Bad credit personal loans
Bad credit home loans
Bad-credit credit cards
Short term loans
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A complete guide to credit scores
Your credit score tells potential lenders whether you have a good or bad financial track record when it comes to borrowing money. Whether you’re looking for a home loan, a car loan, a personal loan or a credit card, lenders may be less inclined to deal with you if your bad credit score makes you look like a risky borrower.
To learn more about credit scores, including how to check your score, what it means for your finances, and what you can do about bad credit, download our guide:
Getting a loan with bad credit
- It’s not impossible to borrow money if you have bad credit. Some lenders specialise in bad credit borrowing, offering financial options to struggling Australians.
- Some loans are available with no credit checks, though most lenders will want to perform a comprehensive financial assessment before approving your loan.
- Most bad credit loans come with higher interest rates and fees. Make sure you can afford the repayments.
- Making timely repayments on a bad credit loan may help repair your bad credit score, which may help you borrow in the future.
Bad credit home loans
Many specialist lenders offer home loans for ‘non-conforming’ borrowers who have difficulty securing a more traditional home loan due to:
- paid or unpaid defaults
- tax debt
- too many loan enquiries
- discharged bankruptcies (when you have been released from bankruptcy status)
- being discharged after a Part 9 Debt Agreement (when your creditors agree to accept an amount of money that you can afford to pay to settle your debts)
- Bad credit home loans come with higher interest rates and fees, as the lender is seen to be taking on more risk. Once your negative listings expire from your credit report (and provided you meet your repayments), you could refinance to a home loan with a lower interest rate.
- Avoid trying your luck by applying for multiple different home loans, as this will further damage your credit score. An alternative is to see a broker or financial consultant who deals specifically with borrowers who have an impaired credit history.
- Most lenders assess borrowers with bad credit on a case-by-case basis. They will most likely want to meet with you, hear about your circumstances and examine your finances to see if you’ll be able to service a loan. Have your tax returns and pay slips ready to show you earn sufficient income.
Bad credit personal loans
bad credit personal loan is designed for borrowers with an impaired credit history. In some instances, they can help those with bad credit to consolidate their debts so it’s easier to pay them off. For example, a borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate.
Personal loans come ‘secured’ and ‘unsecured’. A bad credit personal loan is ‘secured’ when the borrower offers up an asset, such as a car, as collateral. The lender can then seize the asset if the borrower fails to repay the loan. An ‘unsecured’ bad credit personal loan doesn’t have an asset as security, and so comes with a higher interest rate than a secured loan.
- Bad credit personal loans come with higher interest rates than regular personal loans, so make sure you do your research to find some of the most competitive rates on the market.
- Each lender has its own policy, but generally you’ll find it hard to be approved for a bad credit personal loan above $50,000.
- While bad credit lenders may be sympathetic to your circumstances, they usually have stringent application processes to ensure you can handle your repayments.
Bad credit car loans
If you need a car for your family or work but are concerned your credit history will make it difficult to get a loan, there are options available to you. Bad credit car loans cater for borrowers with an impaired credit history. They are almost always secured by the vehicle you are purchasing as an asset. If you can’t make the loan repayments, the lender will repossess your asset.
- Bad credit car loans come with higher interest rates compared to more traditional car loans, due to the added risk for the lender.
- Car loan brokers and specialists are available for borrowers with a bad credit history. They can also assist with helping you improve your credit score.
- You will need to purchase comprehensive insurance to get approved for a bad credit car loan, so it’s a good idea to include this cost in your budget.
Bad-credit credit cards
Credit cards can help Australians manage their purchases and everyday expenses, though their interest charges can quickly add up if you’re not careful. If you have bad credit, it may be more difficult to be approved for a credit card, as lenders may be concerned aboutyour ability to manage your repayments.
Some lenders have credit card options available for bad credit borrowers, as well as balance transfer credit cards that can be helpful for clearing the balance owing on existing credit cards – paying off your outstanding debts can help you become a less risky borrower.
- Bad-credit credit cards are more likely to have higher interest rates and/or fees than other credit card options.
- If you transfer your currently owing credit card balance to a new card, then start spending on your old cards again, you risk ending up in even more debt.
- Bad-credit credit cards may have lower credit limits and tighter restrictions on how they can/can’t be used.
Bad credit short term loans
Short term loans include small loans such as payday loans for amounts under $2000, as well as medium-amount loans for amounts under $5000. Short term loans tend to be repaid over a matter of months or even weeks, and often have very high interest rates and/or fees.
If you’re in financial hardship and are looking to borrow a small amount, it’s important to compare your options before applying for a short term loan, as you could be in for high costs if you’re not careful.
Short term loans often have very high interest rates and/or penalty fees if you miss a payment, so you’ll want to be confident you can repay the loan before making an application
Some short term loans have no credit checks, though you’ll often still need to prove you have a stable income to repay the loan.
Borrowers in bad financial situations may be eligible for a small no-interest loan to pay for essentials.
Bad credit loan calculator
Having a bad credit history is never good – but it doesn’t mean you can’t qualify for personal loans.
Sure, you’ll find it harder than someone with a better credit history. You’d also have to pay a higher interest rate. However, there are several dozen lenders who are willing to consider applications from people with bad credit histories.
This guide will explain the ins and outs of personal loans in general and bad credit personal loans in particular.
It will also explain debt consolidation, credit ratings/scores and comprehensive credit reporting.
Each person’s financial circumstances are unique, so while bad credit personal loans will be suitable for some people, they won’t be suitable for others. The key is to do your research so you can make the best possible decisions.
What is a personal loan?
A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan – however, the process is easier and faster than taking out a mortgage. Loan sizes usually range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.
How much can I borrow with a personal loan?
It’s unusual for a lender to make a personal loan above $100,000, although there is no formal limit. As with all lending products, each lender sets its own policies, while each borrower is assessed on a case-by-case basis.
What interest rates are charged for personal loans?
Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.
For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.
For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent. (Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions – although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.)
What are the pros and cons of personal loans?
The advantages of personal loans are that they’re easier to obtain than mortgages and usually have lower interest rates than credit cards.
One disadvantage with personal loans is that you have to go through a formal application process, unlike when you borrow money on your credit card. Another disadvantage is that you’ll be charged a higher interest rate than if you borrowed the money as part of a mortgage.
Can I get an easy/instant personal loan?
Some lenders are able to approve applications over the internet and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.
Can I get a personal loan if I receive Centrelink payments?
It is hard, but not impossible, to qualify for a personal loan if you receive Centrelink payments. Some lenders won’t lend money to people who are on welfare. However, other lenders will simply consider Centrelink payments as another factor to weigh up when they assess a person’s capacity to repay a loan.
How are personal loans regulated?
Personal lenders are regulated by ASIC (the Australian Securities & Investments Commission) and must follow responsible lending rules. That means they can’t lend money without making “reasonable inquiries” about a borrower’s financial situation and ensuring the loan is “not unsuitable” for them.
Bad credit personal loans
What is a bad credit personal loan?
A bad credit personal loan is a personal loan designed for somebody with a bad credit history. They have higher interest rates than regular personal loans and are also harder to access.
What are the pros and cons of bad credit personal loans?
In some instances, bad credit personal loans can help people with bad credit history to consolidate their debts in such a way that it makes it easier for them to repay those debts. This is because the borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate.
However, this strategy can backfire if the borrower spends the extra money instead of using it to repay the new loan. Another disadvantage of bad credit personal loans is that they have higher interest rates than regular personal loans.
How much can you borrow with a bad credit personal loan?
Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans – they also get loaned less money. Each lender has its own policies, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.
How long does it take to get a bad credit personal loan?
In the best-case scenario, an application for a bad credit personal loan can be made within minutes and then be approved within 24 hours.
How do you get a bad credit personal loan?
You can get a bad credit personal loan by applying directly to a lender, by going through a mortgage broker or by using a comparison website like RateCity.
Can I get guaranteed approval for a bad credit personal loan?
No. Bad credit personal loans are harder to access than regular personal loans, so lenders will want time to study your application.
What is a secured bad credit personal loan?
A bad credit personal loan is ‘secured’ when the borrower offers up an asset (such as a car or jewellery) as collateral or security. The lender can then seize the asset if the borrower fails to repay the loan.
What is an unsecured bad credit personal loan?
A bad credit personal loan is ‘unsecured’ when the borrower doesn’t offer up an asset (such as a car or jewellery) as collateral or security. Lenders charge higher interest rates on unsecured loans than secured loans.
Which lenders offer bad credit personal loans?
Several dozen lenders offer bad credit personal loans. These are generally smaller lenders that aren’t household names.
What is debt consolidation?
Debt consolidation is the process of rolling several old debts into one new debt – usually to save money or for the sake of convenience.
What are the pros and cons of debt consolidation?
In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay a (different) $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 15 per cent.
However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.
How do I consolidate my debt if I have bad credit?
The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.
However, people with bad credit histories can make debt consolidation work by following this three-step process. First, find a lender willing to give you a bad credit personal loan – this process will be simplified if you go through a mortgage broker or use a comparison website like RateCity. Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced. Third, instead of spending those savings, use them to repay the new loan.
What is bad credit?
A person is deemed to have ‘bad credit’ when they have a poor history of repaying debts.
What is credit history?
Your credit history covers everything to do with applying for loans. It includes the number of loans you’ve applied for, the amounts you’ve borrowed and your record of meeting repayment schedules.
What causes bad credit history?
Bad credit history is caused by filing for bankruptcy, defaulting on your debts, falling behind on your repayments and having loan applications rejected. Lenders are wary of borrowers who demonstrate this sort of behaviour, because it suggests they might struggle to repay future loans.
How do I know if I’ve got a bad credit history?
You can find out what your credit history is like by accessing what’s known as your credit rating or credit score.
What is a credit rating/score?
Your credit rating/score is a number that summarises how credit-worthy you are based on your credit history.
The lower your score, the more likely you are to be denied a loan or forced to pay a higher interest rate.
What is a bad credit rating/score?
Credit ratings/scores are calculated by credit reporting bodies such as Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service. These are separate organisations, so they use different systems.
Equifax gives scores between 0 and 1,200:
- 833 to 1,200 = Excellent
- 726 to 832 = Very good
- 622 to 725 = Good
- 510 to 621 = Average
- 509 or less = Below average
Dun & Bradstreet (through the Credit Simple service) gives scores between 0 and 1,000:
- 800 to 1,000 = High end
- 700 to 799 = Great
- 500 to 699 = Average
- 300 to 499 = Room to improve
- 299 or less = Low
Experian gives scores between 0 and 999:
- 961 to 999 = Excellent
- 881 to 960 = Good
- 721 to 880 = Fair
- 561 to 720 = Poor
- 0 to 560 = Very poor
The Tasmanian Collection Service doesn’t give scores. Instead, it prepares credit reports for credit providers and then lets those providers make their own assessment.
What causes bad credit ratings/scores?
Failing to repay loans and bills will damage your credit score. So will falling behind on your repayments. Your credit score will also suffer if you apply for credit too often or have credit applications rejected.
How are credit ratings/scores calculated?
Different credit reporting bodies use different formulas to calculate credit scores. However, they use the same type of information – credit history and demographic profile.
So they’re going to look at how many credit applications you’ve made, who they were with, what they were for, how much they were for and your repayment record. They’ll also look at your age and postcode. They’ll also look to see if you’ve had any bankruptcies or other relevant legal judgements against you.
Your score can change if your demographic profile changes or new information is added to your file (such as a new loan application) or existing information is removed from your file (because it has reached its expiry date).
Who calculates your credit rating/score?
Credit ratings/scores are calculated by credit reporting bodies. The main bodies are Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service.
How do I find out my credit rating/score?
Credit reporting bodies like Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service will give you a free credit report once a year. You can also get a free report if you’ve been refused credit in the past 90 days.
Credit reporting bodies have up to 10 days to provide reports. If you want to access your report quickly, you’ll probably have to pay.
How can I improve my credit rating/score?
Your credit score will improve if you demonstrate that you’ve become more credit-worthy. You can do that by minimising credit applications, clearing up defaults and paying bills on time.
Another tip is to get the one free credit report you’re entitled to each year – that way, you’ll be able to identify and fix any errors.
If you want to fix an error, the first thing you should do is speak with the credit reporting body, which make take of the problem or contact credit providers on your behalf.
The next step would be to contact your credit provider. If that doesn’t work, you can refer the matter to the credit provider’s independent dispute resolution scheme, which would be either the Financial Ombudsman Service or the Credit and Investments Ombudsman.
If that doesn’t work, your final options are to contact the Privacy Commissioner and then the Office of the Information Commissioner.
What’s a credit report?
A credit report is a record of your credit history – your credit enquiries, borrowings and your repayments. The report will include information about any bankruptcies or other relevant legal judgements. It will also include biographical information such as your address, date of birth, driver’s licence number and employment history.
Click here to view a dummy Equifax credit report.
Comprehensive credit reporting
What is comprehensive credit reporting?
Comprehensive credit reporting means including both positive and negative information on a person’s credit file. Before comprehensive credit reporting was introduced, only negative information was included.
When was comprehensive credit reporting introduced?
Why was comprehensive credit reporting introduced?
Comprehensive credit reporting was introduced to make credit reports fairer and more accurate. Under the previous system, credit providers only saw negative information about potential borrowers. Now, they get to see both positive and negative information, which means that credit providers can see if a borrower’s negative credit behaviour is typical or a one-off.
A property and personal finance writer, Nick Bendel covers property, loans, credit cards, superannuation, and other bank products. Nick has previously written for The Adviser, Mortgage Business, Lifehacker, Business Insider, Yahoo Finance, and InvestorDaily, and loves getting elbow-deep in the latest ABS, APRA and RBA data.