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Learn more about personal loans

What is a credit union?

Credit unions are member owned financial cooperatives. Credit unions are “not-for-profit” organisations, which means that they work for their members rather than to turn over a large profit (they are still profit-driven, however). This enables them to provide competitive rates to their customers, as the revenue made is distributed amongst the credit union owners, aka its members and customers.

There are roughly 75 credit unions Australia-wide. 

How do I apply for a personal loan from a credit union?

 In order to get a personal loan from a credit union, you must first become a member of the credit union. Typically, joining a credit union requires you pay a one-time membership fee, as well as making a small deposit.

Credit unions come in all shapes and sizes, so depending on the institution, the application process and the loan eligibility criteria will vary. Some credit unions will accept online applications, but others may require you to come into a branch to sign any necessary paperwork in person.

Credit unions offer secured and unsecured personal loans at fixed rates. This means that the interest rate charged will remain the same for the duration of the loan period. As always, it’s advised that you talk to a financial planner to work out which suits your needs best.

Loan agreement and pen on desk

Is a credit union personal loan better than a personal loan from a bank? 

Credit unions, like banks, assign their rates based on your income, credit history, credit score and existing debts. Banks usually reserve their lowest rates for people with excellent credit scores, which makes them harder for most people to acquire. Credit unions tend to have lower rates and fewer fees than banks, even for people with less than perfect credit histories. Having a good credit score will still bag you a lower rate with a credit union, but they tend to be more forgiving of bad credit borrowers, as they take into consideration your standing in the union and your whole financial picture.

Like banks, credit unions are registered under the Banking Act as Authorised Deposit-Taking Institutions (ADIs), which means that they are as safe to borrow from as any other bank.

Customer satisfaction is rated higher amongst credit unions, scoring 90 per cent satisfaction rate in 2015, according to Roy Morgan research. Banks, specifically the big four, Commonwealth Bank, NAB, Westpac and ANZ, scored just 81.5 per cent. (It’s worth bearing in mind that not all institutions were included in this survey).

On the downside, you may find that there are fewer loan options with a credit union than with a bank. Banks have the monopoly of the market and are therefore able to offer a wider range of financial products.

Also, the requirement of some credit unions to come into branch can be an inconvenience for many people in an era where almost everything is available electronically.

Pros
  • Fewer fees or no fees
  • Lower interest rates
  • Better customer service
  • Flexibility for people with bad credit
Cons
  • Fewer products
  • Less branches in fewer locations
  • Fewer online services

Frequently asked questions

Where can I get a personal loan?

The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:

There are three main ways to access personal loans. You can go through a comparison website, such as RateCity. You can use a finance broker. Or you can directly contact the lender.

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 is a credit rating/score?

Your credit rating or credit 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.

Will comprehensive credit reporting change my credit score?

Comprehensive credit reporting may change your credit score, either positively or negatively, depending on an individual's situation.

Under comprehensive credit reporting, credit providers will share more information, both positive and negative, about how you and other Australians manage credit products. That means credit reporting bureaus will be able to make a more thorough assessment of everyone’s credit behaviour. That will lead to higher scores for some consumers and lower scores for others.

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.

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.

Can students with no credit history get loans?

It is possible for students with no available history of borrowing or managing money to get a personal loan, though it may be more difficult as well as expensive than for borrowers with a good credit history.

Having no credit history means having no credit score. While many lenders may consider having no credit score to be better than having a bad credit score, they may still consider it riskier to lend to an unknown borrower and may charge higher interest rates or fees than to borrowers with good credit scores.

Do $4000 loans have no credit checks?

Many medium amount loans for $4000 have no credit checks and are instead assessed based on your current ability to repay the loan, rather than by looking at your credit history. While these loans can appear attractive to bad credit borrowers, it’s important to remember that they often have high fees and can be costlier than other options.

Personal loans for $4000 are more likely to have longer loan terms and will require a credit check as part of the application process. Bad credit borrowers may see their $4000 loan applications declined or have to pay higher interest rates than good credit borrowers.

Which lenders offer bad credit personal loans?

Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.

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. You should check with any prospective lender about their criteria before making a personal loan application.

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:

  1. First, find a lender willing to give you a bad credit personal loan. This process will be simplified if you go through a finance broker or use a comparison website like RateCity.
  2. Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced.
  3. Third, instead of spending those savings, use them to pay off the new loan.

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.

Can I get an easy/instant personal loan?

Some lenders are able to approve applications with little documentation 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.

How do I find out my credit rating/score?

You're entitled to one free credit report per year from credit reporting bodies like Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service. 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 sooner, you’ll probably have to pay.

How are credit ratings/scores calculated?

Different credit reporting bodies may use different formulas to calculate credit scores. However, they use the same type of information: credit history and demographic profile.

They’re likely to look at how many credit applications you’ve made, which lender the applications were for, what purpose 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 (i.e. because it has reached its expiry date).