Bad Credit Personal Loans

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.

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.

It’s worth taking the time to shop around and compare personal loan offers from multiple lenders to see which deal you feel is best for your circumstances. You can do that simply by using our smart-form.

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.

You can view your credit score when using our smart form, or you can request a full credit history report from one of Australia’s three credit bureaus:

• 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.

You can view your credit score when using our smart form, or you can request a full credit history report from one of Australia’s three credit bureaus:

When comparing bad credit personal loan offers from multiple lenders, use the comparison rate to ensure you are accounting for all fees and potential charges. If you are using the Money.com.au smart-form to compare personalised loan offers and rates, the comparison rate will be listed clearly on the results screen.

Variable fees are not included in the comparison rate - such as late-payment fees - so be sure to keep these in mind when comparing deals. The four types of fees you should be aware of when comparing lenders for a personal loan include:

• Upfront costs - establishment fees and application fees
  

• Ongoing fees - annual fees and monthly fees
  

• Late payment fees - charged if you miss a payment
  

• Extra repayment fees - charged if you make early repayments to reduce the amount of interest payable on the principal amount.
  

If you do not find any available offers to compare, you can work with a personal finance broker to assist in finding you a suitable deal and completing your application.

Brokers operate all across Australia — whether you need a bad credit personal loan in Sydney, Melbourne, Brisbane, Perth, Adelaide, Newcastle, or Canberra, you'll be able to find one who can help you assess a range of suitable options specific to your financial circumstances.

What is the cheapest car loan? First, answer this: what does 'the cheapest car loan' mean to you?

• Cheaper repayments over your car loan term; or
  

• Lower total interest (cost) over your car loan term
  

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.

You can qualify for a bad credit personal loan in Australia if you are:

• Over the age of 18; and
  

• An Australian citizen or permanent resident; and
  

• Employed or have a regular source of income over $25,000 per year
  

• Not currently bankrupt or under a Part IX Debt Agreement
  

Before applying with a low credit score, it’s crucial that you look at ways to 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
  

If you use our smart form and find a lender you want to apply with, you will be directed to the lender’s website and need to supply all documentation as you normally would when applying for a bad credit personal loan, which may include:

• 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
  

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.

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.