A guide to $5,000 loans with bad credit
Find out the options for getting a $5,000 loan when you have bad credit.
It can be difficult to get a loan from a bank with a bad credit history. And while payday lenders usually don't require a good credit score to take out a loan, most only offer finance of up to $2,000. However, it is possible to get a $5,000 loan with bad credit, though be aware that there are high costs that come with these loans, including the maximum establishment and monthly fees that can be charged, plus high late payment and default fees.
If you're unemployed and looking for a loan you can read our guide to unemployment loans.
What's in this guide?
- How do $5,000 bad credit history loans work?
- Compare $5,000 bad credit history loan options below
- How much do $5,000 loans with bad credit cost?
- Which companies offer bad credit loans up to $5,000?
- How bad credit history affects taking out a loan
- Understanding bad credit
- What are the risks of no credit check loans?
- Options for an unsecured $5,000 loan with a good credit rating
- What to remember when comparing $5,000 loans
- Frequently asked questions about $5,000 bad credit loans
Are you struggling financially?
If you're struggling financially and would like to speak to someone for free financial advice, information and assistance you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday). If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support. Find out more here: https://www.finder.com.au/coronavirus-financial-help
⚠️ Warning about Borrowing
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
How do $5,000 bad credit history loans work?
Bad credit loans work in a similar way to standard personal loans, except with different fee and interest rate structures. These loans are more expensive because the lenders need to offset the risk of lending to those with adverse credit histories. However, bad credit history loans up to $5,000 have capped fees and charges.
With bad credit loans, an applicant's credit history may or may not be checked. This will be disclosed by the lender beforehand. Most lenders will check a person's credit history to ensure that they are reasonably able to repay the loan, but lenders that advertise bad credit loans will not disqualify applicants based on credit history defaults.
$5,000 loans with bad credit interest and fee caps
- One-off establishment/application fee
- Maximum annual interest rate of 48%, which includes all other fees and charges
Compare $5,000 bad credit history loan options below
How much do $5,000 loans with bad credit cost?
When borrowing from a non-authorised deposit-taking institution, which is basically any lender that isn't a bank, credit union or building society, the following charges apply:
- Loans under $2,000. These charge a 20% establishment fee and a 4% monthly fee. Both fees are calculated using the loan principal.
- Loans of $2,001 to $5,000. These loans are repaid over 16 days up to 2 years. You cannot be charged more than a one-off establishment fee of $400 and a maximum annual interest rate of 48% p.a. which includes all other fees and charges.
- Loans over $5,000. These cannot charge more than 48% p.a. including all fees and charges.
Which companies offer bad credit loans up to $5,000?
There are various options when it comes to finding up to a $5,000 loan with bad credit history. Click through to the review page to find out more details on these loan products.
|Lender||Loan amount||Eligibility criteria||Find out more|
Fair Go Finance
|$500 to $10,000|
|$2,000 to $4,581.80||Details|
|$300 to $5,000|
|$500 to $5,000|
|$2,001 to $3,000|
Good to Go Loans
|$500 to $5,000|
|Up to $4,600|
How bad credit history affects taking out a loan
There are some important points to consider before applying for a $5,000 loan with bad credit.
- Check the eligibility criteria before applying
Lenders have set eligibility criteria that can be checked via the Finder review pages. Check the criteria online, if it's still not clear, call the lender to discuss the situation.
- Order a credit report
A credit report is the most up-to-date and accurate recording of a person's financial history and this is what lenders use to judge creditworthiness. You can order a full credit report for free with Finder.
- Compare options before applying
It's important to remember that every application for credit you make shows up on your credit history. Therefore, it's best not to make numerous applications at the same time. It's also important to be crystal clear on the fine details of the loan before making an application or taking out a line of credit.
Understanding bad credit
Generally, if someone has any black marks on their credit file (defaults or bankruptcies, for example) it's safe to assume they have some degree of "bad credit" history. However, as the degree of "bad credit" varies between people, one of the easiest ways to check if you have a bad credit history is by checking your credit report and credit score. You can do this for free with Finder.
When checking your credit report, you should look out for bad credit listings such as defaults, bankruptcies, late payments and excessive credit enquiries. Your credit score will also give you a good indication of your standing. The credit score you receive from Finder is from credit reporting bureau Experian, and will be a number between 0 and 1,000. You can see a breakdown of the credit score ranges below from both Experian and Equifax – the lower your credit score, the more likely it is that you have bad credit.
What are the risks of no credit check loans?
- Unreputable lenders. Check the lender has a credit licence and is not charging you more than ASIC allows. The lender should be easily contactable.
- Unaffordable repayments. Consider the size of the regular repayments and ensure the loan is able to be repaid during the loan term. If not, extra fees apply to extend it. Be careful, since repayment periods for these kinds of loans tend to be shorter than regular loans.
- Multiple applications. Every loan application shows up on credit reports. While lenders might not consider credit history, several applications within a short period can have a negative impact on your credit score moving forward.
- Check rates and fees. Establishment and monthly fees are capped, so be wary of lenders quoting prices beyond the legal maximum amounts. Be crystal clear on what will be charged for late payments or a default on the loan. The total cost of the loan matters here - lenders can charge interest rates on top of everything else.
- Long-term repercussions and legal issues. Once the loan agreement is signed, the customer is bound to its conditions until the loan and any associated rates and fees have been paid. Typically these loans are unsecured, which means that the lender can initiate legal proceedings against the customer if they can't repay.
Options for an unsecured $5,000 loan with a good credit rating
People who don't have a bad credit history are likely to be eligible for a loan from a bank, credit union or standalone lender at a more competitive rate than bad credit loans. Good credit applicants may also find it easier to qualify for unsecured finance.
What to remember when comparing $5,000 loans
- Online applications
The convenience of online application forms and quick approval systems can save time. They also offer the opportunity to compare a range of credit providers.
- Lenders consider your current financial situation over your credit score
It's common to have difficulty being approved for a personal loan from many credit providers with a bad credit history. However, opting for a bad credit lender gives you access to lenders that look at your current financial situation when considering you for a loan. However, it's important to remember that bad credit lenders generally charge high interest and fees.
- Repayment terms
Some lenders may offer options of how to make repayments and direct debit repayments are offered by most lenders.
- Bad credit loans are high cost
Due to the high risk of this loan, the lender will usually charge higher fees. However, keep in mind fees are capped by the Australian Securities and Investments Commission (ASIC).
- Loans over $2,001 come with high interest
While loans under this amount do not come with interest rates (only set fees), loans above this amount come with rates maxed at 48% p.a.
- Disreputable lenders operate in the bad credit loans space
There are many disreputable lenders operating online that prey on people with bad credit, so it's important to thoroughly research the lender in question and consider if a bad credit loan is the best approach to the situation.
Frequently asked questions about $5,000 bad credit loans
Some of the questions we get asked the most often in regards to $5,000 loans with bad credit include:
How do I apply for a $5,000 bad credit loan?
What happens after I send my application?
Are my details secure?
Can I get a $5,000 loan if I'm unemployed?
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