Having bad credit in Australia doesn’t automatically mean every lender will say no. A default, late payments or a low credit score make banks more cautious, but some lenders specialise in borrowers with a patchy credit history. The catch is the price: bad credit personal loans usually come with higher interest rates and fees, and licensed lenders still have to check that you can afford the repayments.
In this guide, find out what is actually on your credit file, which option fits your situation, what a bad credit loan really costs compared with a standard one, and the steps that most improve your chances. Use the calculator below to see the monthly repayment for your profile.
What’s on your file → how lenders will see you
“Bad credit” covers very different situations. Find yours in the table to see how a lender is likely to react:
| On your credit file | How long it stays | How lenders usually react |
|---|---|---|
| One or two late payments | 2 years in repayment history | Many mainstream lenders may still approve, sometimes at a higher rate |
| Repeated late payments | 2 years in repayment history | Banks often decline; non-bank lenders may consider |
| Paid default | 5 years, marked as paid | Specialist lenders may approve; banks rarely |
| Unpaid default | 5 years | Most lenders decline until it is paid |
| Many recent credit applications | Enquiries usually stay 5 years | Seen as a sign of credit stress |
| Bankruptcy or debt agreement | Several years, including after it ends | Very few lenders, usually only once discharged |
A default is only listed if you owed at least $150, it was at least 60 days overdue and the lender sent you the required notices. If any of that didn’t happen, the listing may be wrong. See how long a default stays on your credit file and how to correct one.
Worked example: $5,000 with good, fair and bad credit
The same $5,000 loan over 36 months, at rates typical for each credit profile:
| Credit profile | Example rate | Monthly repayment | Total interest |
|---|---|---|---|
| Good | 10% p.a. | $161.34 | $808.09 |
| Fair | 16% p.a. | $175.79 | $1,328.27 |
| Bad credit | 24% p.a. | $196.16 | $2,061.91 |
| Bad credit, high-cost lender | 30% p.a. | $212.26 | $2,641.28 |
Example rates only, not offers. Fees are not included.
Bad credit can cost you more than three times the interest of a good-credit borrower on the same loan. Two ways to reduce that cost:
- Borrow less: $3,000 over 24 months at 24% costs $806.72 in interest, about the same as $5,000 over 36 months with good credit.
- Repay faster: $5,000 at 24% over 24 months instead of 36 costs $1,344.53 instead of $2,061.91, if the higher repayment of $264.36 fits your budget.
Always compare loans on the comparison rate, which includes most fees, not just the advertised interest rate. Run your own numbers in our personal loan calculator.
Bank, non-bank or specialist lender: which one for your profile
| Lender type | Best for | Watch out for |
|---|---|---|
| Major bank | Minor blemishes, strong income, existing customer | Strict credit rules; declines add enquiries to your file |
| Credit union or mutual bank | Members with a stable history at the institution | May require membership first |
| Non-bank or online lender | Fair credit, regular income, smaller amounts | Higher rates and fees; most can’t charge more than 48% a year including fees, but small loans have separate caps |
| Specialist bad credit lender | Paid defaults, discharged bankruptcy | The most expensive option; read every fee |
Whichever you choose, check that the lender holds an Australian Credit Licence.
6 things that improve your chances (ranked by impact)
- Fix errors on your credit report. Get your report free every 3 months from each credit reporting body. A wrongly listed default can be corrected, and that changes everything.
- Pay any unpaid default. It stays on your file, but a paid default looks far better to lenders than an unpaid one.
- Show 3 months of clean bank statements. Lenders read them closely: no dishonoured payments, no unarranged overdrafts, regular income.
- Borrow less, or over a shorter term. A smaller repayment is easier to approve.
- Reduce or close unused credit card limits. Lenders count the full limit as a potential debt, even if your balance is zero.
- Stop applying everywhere. Each application adds an enquiry to your file. Get quotes that use a soft check first.
Been declined already? Read loan application declined: why, and what to do next.
Secured vs unsecured with bad credit: when using your car makes sense
A secured loan uses an asset, usually a car, as security. Because the lender can take the asset if you don’t pay, it often offers a lower rate:
| $5,000 over 36 months | Example rate | Monthly | Total interest |
|---|---|---|---|
| Unsecured, bad credit | 24% p.a. | $196.16 | $2,061.91 |
| Secured by a car, bad credit | 14% p.a. | $170.89 | $1,151.97 |
It makes sense when the car is worth well over the loan amount and your income is stable. It makes no sense if you need that car to get to work and your budget is already tight: missing payments could cost you both the car and your job.
Guarantor loans: what your guarantor is really signing up for
A guarantor, usually a family member, agrees to repay the loan if you don’t. It can get you approved or lower your rate, but before anyone signs, be clear about what they are taking on:
- They can be asked to repay the whole remaining debt, not just a missed payment.
- If the guarantee is secured against their home, that home can be at risk.
- The guarantee can show on their credit file and affect their own borrowing.
- They should get independent legal advice and read the contract before signing.
If you wouldn’t be comfortable seeing your guarantor pay the full amount, the loan is probably too big.
Before you borrow: options that cost less
If the loan is for an essential item and you have a concession card or a lower income, a No Interest Loan of up to $2,000 costs nothing and needs no credit check. See no credit check loans in Australia: what actually exists. If you are struggling with existing repayments, ask your lender for a hardship arrangement before taking new credit, and call the free National Debt Helpline on 1800 007 007. Several debts at once? See when debt consolidation actually saves money.
Frequently asked questions
Can I get a personal loan with bad credit in Australia?
Often yes, but not always from a bank. Non-bank and specialist lenders consider borrowers with defaults or late payments, at higher rates, and they must still check you can afford the repayments.
Can I get a loan with a default on my credit file?
Some lenders approve applicants with a paid default, especially if it is older and your recent history is clean. An unpaid default makes approval much harder.
What credit score do I need for a personal loan?
There is no single minimum: each lender sets its own criteria and looks at your whole file, income and expenses, not just the score.
Are guaranteed approval bad credit loans real?
No licensed lender can guarantee approval, because responsible lending rules require them to assess every application. Treat any guarantee as a red flag.
How can I improve my credit score quickly?
Correct errors on your report, pay overdue accounts, keep every repayment on time and avoid new applications. Late payments drop out of your repayment history after 2 years.
Conclusion
Bad credit personal loans exist in Australia, but they cost more and still require you to show you can afford them. Check your credit file first, fix what you can, borrow the smallest amount over the shortest term you can manage and compare every offer on its comparison rate. And if the loan is for essentials, look at a No Interest Loan before anything else. Borrow only what you can afford to repay.
