.g. payslips, bank statements 
  • Details of any current debts or other loans  
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The most important factor in gaining approval is to demonstrate your ability to repay the full loan amount to your lender.

Although your pool of available lenders will be limited when applying for a personal loan with bad credit, there are still a number of specialist lenders offering these loans. If you successfully improve your credit score and meet repayments, you may also be able to refinance your personal loan with a new lender in the future.

When applying with a specialist lender online, you will need to provide some basic personal identification and financial documents (usually your bank statements or recent payslips). This allows lenders to use financial technology to quickly assess your financial stability and borrowing capacity. 

Specialist lenders will generally:

  • Offer fast approval on personal loan applications 
  • Charge higher rates of interest than traditional lenders 
  • Include higher establishment and ongoing fees 
  • Offer shorter terms relative to the risk posed by the borrower 

You can use the personal loan calculator to estimate repayments on various loan offers in seconds.

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Specialist lenders offer fast approval and relaxed qualifying criteria, but may also charge the highest fees.

Bad credit personal loan alternatives

Alternatives to bad credit personal loans

Applying for a bad credit personal loan with a specialist lender can provide access to finance when a borrower may not qualify with traditional lenders. However, before applying for a bad credit loan, it’s worth considering all available options for finance, including:

Guarantor loans

A guarantor loan requires someone else (usually family members) to take equal responsibility for repayment of the loan. In the event that the borrower is unable to make repayments, the guarantor of the loan may be liable. 

Lenders may offer lower interest rates if you have a loan guarantor, while some lenders may request a guarantor be included on your loan agreement to ensure approval, particularly if it's an unsecured loan.

The No Interest Loan Scheme (NILS)

The No Interest Loan Scheme is a Government initiative which enables certain Australian residents to receive a loan with no interest or fees. NILS allows eligible applicants to borrow up to $1,500 for essential goods with no credit check required. 

The NILS is available for Australian residents who:

  • Hold a valid healthcare or pension card 
  • Earn less than $45,000 as a single applicant 
  • Earn a combined income of less than $65,000 as a joint applicant 

StepUP Loan

StepUp Loans are low interest, low fee loans designed specifically for low-income Australian residents who can’t get credit from a bank. To apply, you must hold valid healthcare or pension card, or receive Family Tax Benefit A.

Bad Credit Personal Loan Summary


Bad credit personal loans are a type of finance available in Australia. They are often used by borrowers with a history of defaults, or those previously involved and cleared of bankruptcy or a Part IX debt agreement. 

Specialist lenders in Australia offer bad credit personal loans with a simple online application. However, this type of finance will generally feature higher interest rates, high fees and shorter terms than traditional loans. 

Before you apply, make sure you’ve considered any available government assistance schemes, and spoken to a financial adviser to accurately assess your borrowing capacity and financial stability.

Bad Credit Personal Loans FAQ

Can I get a bad credit personal loan with guaranteed approval?

No — lenders in Australia are not allowed to offer bad credit personal loans with guaranteed approval. That’s because lenders are legally required to make reasonable enquiries to make sure you are able to pay back the loan and make reasonable enquiries to make sure the loan is suitable for you.

Can I get a bad credit personal loan if I’m receiving Centrelink payments?

Yes, you may be able to get a personal loan even if you have bad credit and are receiving Centrelink payments. However, loans like these may have high interest rates.

Are there bad credit loans with no credit checks?

Yes. There are personal loans available that do not require a credit check. However, lenders will still need to see up to three months of your bank statements to verify that you have the income necessary to service the loan.

Are bad credit loans expensive?

Yes and no. Bad credit personal loans will have higher rates and fees than other types of personal finance, but a loan can still be serviceable in the right financial circumstances. This is due to the higher level of risk presented by borrowers with a low credit score. Always speak to a financial adviser and accurately assess your ability to meet repayments before applying for a loan.