Bad Credit Loans

Even a bad credit score won’t stop you from getting approved for a loan. Learn about your options across a range of finance types with Savvy.
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Last updated on April 20th, 2022 at 12:40 pm by Thomas Perrotta

Bad credit? Don’t sweat it

Get approved for your loan with bad credit

If you’re saddled with a bad credit score, it’s important to know that you’re far from alone: hundreds of thousands of Australians find themselves in that very position. While it hasn’t always been the case, there are more specialist lending options today than ever before when it comes to financing loan applications from those with imperfect credit histories. Just because you have bad credit doesn’t mean you can’t be approved for the loan you need to help you achieve your financial goals.

Let Savvy help you out

We understand that bad credit can happen for a myriad of reasons and believe that Australians in this position deserve a second chance at financing. Because of this, we’ve built partnerships with lenders across a variety of finance types to help you find your ideal loan. Whether you’re in the market for your next car, a new home or miscellaneous funds for your personal needs, you can compare your options here and start the application process today.

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Why Savvy can help you find your ideal bad credit loan

More about bad credit loans

How are bad credit loans different to other finance offers?

There are a few key areas where bad credit loans generally differ from those designed for customers with a strong record in terms of their credit history. The two most important factors which are impacted by bad credit are your borrowing power and the cost of interest and fees.

Borrowing power

Because borrowers who’ve struggled with their credit score in recent years are seen as a greater risk of defaulting, lenders are less likely to offer significant amounts on their loans. This is especially the case for unsecured loans such as personal or business finance, which may only be obtainable for up to around $10,000 and $30,000 respectively with bad credit. It’s useful to approach the process with this in mind, as you can potentially avoid delays in the process brought about by applying for too much.

However, secured finance such as car loans can, in some cases, enable borrowers without a strong credit history to be approved for larger loans up to the maximum value of the asset. Home loans can also be taken out with a specialist lender for larger amounts due to the nature of the loan’s security (property) being highly valuable and often able to be resold easily.

Interest and fees

Part of the risk mitigation taken on by specialist lenders in this position comes in the form of increased interest rates and fees. These are charged as a result of the greater risk taken on by lending to an unproven borrower or one who has struggled with repayments in the past. It’s important to try to secure the lowest rates and fees available, and there are many ways to boost your chances of approval for a lower rate, but you’ll need to enter this process aware of the fact that your loan will cost more than those generally offered to borrowers with good credit.

How can I increase my chances of approval for a bad credit loan?

There are several ways you can go about maximising the likelihood of approval for your loan application. It’s important to do some or all of these, depending on the type of loan you’re applying for. These include:

Show positive recent credit behaviour

Even with very bad credit, taking steps to start increasing your credit score will boost your chances of being approved for the loan you’re after. One of these is continuing to pay your bills and other liabilities such as loans in a timely manner. Doing so will help your credit score grow and fill your credit file with positive recording in the weeks and months leading up to your application.

Pay off outstanding debts

The less debt you have outstanding, the greater your chances of approval. Each debt, such as outstanding loans or credit cards yet to be repaid, will impact your ability to borrow, as they come with monthly commitments to contribute instalments. By paying them down, you’re not only removing that roadblock but also showing lenders you’re capable of promptly paying your debts.

Save up a deposit

Displaying savings will also increase a lender’s confidence in you as a borrower. This is because you’re showing financial discipline in being able to set money aside and save up over an extended period. On top of this, a deposit reduces the required loan amount, which in turn cuts down on the potential risk taken on by your lender. Of course, deposits are required for home loans, so saving up a larger deposit in this case can help you get approved and potentially save you a significant amount.

Lower your credit limits

With lower limits on your credit cards, you decrease the amount of overall unsecured debt you’re exposed to. Even if you don’t have any debts outstanding on your credit card, it can be impacted by a high limit. By reducing your limit, you can improve your chances of receiving the green light on your application from your chosen lender.

Try to avoid job and address changes

Lenders want to see stability in your life, as this suggests changes to your income and expenses are more minimal and thus reduce the risk of becoming overwhelmed by your loan repayments. Staying in the same job for an extended period and trying to stick to the same address in the months and years leading up to your application can make a big difference (particularly when applying for a home loan).

Common bad credit loan questions

Can I get approved for a loan if I’m on Centrelink?

Yes – there are specialist lenders across all finance types who can accept Centrelink payments as part of your assessable income. It’s important to know which payments can be accepted in your loan application, which include the following:

  • Aged pension
  • Disability pension
  • Veterans’ Affairs pension
  • Family Tax Benefits A and B
  • Single parent payments
  • Carer payments
  • JobSeeker (as a low income supplement)
Is pre-approval still available for bad credit finance?

Yes – you can still be pre-approved for finance even if the product you’re applying for is designed for borrowers with bad credit. This will help you gain a clear understanding of how much you’re eligible to borrow, which can help you if you’re using the pre-approval to negotiate on the price of a particular item or asset.

Will I be able to refinance to a better loan if my credit score improves?

Yes – borrowers can look to refinance their loans down the track if they’ve kept up with repayments and their credit score has improved to potentially take advantage of a better deal and lower rates. While this isn’t really an option for small loans, you can refinance just about any other loan deal. However, you’ll need to consider any early exit costs associated with doing so.

How long will it take me to get approved?

Having bad credit and applying to a specialist lender may not impact the approval time for your loan as much as you might expect. However, this depends entirely on the type of loan you apply for. A small loan or personal loan can be approved and funded as soon as the same day you apply and car loans can take as few as two days, but a larger loan like a mortgage is likely to take weeks or months to complete, especially with a complex financial profile.

Will I be able to take out a loan if I’m under a Part IX debt agreement?

Yes – there are lenders operating in the market who can approve applications from individuals under a Part IX debt agreement. It’s important to note, though, that you’ll stand a far greater chance of approval for your loan if you wait until your agreement has been completed, as more lenders will be able to help you.

Can I be approved with unpaid defaults on my file?

Yes – lenders who work with customers who have an imperfect credit record can often look past unpaid defaults and are able to approve your application. Like a Part IX debt agreement, though, you’ll boost your chances of approval if you pay off your existing defaults before you apply, as your outstanding debt will be lower and your borrowing power will be increased overall.

How soon after being discharged from bankruptcy can I apply for my loan?

You can apply for finance from the day after you’re discharged from bankruptcy. Unlike Part IX debt agreements, bankruptcies won’t allow you to apply whilst hanging over your head, so you’ll be required to wait until your commitments are completed before applying for credit with a lender.

Can I get guaranteed approval on my loan with any lenders in Australia?

No – all lenders are required to do their due diligence when assessing applications to determine whether the individual or couple is able to comfortably take on and repay the proposed loan. In that way, there is always an element of oversight from the lender which prevents guaranteed approval in any form.