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Bad credit debt consolidation loans

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In our bad credit debt consolidation loans guide:















Bad credit debt consolidation loans Australia

Consolidating debt when you have bad credit can be a particularly appealing option for getting on top of debt. If handled carefully, a debt consolidation loan could even play a part in helping rebuild your credit score.

The whole idea behind consolidating debt is that it helps make credit repayments more manageable, allowing you to repay debt more consistently and faster. This could be a good thing for your credit report and overall finances.

If you're in this position, understanding where you can get a bad credit debt consolidation loan is a good place to start. It also help to be aware of the process for applying and the risks to watch out for.

Debt Consolidation

Can I get a debt consolidation loan with bad credit in Australia?

Whether you can get a debt consolidation loan with bad credit will depend on your situation, but in general it is possible.

In fact, there are lenders in Australia who specialise in helping borrowers with bad credit, including by offering debt consolidation loans.

These lenders will assess your application for a bad credit debt consolidation loan based on your situation as a whole – not just your credit history. For example, being able to prove you are on top of your current loan commitments will be a big help.

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Lenders generally don’t use the words ‘bad credit’ when describing their loans. But phrases like ‘below average credit’ and ‘poor credit considered’ may indicate a lender is open to bad credit applications
Credit card consolidation loans

How do bad credit debt consolidation loans work?

With a bad credit debt consolidation loan, you’re combining multiple debts into a single loan. This could include credit cards, other personal loans and buy now pay later accounts.

Bad credit debt consolidation loans, as the name suggests, are aimed at borrowers with a low credit score. But once the loan is established, it will work just like any other kind of personal loan, with regular repayments over a fixed term.

That said, there are some important differences with bad credit debt consolidation loans.

How are debt consolidation bad credit loans different?

The main differences between debt consolidation bad credit loans and standard loans are:

  • You’ll need to apply with a specialist lender (banks and credit unions generally look for a good credit score).
  • You may be asked for extra information on your credit history and finances when applying. It likely won't be just a simple credit score check.
  • There may be a lower limit on how much you can borrow (e.g. up to $30,000).
  • The interest rate on the loan will likely be higher.
  • Bad credit debt consolidation loans may come with extra fees, such as a 'risk fee' that some lenders charge.

What are the interest rates on bad credit debt consolidation loans?

Bad credit debt consolidation loan interest rates in Australia typically start from around 15-20% p.a. but can be higher depending on the borrower and their situation.

Analysis by shows the average personal loan interest rate quoted to borrowers with the lowest credit scores (less than 460) is 25.25% p.a. That's compared to the average interest rate of 14.64% p.a. for debt consolidation loans among all borrowers.

As the table below shows, the interest rate can make a significant difference to the regular repayments on a bad credit debt consolidation loan. Finding the best rate you can could save you thousands over the life of your loan.

Best bad credit debt consolidation loan interest rates comparison

The table below shows the potential difference in costs between the best debt consolidation loan rates and rates at the upper end of the scale.

Weekly repayment (15% interest)Weekly repayment (20% interest)Weekly repayment (25% interest)

























Bad credit debt consolidation loan repayment comparison examples are calculated using weekly repayments with a fixed interest rate on a 5-year term. They do not include any fees that may be charged by a lender in addition to interest.

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Benefits of debt consolidation for people with bad credit

Potential benefits of consolidating debt for borrowers with bad credit include:

  • You’ll have a single debt repayment instead of several.
  • You may be able to get a lower interest rate than what you currently pay.
  • There is a fixed repayment plan for the loan, meaning a set date for paying it off.
  • Repayments can be weekly, fortnightly or monthly (e.g. to match you salary payments)
  • Making repayments more manageable so you can stay on track may help your credit score to improve.

How to compare bad credit debt consolidation loans


Compare interest rates

Debt consolidation loans for bad credit borrowers can come with higher rates than other loans. The key is making sure your rate is as low as possible. And IDEALLY, that it’s lower than the rates on the debts you’re consolidating.


Look for low fees

For debt consolidation to be worthwhile, it’s important to avoid high fees. Aim to minimise the upfront and ongoing fees you’ll pay with the new lender. Remember there may also be fees for closing out your old loans and extra ‘risk fees’ for bad credit borrowers.


Check the comparison rate

The comparison rate will give you an idea of the actual cost of your bad credit debt consolidation loan per year, including interest AND fees. Don’t be fooled by a low interest rate that seems too good to be true.


Consider the loan term

Repaying your bad credit debt consolidation loan as soon as possible may be the priority. Just be sure to balance that with being able to afford the higher regular repayments on a shorter term. Some loans also allow you to choose a longer term but make extra repayments and pay it off early if you can afford to pay more.


Calculate the total cost of the loan

Knowing your regular repayment amount is one thing. But be sure to also work out the total cost of the loans you’re comparing over the full term. Ultimately, you want to make sure that your new loan won’t end up costing you more.

Calculate loan costsCalculate loan costs

Do I qualify for a bad credit debt consolidation loan?

You can generally apply for a debt consolidation 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
  • Able to show the lender that you can afford the loan repayments and will be able to service the loan for the duration of the term.

On top of these basics, the lender will do several other checks. This is particularly true with bad credit borrowers.

How do lenders assess bad credit debt consolidation applications?

Shaun McGowan

The lender will look at your income and other expenses to make sure you can afford to repay the loan comfortably. Of course, they will look at your credit history too. This is why it can be a good idea to do a free credit score check before applying so you know what kind of position you're in. But unlike a traditional lender, bad credit lenders take a closer look at why exactly you have bad credit. They'll also consider what you have been doing to improve it.

Shaun McGowan, founder and loans expert

Bad credit debt consolidation default type

Type of default

Financial versus non-financial defaults

Financial defaults, like missing credit card payments, are more of a red flag than non-financial defaults, like missing payments on a streaming subscription.

Paid versus unpaid

If you have since paid off your defaults, or are making steady progress towards paying them, a specialist bad credit lender will take that into account.

In short, if your credit record suggests that you’re struggling to meet the repayments on your current debt, the lender may be reluctant to help you consolidate them.

The situation is similar if you are currently bankrupt or in a Part IX debt agreement.

Most lenders won't give you a bad credit debt consolidation loan until you have been discharged for at least 12 months.

In most instances, bad credit debt consolidation loans are unsecured personal loans. But some lenders may be more likely to approve your loan if you provide an asset you own as security.

bad credit debt consolidation loan application

How to apply for a bad credit debt consolidation loan

When assessing applications for a bad credit debt consolidation loan, lenders will ask for information about your financial and living situation:

  • Income and employment verification (employment contract, payslips)
  • Bank statements for up to six months
  • Valid ID (e.g. driver licence)
  • Proof of address (the longer you’ve been at the same address, the better)
  • Details of the debts you are consolidating (loan and credit card statements)

Bad credit debt consolidation FAQ

There’s no such thing as guaranteed loan approval in Australia, including on bad credit debt consolidation loans. That’s because lenders must comply with responsible lending laws that require them to take steps to verify the borrower’s financial situation before approving a loan.

In the short term, making new credit implications can cause a dip in your credit score.

But if you make the repayments on the loan over time and don’t take on any new debt or miss repayments elsewhere, your credit score should improve.

To get approved, it can take 1-2 days as long as you're able to provide all the information that the lender requests.

In most instances you should be able to find a debt consolidation loan with an interest rate that's lower than a typical credit card rate (the average credit card interest rate is around 17.74% p.a.).

But remember bad credit borrowers usually pay higher rates on loans.

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.

Hear from people who found the right loan           

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Written by

Sean Callery Editor


Sean Callery

Reviewed by

Shaun McGowan founder

Loans Expert

Shaun McGowan


*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.