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Secured loans for bad credit

If you have bad credit, you can still apply for car loans, home equity loans and secured personal loans.

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Bria Horne

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There are still a number of secured loan options available to bad credit borrowers. If you're able to offer an asset as security for the loan you can usually lock in lower interest rates and fees. Lenders may also be more willing to approve customers who provide security, as it's less risky.

How do secured bad credit loans work?

Secured bad credit loans are loans for people with bad credit that are secured by asset collateral. People with poor credit scores can find it more difficult to get loans than people with good or excellent credit. This is because they pose a higher risk to the lender.

So, it can help people with bad credit to procure finance more easily if they opt for secured loans, as the asset collateral mitigates some of the risk to the lender because the lender can repossess the property to cover loan costs in the case of repayment failure or default.

Which lenders offer secured bad credit loans?

The following lenders are some which currently offer secured loans to applicants with bad credit histories:

LenderLoan amountLoan term Type(s) of security
Cash Stop$300 - $5,0001 month - 1 yearGold, gold jewellery & small electronic devices
Champion Loans $1,600 - $15,000

 

5 months - 5 yearsVehicle security only - car, motorbike, caravan or boat
Fair Go Finance$500 - $10,0003 months - 3 yearsCar, boat, caravan, motorbike or other asset of value
Good2Go Loans$5,000 - $30,0006 months - 2 yearsCar, boat, caravan, motorbike or other asset of value
Jacaranda$300 - $10,00013 months - 2 yearsVehicle security only - car, motorbike, caravan or boat
Money3$2,000 - $50,0001 - 2 yearsVehicle security only - car, motorbike, caravan or boat
Monzi$300 - $10,00013 months - 2 yearsCar, boat, caravan, motorbike or other asset of value
nifty$2,100 - $10,0009 months - 2 yearsCar, boat, caravan, motorbike or other asset of value
nmoni$2,001 - unspecified maximum1 - 7 yearsCar, boat, caravan, motorbike or other asset of value

What is a secured bad credit loan?

These loans can be used to purchase a new vehicle or can be taken out if someone already has an asset to offer as security. Assets used as security on loans are usually vehicles or home equity, but some lenders will accept almost anything of value – such as art or jewellery – as loan security. It will be a requirement that the asset has value equal to or surpassing the value of the loan.

Interest rates on these loans can be more competitive than unsecured loans. People who may not be eligible for an unsecured loan can have a better chance of being approved for a secured loan.

How can you get a secured loan with bad credit?

Getting a secured loan isn’t difficult as there are a variety of lenders in this space. Typically, the following process will apply. Customers should:

  • Go through the offerings of bad credit loan providers and compare the fees, rates and features.
  • Establish that their credit history, income and employment are in line with the requirements of the lender they want to apply with.
  • Find out how much they'll have to repay each month and check if the repayments suit their budget.
  • Ensure that they can keep up with the repayments before submitting an application.
  • Submit an application form, including all relevant information.
  • Accept the terms and conditions (subject to approval) before the lender sends them their loan, which is usually transferred straight into their account.

Types of secured bad credit loans

The kind of secured bad credit loan someone can get depends on the kind of collateral that they provide, but generally they'll have the choice of:

  • Car loans. If someone is looking to purchase a new or used car, they can use the car to secure the loan and receive a lower rate from the lender. These loans may have restrictions as to the type of car applicants can buy and what they can do with the loan amount.
  • Home equity loans. If someone has equity in their home they can consider getting a home equity loan where the equity they hold works as collateral.
  • Secured personal loans. Customers can also consider getting a secured personal loan. This loan is similar to the above in that customers can purchase an asset such as a car and use it as security, but they also have the option to use an existing asset as collateral.

How to compare bad credit secured loans

Going through the following should give a good indication of what to expect when comparing loan options.

  • Loan amount. The minimum and maximum someone can borrow varies from one loan to the next. The maximum someone can borrow also depends on the security they provide along with their ability to repay the loan.
  • Loan term. The loan term of secured bad credit loans also varies depending on the loan they choose. While a personal loan might offer terms of no more than 12 months, a car loan could give applicants up to 5 or 7 years to repay, and even longer with a home equity loan.
  • Interest rate. Applicants generally have the option of a fixed or variable rate. As these are bad credit loans, you can expect the rate to be higher than other forms of credit.
  • Flexibility in repayments. Does the loan allow borrowers to make weekly, fortnightly or monthly repayments as per the individual's needs? Do early repayment penalties or extra repayment fees apply?
  • Use funds for any purpose. Unless someone is applying for a car loan to purchase a car, they can use the funds from secured loans for just about any legitimate purpose.
  • Building credit. Getting a bad credit loan gives loan customers the means to repair their credit history. Loan applicants can do this by ensuring that they make your ongoing payments on time.

Dos and don'ts of secured bad credit personal loans

Dos

  • Your research. It's important to check the reputation of any lender prior to submitting a loan application. While lending institutions are heavily regulated by the Australian Securities & Investments Commission (ASIC) there may still be some organisations that prey on financially vulnerable people, such as people with bad credit histories. Make sure that your lender is legitimate and has a good reputation.
  • Check you're eligible. It's important to thoroughly check a loan's eligibility criteria before applying. This will generally include factors about your financial standing, such as your employment status and income. In the case of secured bad credit loans, this will also include information about your asset security. Ensure that you are the owner of a viable asset before applying for a secured loan.
  • Consider improving your credit score. If you can wait a bit of time before applying for a loan, it might be a good idea to try to improve your score somewhat, as a better credit score will generally give you access to a greater range of loans and lower rates. You can improve your score by doing things like paying bills on time, paying off existing debts, lowering your limits on your credit cards, etc. You can contact your credit reporting bureau to find out your score, and also to fix any potential mistakes that could be on your file.

Don'ts

  • Over-apply. Don't apply for more than one loan at a time, as this could further damage your credit score. This is because lenders generally look at multiple applications or loan rejections unfavourably. Once you are happy with a loan and you meet all of the required eligibility criteria, submit an application for that loan only.
  • Apply for more than you can afford. It's important that you take a look at your incomings and outgoings and try to draw up a budget before applying for finance. Never apply for more money than you can comfortably afford to repay each month. If you fail to meet your repayments, you could lose your asset security.
  • Forget to compare loan products. .While generally, bad credit loans are more expensive than other forms of finance, that doesn't mean they are all created equal. Therefore, it's vital to compare the market for the best deal you can find. You can do this by using the comparison tools on the finder.com.au website, or by doing your own research. Opting for a secured bad credit loan rather than an unsecured bad credit loan may also allow you to access lower rates and better deals.

Secured bad credit loans for self-employed applicants

Being self-employed can sometimes negatively affect your credit score, as waiting on clients to fulfil your invoices or fluctuations in your income can mean that you sometimes are forced to pay bills late. Getting a loan if you are self-employed might therefore be more difficult than if you were employed by an organisation and taking home a regular salary. That being said, it certainly doesn't make it impossible.

Some lenders specialise in personal loans for self-employed applicants. Depending on your industry, you may also be able to qualify for some forms of business finance, such as an invoice finance facility, whereby you can borrow money against your unpaid invoices ahead of client payment.

Is there anything to keep in mind before applying?

Before committing to a bad credit secured loan, the main factor that customers should probably keep in mind is that the lender will have the right to repossess any property used as security in the case of a loan default. With that in mind, applicants should:

  • Borrow only according to their budget. Borrowers shouldn't apply for funds if they think they will have trouble repaying them.
  • Go through the loan’s terms and conditions to check just how much they could end up paying in fees and charges.
  • Not agree to take on extras like loan insurance until they have gone through the PDS (product disclosure statement).
  • Consider the loan terms. While short terms will require higher repayments, it will also cost less over the life of the loan in interest. Longer term loans have lower repayments, but cost more in interest over the life of the loan.
  • Account for the car’s depreciation in value over time, if considering a car loan.

Pros and cons of secured bad credit loans

Pros

  • Easier to qualify for. Offering asset security generally makes loans easier to qualify for. This can be particularly useful if you have a less-than-perfect credit history.
  • May be lower-cost. While having poor credit usually means that you will end up paying more than an applicant with an excellent credit history, you may be able to avoid paying top dollar if you choose to use security on your loan.
  • Higher funding access. If you have an asset of considerable value, you will likely be able to access a higher level of funding than if you were to use no asset at all.

Cons

  • More paperwork. You may find that proving that you are the owner of a viable asset requires more paperwork than opting for a low-doc, unsecured loan.
  • Could lose your asset. If for any reason you are unable to meet your repayments, you could have your asset repossessed by the lender to cover the costs of the loan.
  • Costly. Bad credit loans tend to cost more than regular loans, even with asset security. This could mean that you have to meet high repayments and will face a high overall loan cost.

Can you get a loan with no credit check?

No credit check loans are available on the market. However, they often have higher fees and interest rates than other loans. Responsible lenders tend to want to check all of your financials, such as your income, outgoings, existing debts and credit score prior to offering you a loan. This is so that they can work out whether or not you will be able to comfortably repay the loan amount.

Lenders offering "no credit check" loans could, in some instances, be a red flag for irresponsible lending. Remember that many lenders offer loans to applicants with bad credit scores, while still checking their histories and financials.

Bad credit secured loan eligibility criteria

Applying for any kind of loan requires borrowers to meet some eligibility criteria, and this is no different when it comes to secured bad credit loans. Applicants must be over 18 years of age, must be a permanent Australian resident or an Australian citizen, and they must have a regular source of income. They also need to have various details and proof of ownership of the collateral that they want to secure the loan with.

Applying for a secured loan will require that someone undergoes an identity verification process, and they'll also have to provide details about their employment and existing financial situation.

Have more questions about these loans?

How quickly can I get a secured bad credit loan?

While some lenders can give you access to funds on the same day or the next business day after approval, you could have to wait longer for others. If you require funds quickly, ensure that the lender with which you apply offers a same- or next-day turnaround.

How can I apply for a secured bad credit loan?

You can apply for one of these loans online. Lenders also give you the option of applying over the phone and in-store when physical locations are available.

Can I apply for a secured loan if I receive Centrelink payments?

Yes, some lenders accept applications from individuals who receive Centrelink payments. These loans usually come with additional eligibility criteria.

Find out what lenders will consider Centrelink borrowers

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10 Responses

    Default Gravatar
    dragi.b@icloud.comMarch 5, 2019

    Can I get a personal loan with a car as a guarantor

    Reply
      AvatarFinder
      JohnMarch 6, 2019Finder

      Hi dragi.b@icloud.com,

      Thank you for reaching out to Finder.

      You may be looking for a secured personal loan. These loans can be used to purchase a new vehicle or can be taken out if you already have an asset to offer as security. If you already have an asset, such as a vehicle, you can generally use the loan for any purpose.
      Security is usually a vehicle, such as a car, motorbike, or caravan, but can also be boats, jewelry, or something similar. Interest rates on these loans can be more competitive than unsecured loans. People who may not be eligible for an unsecured loan can have a better chance of being approved for a secured loan.

      You can press the link above to compare your options. Once you have chosen a particular provider, you may then click on the “Go to site” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.

      Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. Hope this helps!

      Cheers,
      Reggie

      Reply
    Default Gravatar
    DanDecember 30, 2018

    Hi wondering what loan is available to me I have a house with equity and own car out right. But had some bad luck this time last year my credit score would be poor. What options full time working

    Reply
      AvatarFinder
      JoshuaDecember 31, 2018Finder

      Hi Dan,

      Thanks for getting in touch with Finder. I’m sorry to hear about your credit score decreasing last year.

      Since you have a house and a car, you might consider secured credit loans such as home equity loans and secured personal loans.

      Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision. Moreover, check the eligibility requirements as well and consider whether the product is right for you.

      I hope this helps. Should you have further questions, please don’t hesitate to reach out again.

      Have a wonderful day!

      Cheers,
      Joshua

      Reply
    Default Gravatar
    SherreeJanuary 17, 2018

    I have really bad credit, and it’s not currently working, solo parent, but need a loan for $1200 with my car as security. Where would be the best place to look?

    Reply
      AvatarFinder
      RenchJanuary 17, 2018Finder

      Hi Sheree,

      Thanks for your inquiry.

      Generally, it would be difficult to get approved for a loan if you have a poor credit score. In most cases, lenders require good to excellent credit. There are quite a few that will accept applications from people with bad credit however this can cost higher interest rates and poorer terms. Thus, it is advisable to improve your credit before you borrow.

      If you need the loan now and want to offer your car as security, you may refer to our list of secured bad credit loans. On the page, is a comparison table you can use to see which lender suits you. You can press the “Go to site” button of your preferred lender to proceed with your application.

      Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.

      Best regards,
      Rench

      Reply
    Default Gravatar
    KapApril 13, 2017

    Hi
    I am bankrupt, have a cash shot fall, need $600 with my car as security. I am employed full time with good monthly take home pay. I would like to know whether any lender can help

    Reply
      AvatarFinder
      MayApril 13, 2017Finder

      Hi Kap,

      Thank you for your inquiry.

      Though I am not sure if you’ll be approved for a loan or not, you can find more information from our guide and contact a lender featured on our bankrupt loans page to explore your loan options and eligibility.

      Cheers,
      May

      Reply
    Default Gravatar
    mandyvFebruary 17, 2017

    Hi, I am on the Disability Support Pension fortnightly from Centrelink, I don know where to find out about a short term loan because I urgently need this for major repairs for my car. It is old and I rely on my car everyday. I had to take out an Advance Payment in January for an operation for my dog it was an urgent operation I had to do this. So I am paying off this Loan from Centrelink but it is not a lot.
    Hope you can give me advice on this.

    Reply
      AvatarFinder
      DeeFebruary 17, 2017Finder

      Hi Mandyv,

      Thanks for your question.

      You may want to check loans for Centrelink recipients featured on our website. Open that link and you should find a comparison table. Once you’re done comparing, please select the “Go to site” button to be safely redirected to your chosen lender.

      Please make sure that you’ve read the relevant T&Cs or PDS of the loan product you are interested in before submitting your application.

      Cheers,
      Anndy

      Reply
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