Bad credit personal loans
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Getting a personal loan with bad credit in Australia
Firstly, it’s possible. You might not be able to walk into your local bank branch and get one. But if you look in the right place, getting a personal loan with bad credit can be relatively straightforward.
Thankfully you are looking in the right place. We can help connect you to multiple specialist lenders who offer loans for bad credit borrowers.
You'll be able to see real offers and interest rates based on your situation, without it impacting your credit score.
How do bad credit personal loans work?
Bad credit personal loans are designed for borrowers who have a low credit score. This is usually because the borrower has defaults or other negative information on their credit report.
But in many respects bad credit loans work in the same way as other personal loans. You borrow a fixed amount of money for a fixed term (duration) and repay it in weekly, fortnightly or monthly instalments, plus interest and fees.
The loan can be used for a range of purposes, including debt consolidation, paying for a holiday or financing a home renovation.
The key difference is that bad credit personal loans are riskier for lenders. Because of this, there are some limitations to be aware of.
How are bad credit personal loans different?
| Standard personal loan | Bad credit personal loan | |
|---|---|---|
Loan amounts | Up to $100,000 | Up to $30,000 (but varies by lender) |
Interest rates | Starting from around 7% | Starting from around 15% |
Available from | Major banks, credit unions and online lenders | Specialist bad credit lenders |
Proof of income and expenses required | Usually 3 months | Up to 6 months |
Where can I get a personal loan with bad credit?
Don’t waste your time applying for a personal loan for bad credit with a bank or credit union. Chances are you won’t be approved. This could affect your credit score further.
Instead, consider looking at the lenders who specialise in loans for bad credit borrowers.
You can compare your options now using Money Matchmaker®.
You’ll see tailored quotes from up to 12 lenders. There’s no obligation to proceed and it won’t impact your credit score.
What are the interest rates on bad credit personal loans?
The average personal loan interest rate for loans with bad credit (0-459 credit score) is 25.25% p.a. That's according to on personal loan statistics compiled by Money.com.au's based on real quotes provided to borrowers in 2023. The average rate for borrowers with a credit score between 460 and 660 is 20.07% p.a.
But remember, your interest rate will be tailored to you and some bad credit borrowers will qualify for lower rates, starting from around 15% p.a.
It's definitely worth your while shopping for the lowest interest rate you can find, as it can have a major impact on your regular repayment and how much the loan will cost you overall.
Remember to pay particularly close attention to the loan's comparison rate as this factors in how fees impact the overall cost of the loan. Use a personal loan calculator to work out the cost of different loan options based on the rate.
Best bad credit personal loan interest rate comparison
| Loan amount | Weekly repayment (15% interest) | Weekly repayment (20% interest) |
|---|---|---|
$5,000 | $27 | $30 |
$10,000 | $55 | $61 |
$15,000 | $82 | $91 |
$20,000 | $109 | $122 |
$25,000 | $137 | $152 |
$30,000 | $164 | $183 |
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Am I eligible for a bad credit personal loan?
First, you’ll want to check you meet the basic criteria for applying. You must be:
- Over the age of 18; and
- An Australian citizen or permanent resident; and
- Employed or have another regular source of income; and
- Not currently bankrupt or under a Part IX debt agreement
In addition, lenders will assess other aspects of your financial and living situation. They’ll consider:
- Your income
- How long you’ve been in your current job for (the longer the better)
- How long you’ve been in your current address for (again the longer the better)
- Your other expenses and debts
- Any assets you own
- Whether you have dependents
- The amount you’re borrowing
- The loan purpose
- The term of the loan
- Your credit history
What do bad credit lenders look for on your credit history?
Traditional lenders assess personal loan applications based on a small number of factors relating to credit history.
- Is your credit score above their cut off?
- Are there defaults of any kind on your record?
A specialist bad credit lender will look at your credit record in more detail.
Bad credit lenders consider...
1
The type of default
Not all credit defaults are viewed the same. Non-financial defaults (e.g. a phone bill) are generally less of an issue for bad credit personal loan providers. Financial defaults (e.g a missed loan or credit card payment) are more serious.
2
Paid versus unpaid defaults
A specialist lender will consider whether any defaults have now been repaid. Paid defaults are less of an issue. They may also consider whether you’re making progress towards repaying any defaults that are still outstanding.
3
The age of the information
Specialist bad credit lenders will factor in the age of the information on your credit file. For example, they may still consider your application if you were discharged from a debt agreement more than 12 months ago.
4
The current picture
Your credit history is based on, well, history. If your overall financial position has improved in the meantime and you’re in stable employment, a bad credit lender will weigh this up against any negatives from the past.
Secured versus unsecured bad credit personal loans
Secured bad credit personal loans
- You offer up an asset to secure the loan (e.g a car).
- The lender can sell the asset to recoup its costs if you don’t repay the loan.
- It may be easier to be approved because there’s less risk for the lender.
- Interest rates are generally lower on secured loans for the same reason.
Unsecured bad credit personal loans
- With an unsecured you don’t put up an asset as security.
- The lender cannot sell an asset to get its money back if you default.
- The approval process may be stricter because the lender is taking on more risk.
- Expect to pay a higher interest rate if you’re approved.
8 tips to help with bad credit loan approval
- Check your credit score before you apply so you know if you're in a good position to be approved. Knowing your credit score can also help you negotiate a better deal, according to Moneysmart.
- Look at your budget (your income and expenses) and work out how much you can afford to make in regular loan repayments.
- Based on that, calculate what you can afford to borrow in total.
- Put your repayment amount into a savings account for 6-8 weeks before applying. This will prove to the lender that you’ll be able to afford the repayments.
- Make sure your last six months worth of bank statements look good. Regular dishonours, missed payments or gambling transactions could be red flags.
- If you’ve just started a new job or changed address, it may be best to wait until you’ve been there for six months before applying. Lenders like to see stability.
- Consider asking someone you trust if they will act as a guarantor for the loan. The guarantor agrees to be responsible for the loan if you cannot meet the repayments.
- Lastly, consider carefully if now is a good time to take on debt. It may be better to wait until your financial situation and credit score have improved.
Bad credit Personal Loans FAQs
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Are there any other ways to get a loan with bad credit?
Depending on your situation, you may be eligible for a no interest loan through the No Interest Loan Scheme (NILS).
NILS is a Government initiative that lets Australian residents get a loan of up to $2,000 with no interest, fees or credit checks.
NILS can only be used for essential purchases, like home appliances or car repairs.
Do you qualify for NILS?
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Earn less than $70,000 annual income before tax as a single person (or $100,000 annual income before tax if you have a partner or dependants); or
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Have experienced family or domestic violence in the last 10 years; or
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Have a Health Care Card or Pension Card You must also be able to prove that you will be able to repay the loan.
Is it harder to get a loan with bad credit?
Not necessarily. It depends on WHY you have bad credit. If you no longer have any unpaid default and you’re not currently bankrupt or subject to a Part IX debt agreement, it may be possible to get a bad credit loan.
Assuming you also meet the lender’s other eligibility criteria.
However, you will have fewer options to choose from if you need a bad credit loan. If you’re struggling to find a bad credit personal loan, you could consider working with a personal loan broker.
Can I get a bad credit personal loan if I’m receiving Centrelink payments?
It may be possible. Lenders will consider all of your sources of income and your expenses when assessing your bad credit loan application.
If you can demonstrate overall that you will be able to afford the repayments, you may still be approved.
Are bad credit loans expensive?
Compared to a borrower with good credit, a bad credit loan will be more expensive in terms of the interest rate charged and sometimes the fees too.
This is because bad credit loans are a greater risk to the lend
What’s the best bad credit loan?
This will depend on your credit history, your other financial circumstances and what you need the loan for.
In general, when looking for a the best bad credit loan for you, consider the following factors:
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The eligibility criteria
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The interest rate
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Fees charged
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The term (duration) of the loan
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How flexible the repayments are (weekly, fortnightly or monthly ideally)
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Can you make extra repayments without penalty?
Can I get a bad credit personal loan if I’m self-employed?
Being self-employed doesn’t necessarily rule out being approved for a bad credit personal loan.
In the absence of payslips you’ll need to provide alternative documentation to get approved. For example, up to two years worth of tax returns.
How can I pay less interest on my bad credit personal loan?
To save on interest on your bad credit loan, shop around for the lowest interest rate you can find, select the shortest loan term you can afford and make extra repayments to pay the loan off faster if you’re able to.
Also consider applying for a secured loan if you can as these generally have lower interest rates.
Once you have been repaying the loan for more than 12 months, you could also consider refinancing the personal loan to another lender.
A solid repayment record is likely to have helped your credit score to improve, meaning you might be eligible for a cheaper rate.
Personal Loans guides and resources
The great thing about personal loans is they can fund almost anything. They are perfect when you need that bit extra to cover expenses, start a project or reset your finances to get back on track.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
AS FEATURED IN
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $10,000 over 3 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
