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Need a personal loan with bad credit? View your loan options

Need a personal loan with bad credit? View your loan options

Receiving a poor credit rating and being black-marked as a poor credit risk can be a serious matter, especially if you are looking to take out a mortgage or personal loan in the future.

Having a bad credit rating makes you look like a high risk to lending institutions, who will moderate that risk by charging you higher interest rates or refusing your application for a loan altogether.

What are bad credit loans?


Bad credit loans are designed for people with impaired credit files and bad credit histories. They are also provided to first home buyers and the self-employed, who lenders sometimes regard as higher-risk borrowers.

Mortgage brokers can help people with bad credit histories find some of the best personal loans and car loans on the market. If you have an impaired credit file or a poor credit history, a qualified broker may be able to provide some assistance.

Lenders that specialise in finance for people with bad credit histories can sometimes have bad reputations, because borrowers usually have to pay higher interest rates. However, this reflects the increased risk the lender is being asked to assume. If you feel more comfortable, you can apply for a loan at a major bank, but keep in mind that they usually have stricter criteria than other lenders, which might result in your application being rejected. Rejected loan applications can do further damage to your credit score, which can affect your future loan applications.

Regardless of where you apply, it’s important not to sign up a for a loan that you doubt you’d be able to repay. Missing or defaulting on your loan repayments can lead to financial problems and damage your credit score.

Here are five tips to keep in mind when taking out your loan to avoid impairing your credit rating any further:

  • Get an idea of how much you can safely borrow by using a personal loan calculator.
  • Once you know how large the payments will be, factor them into your weekly budget to make sure you can afford the repayments.
  • If there is any doubt that you will be able to afford the repayments, seriously consider if taking out the loan is in your best interests.
  • Choose the credit providers you apply for wisely, because if you are rejected, this will damage your rating even further.
  • Save up a reserve of funds to tide you through an emergency, so you can avoid defaulting on your loan.

RateCity Personal Loan Marketplace

There’s another way to search for a personal loan that suits your household finances. RateCity’s Personal Loan Marketplace lets you compare personal loans not just by their interest rates and fees, but by your estimated chance of being approved by the lender, all without affecting your credit score.

Simply enter your details to receive a list of personal loan options from different lenders in less than 60 seconds, based on your personal finances and credit history.

Other personal loan options for bad credit borrowers:

    • Secured personal loans– Using the value of your car or home to guarantee your loan can help you qualify for some personal loans when you have bad credit.
    • Guarantor personal loans– Some lenders allow borrowers with bad credit to take out personal loans that are guaranteed by a family member or friend. If you can’t pay back the loan, it’s the guarantor’s job to cover the cost.
    • Payday loans– For smaller amounts, some lenders are less concerned with your credit history as they are with your current finances. Remember that payday loans often have hefty penalties if you don’t pay on time, and you could risk further worsening your credit rating.

What is a bad credit rating?


Your credit rating comes from an assessment of several different factors. These include any outstanding debts or repayments you have not made, previous applications for credit and their status, as well as the types of credit and lenders you have applied to.

Common practices that damage a credit rating include:

  • Missing payments
  • Making late payments
  • Skipping payments
  • Exceeding card limits
  • Being careless about your bills
  • Making multiple credit applications at once

Having no credit history (e.g. having never applied for a credit card or loan before) can sometimes be considered “bad” credit by some lenders, and can limit your lender’s ability to predict whether you’ll be able to repay a credit card or loan. 

To avoid red tape and not fall into bad credit habits, experts recommend that you conduct regular reviews of your credit payment history.

How to find your credit rating and/or credit history:

There are several credit reporting agencies that keep track of the borrowing histories of Australians, and assign the credit ratings that lenders use when assessing credit applications.

These agencies include:

Contact one or more of these agencies for a copy of your credit history. You can usually request one free copy of your credit report per year, with additional requests incurring fees. You can also request a free copy of your credit report if you have been refused credit within the past 90 days, so you can find out the reason for your refusal.

What is comprehensive credit reporting?

From March 2014, the Australian credit system began to report credit history more comprehensively. Under the previous arrangement, it was not possible for positive repayment history to balance out any negative history. Even with a secured bad credit loan, your negligence would still be reported to the credit bureaus.

This is no longer the case as comprehensive credit reporting provides a more holistic view of your past payments. This may be beneficial to people with a bad credit rating who may have defaulted on a loan but have kept up with bill repayments regularly, as well as new borrowers with short of limited credit histories. 

Keep in mind that participation in comprehensive credit reporting is voluntary at time of writing, and that not every credit provider offers positive credit information to credit agencies.  

How to improve a bad credit rating:

  • Keep up to date with repayments and bills
  • Keep a regular job and residence
  • Build up your savings
  • Clear existing debts and avoid new debts
  • Correct any errors/inaccuracies on your credit report (contact the credit agency)

If you would like to compare more specific features on our extensive range of fixed-rate and variable rate loans, visit our personal loans comparison page.

How do I know if I've got a bad credit history?

You can find out what your credit history looks like by accessing what's known as your credit rating or credit score. You're also able to check your credit report for free once per year.

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.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.

Are there emergency loans with no credit checks?

While many personal loans require a credit check as part of the application process, some personal loans and payday loans have no credit checks, which may appeal to some borrowers with a bad credit score.

Keep in mind that even if a loan is available with no credit check, the lender will likely want to confirm that you can afford the repayments on your current income.

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, which can help make it easier for them to clear 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 and potentially fewer fees.

However, this strategy can backfire if the borrower spends the loaned funds 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.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.



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