Credit scores and credit history help lenders determine whether someone will be able to responsibly manage a loan. Negative listings, such as late payments or default accounts, can indicate financial challenges that increase the risk of approving someone's application for a personal loan.
As a result, there are only limited options available for people who have a bad credit history. These options may also have higher fees, interest rates or other restrictions when compared to other personal loans. This makes it important to carefully compare the options available before deciding if this type of loan is suitable.
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.
Personal loan options for people with bad credit history
If someone with bad credit history wants to apply for a personal loan, there are a few different options they can consider. This includes:
- Secured personal loans
This type of loan requires financial collateral – such as a home, car or other valuable asset – to "secure" the loan. This means that if repayments are not made on time or if other terms of the loan are not met, the lender may claim the asset as a form of compensation.
- Guarantor personal loans
Guarantor personal loans require someone else to financially guarantee that the loan will be repaid. For example, a parent, spouse or other relative. This person shares responsibility for the loan and may be required to repay it if the terms are not met.
- Short term loans
A short-term loan from a payday lender offers up to $2,000, with repayment terms typically between 2–12 months. The eligibility requirements for these loans tend to focus on a person's current financial circumstances and their ability to repay the loan within the set timeframe.
- Large amount bad credit loans
For people who want to borrow more than $2,000 and have bad credit history, there are also lenders offering loans of up to $5,000. There are also a few lenders that offer loans as large as $10,000 to those with bad credit history.
How much do bad credit loans cost?
The costs can vary depending on factors including the lender, the type of loan and the amount borrowed. However, lenders must not charge more than the following amounts:
Loans under $2,000 with terms between 16 days and one year
- Establishment fee of 20% of the principal
- Monthly fee of 4%
Loans between $2,001 and $5,000 with terms between 16 days and two years
- Establishment fee of $400
- A maximum interest rate of 48%, including all other fees and charges
Loans over $5,000 with terms between 16 days and two years
- All fees and charges must not be more than 48% p.a.
Lenders that offer personal loans to bad credit borrowers
Sunshine Short Term Loans
Go to site
This is a short-term loan offer with a fast and easy online application for good or bad credit borrowers. You can apply today to get approved
for up to $2,000. Get your loan funded in 30 minutes - conditions apply.
- Loan Amount: $2,000
- Loan Term: 9-12 weeks
- Turnaround Time: 30 minutes - conditions apply
- Fees: 20% of loan amount + 4% of loan amount each month
- Income requirement: 50%+ of income cannot be from Centrelink
- Bad credit borrowers OK
- Quick & easy Approval
- Bad credit applicants considered
- Fast approval service
- Borrow up to $2,000
- Borrow up to $4,581.80
- Loan term up to 2 years
- Instant online decision
100% confidential application
Swoosh Finance offer fast, reliable, and hassle-free secured loans up to $4,581.80 for when you are in need of money.
- Loan amount: $4,581.80
- Loan term: 12-24 months
- Turnaround time: Next business day
- Fees: $418.20 + 48% p.a. of borrowed amount
Things to consider before applying for a loan with bad credit history
As with any loan, approval is determined based on a range of eligibility factors and lending criteria. So, before applying, it is important to check the details and requirements of a loan to decide if it is suitable. Some other actions to consider include:
- Checking your credit score to see where you stand
By checking your credit score you can get an idea of your credit position and any details that may affect the chances of loan approval.
- Discussing your options with a qualified professional
If you're struggling financially and need help, the Financial Counsellors hotline (1800 007 007) offers free support and advice from qualified professionals. This can help you make decisions that fit with your current circumstances.
- Not making too many credit applications at once
Applying for more than one loan at a time (or over a short amount of time) is a red flag to lenders and can hinder the chances of loan approval now and in the future. If applying for loans, apply for one and wait for a response before taking further action.
- Using a personal loan calculator
This will ensure you don't apply for a loan you can't afford. Lenders, when reviewing your application, will only approve your loan if you can afford the repayments.
Calculate your personal loan repayments
How do I know if I have a bad credit history?
Although the definition of "bad credit" differs between each lender, bankruptcy, defaults and Part 9 debt agreements are all red flags to lenders and generally will place you in the bad credit history category.
However, your credit file also holds other important financial information which may look bad to prospective lenders. This includes late bill payments, late loan repayments, multiple credit applications or exceeded credit card limits. There are varying levels of how bad your credit file can look to lenders, so be sure to check and compare the application criteria for personal loans to see if you may be eligible.