Bad Credit Personal Loans Australia: What You Can Actually Get (and What It Costs)
Yes, you can borrow with bad credit — but the rate premium is steep. Here's exactly who'll lend to you, what it costs in dollar terms, and the traps to avoid.
Bad Credit Personal Loans in Australia: Here's What You Can Actually Get (and What It'll Cost)
Yes, you can get a personal loan with bad credit in Australia — but you'll pay a significant rate premium for it. Borrowers with an Equifax score below 460 face average rates of 25.25% p.a., compared to 9.79% p.a. for top-credit borrowers — a 15.5 percentage point gap that adds nearly $5,000 in extra interest on a typical debt consolidation loan. This guide breaks down exactly who will lend to you, what it costs in dollar terms, and the traps to avoid.
What 'Bad Credit' Actually Means in Australia
Australia has three credit reporting bureaus: Equifax, Experian, and illion. Each uses a different scoring range, but Equifax is the most widely used by lenders, running from 0 to 1,200.
Here's how the Equifax bands break down — and what they mean for lending:
| Equifax Score | Band | What Lenders Think |
|---|---|---|
| 853–1,200 | Excellent | Best rates, instant approvals |
| 735–852 | Very Good | Competitive rates, easy approval |
| 661–734 | Good | Most lenders will approve |
| 460–660 | Average / Fair | Higher rates, stricter criteria |
| 0–459 | Low | Specialist lenders only |
The national average Equifax score in Australia is 864 (Excellent, 2025). The average personal loan borrower sits at 782 (Very Good). If you're below 661, you're already outside the approval window for most mainstream lenders — and below 460, you're in territory where most banks won't look at you at all.
What puts a score below 460? Defaults (unpaid debts reported by creditors), serious credit infringements, court judgments, debt agreements, or bankruptcy. Defaults stay on your credit file for up to five years. Bankruptcies sit for five to seven years. Late payments and multiple hard credit enquiries also drag your score down — just less dramatically.
Can You Get a Personal Loan with Bad Credit? (The Honest Answer)
Yes. But where you can get one — and how much it'll cost — depends on exactly where your score sits.
Mainstream banks (NAB, ANZ, Westpac, CommBank): Typically require a minimum Equifax score of around 661. Below that, most will decline outright or offer rates so loaded with risk pricing they're not competitive. Don't waste a hard enquiry applying to the big four if you're below 661.
Online lenders and fintechs (e.g. Plenti, Harmoney, OurMoneyMarket): Many approve from around 580. They use more nuanced credit assessment — your bank statement patterns and income stability carry more weight than at a bank. Rates are higher than bank rates but more transparent.
Specialist bad credit lenders: Will consider applications from around 500. These lenders price heavily for risk — expect rates from 20% p.a. upward and loan amounts usually capped at $10,000–$15,000 for first-time applicants.
Credit unions and mutuals: Often more flexible than banks for existing members. If you have a history with a credit union, it's worth a soft enquiry before going to a specialist lender.
The honest answer: you can get a loan, but below 580 your options narrow fast and your rate climbs steeply.
How Much More Will You Pay? The Rate Penalty in Dollar Terms
This is where bad credit moves from abstract to expensive.
The average rate spread between bad-credit borrowers and top-credit borrowers in Australia is 15.5 percentage points — 25.25% p.a. vs 9.79% p.a.
Here's what that means on real loan amounts:
The Typical Debt Consolidation Loan
| Good Credit (9.79% p.a.) | Bad Credit (25.25% p.a.) | Difference | |
|---|---|---|---|
| Loan amount | $17,407 | $17,407 | — |
| Term | 35 months | 35 months | — |
| Total interest | ~$2,750 | ~$7,700 | $4,950 extra |
| Monthly repayment | ~$574 | ~$651 | $77/month more |
Larger Loan: $30,000 Over 5 Years
The gap widens on bigger loans. Between a 580 credit score and a 720 score on a $30,000 loan over five years, you'll pay $8,000–$14,000 in extra interest — depending on the lender and your full credit profile.
That's real money. For many borrowers, spending 6–12 months rebuilding their score before applying is worth more than the urgency of getting a loan today.
Lender Types and What They'll Actually Lend You
Big Banks
The big four won't usually approve personal loans below a 661 Equifax score. Some use their own internal scoring models that factor in your banking history with them — so if you've had a transaction account with your bank for years, there's a marginal chance of approval near the threshold. But don't count on it.
Online Lenders and Fintechs
Lenders like Plenti, Harmoney, and OurMoneyMarket use risk-based pricing — they approve more applicants but price the risk into your rate. Loans from $2,000 to $50,000 are available, and approval is possible from around 580. Expect rates in the 12–25% p.a. range depending on your score.
Specialist Bad Credit Lenders
Lenders in this space specifically serve borrowers with scores under 580 and those with defaults or debt agreements. They will lend from around 500, but:
- Rates typically run 20–35% p.a.
- Loan amounts are usually capped at $10,000–$15,000 initially
- Fees (establishment, monthly) stack on top of the rate
- Some require an asset as security
Credit Unions and Mutuals
Not all credit unions use the same cutoff as banks. For existing members, some will assess applications with scores below 661 using a relationship-based approach. Rates are generally lower than specialist lenders. Worth a conversation if you're already a member.
What Lenders Look at Beyond Your Credit Score
Your credit score is a starting point, not the whole picture. Lenders doing thorough assessment look at:
- Income stability: Regular, consistent income — ideally through employment — outweighs the same income from irregular sources. Casual, contract, and self-employed borrowers face higher scrutiny.
- Employment type: Full-time employment is easiest to assess. Casual and gig workers will need to show 12+ months of income history.
- Expense-to-income ratio: Your net income minus your recurring expenses. Lenders want to see genuine surplus — not just that you earn enough, but that you spend responsibly.
- Bank statement patterns: Most lenders now require 90 days of bank statements. They're looking for gambling transactions, consistent overdrafts, missed direct debits, and bill payment failures. These are red flags that override a reasonable credit score.
- Existing debts: Total debt load relative to income. Multiple buy-now-pay-later accounts count as credit commitments.
- Whether you've addressed the cause: A default from three years ago that's now resolved is viewed differently from a default that's still active. A short explanation — unprompted — can help, but doesn't guarantee anything.
How to Apply Without Making Your Score Worse
Every time a lender pulls your credit file as part of a formal loan application, it's recorded as a hard enquiry. Hard enquiries can lower your score by 5–10 points each, and multiple enquiries in a short period signal desperation to future lenders.
What you should do instead:
- Check your own score first. Checking your own score is a soft enquiry — it doesn't affect your score. Equifax, Experian, and illion all offer free annual checks. You can also use services like Credit Savvy (free, soft enquiry only).
- Use a broker for multi-lender comparison. A mortgage or personal loan broker can conduct soft enquiries across multiple lenders before you formally apply. LoanGorilla compares 30+ personal loan lenders — one application, one enquiry.
- Apply to one lender at a time. If you go direct, pick the most likely fit based on their published criteria and apply once. Wait for a response before trying elsewhere.
- Space out applications. If you need to apply to multiple lenders, wait at least 30 days between applications where possible.
The worst thing you can do with bad credit is panic-apply to five lenders simultaneously. You'll end up with five hard enquiries, five potential declines, and an even lower score than when you started.
Alternatives to a Bad Credit Personal Loan
Before you accept a 25% rate, check these first:
NIL Scheme (No Interest Loans — Good Shepherd)
The No Interest Loan Scheme (NIL Scheme), run by Good Shepherd and supported by NAB and the federal government, provides interest-free loans of up to $3,000 for eligible borrowers. The money goes directly to the supplier — you don't receive cash. Eligible purposes include essential household goods, medical expenses, and car repairs.
Eligibility: You must hold a healthcare card or concession card, or meet an income threshold. Single adults under ~$70,000 gross income generally qualify.
This is the best deal in the market if you qualify and your needs fit the criteria.
Secured Personal Loans
If you own a car, motorbike, or other asset with clear title, you may be able to use it as security. Secured loans reduce the lender's risk — which translates directly into a lower rate for you, even with a bad credit history.
Guarantor Loans
A guarantor — typically a parent or close family member — agrees to be responsible for the loan if you default. This effectively lets you borrow against their credit profile. Rates can be significantly lower. The risk: if you miss repayments, it damages your guarantor's credit and their relationship with you.
Centrelink Advance Payment
If you receive Centrelink payments, you may be eligible for an advance of up to $1,500 (the amount varies by payment type). This is repaid from future Centrelink payments and has zero interest. Not useful for large amounts but worth exhausting before any commercial lender.
Payment Plans with Creditors
If you need a loan to pay a specific bill or debt, ask the creditor directly about a payment plan before borrowing to pay them. Utility companies, medical providers, and even the ATO have hardship programs. A payment plan has zero interest and doesn't appear on your credit file.
The Trap: What to Avoid When You Have Bad Credit
SACC (Small Amount Credit Contracts) / Payday Loans
These are loans under $2,000 with a term under 12 months. They're legal in Australia, but the cost structure is brutal:
- 20% establishment fee on the loan amount
- 4% monthly fee (equivalent to 48% p.a.)
- On a $1,000 loan, you repay $1,560 — $560 in fees
They don't help rebuild your credit, they drain your cash flow, and they're frequently the gateway to a debt spiral.
Unlicensed Lenders
Any lender offering personal loans in Australia must hold an Australian Credit Licence (ACL) from ASIC. Check ASIC's register before you hand over any personal information. Unlicensed operators exploit borrowers in desperate situations.
"Guaranteed Approval" Offers
No legitimate lender offers guaranteed approval. Guaranteed approval is the calling card of scammers or unlicensed operators. Legitimate lenders always conduct credit and income checks — it's a legal requirement under responsible lending obligations.
Rolling Over Debt
If a lender offers to "roll over" your loan — extend the term by adding fees to the principal — walk away. You'll pay fees on fees indefinitely. This is one of the patterns ASIC has been actively enforcing against in 2026, specifically targeting lenders moving vulnerable borrowers into medium-amount credit contracts to sidestep SACC protections.
Can You Improve Your Score Before Applying?
For many borrowers, a short delay is the single most valuable financial decision they can make.
Quick Wins (30–60 Days)
- Pay down credit card balances. High credit utilisation (balance ÷ limit) is a significant score drag. Getting below 30% utilisation on each card helps.
- Dispute errors on your credit file. Errors — incorrect defaults, accounts that aren't yours — appear more often than you'd expect. Get your free credit report and check it. Correcting an error can move your score materially within weeks.
- Reduce credit enquiries. Stop applying for things until you're ready to apply strategically.
Medium-Term Rebuild (6–12 Months)
- Pay every bill on time, every month. Comprehensive Credit Reporting (CCR) means positive repayment behaviour is now reported by lenders — not just the negatives.
- Close accounts you don't use. Multiple open credit facilities signal risk even with zero balances.
- Don't close your oldest account — length of credit history matters.
- A default that's 4 years old has less impact than one that's 6 months old, even though it's still on your file. Time is part of the rebuild.
A 6-month focused rebuild can realistically move a score from 480 to 560–580 — which is the difference between specialist-lender rates and fintech rates. That's potentially $3,000–$6,000 in interest savings over the life of a loan.
Frequently Asked Questions
What credit score do I need to get a personal loan in Australia?
Most mainstream banks require an Equifax score of at least 661. Online lenders and fintechs will consider applications from around 580. Specialist bad credit lenders will look at scores from approximately 500. Below 500, personal loan options are very limited and extremely expensive.
How much higher are interest rates for bad credit personal loans?
Borrowers with an Equifax score below 460 are quoted an average of 25.25% p.a., compared to 9.79% p.a. for excellent-credit borrowers — a gap of 15.5 percentage points. On a $17,407 loan over 35 months, that's approximately $4,950 in extra interest.
Will applying for a personal loan make my credit score worse?
Yes, but only if you submit a formal application. Every formal application triggers a hard enquiry, which can reduce your score by 5–10 points. Checking your own credit score is a soft enquiry and has no effect. Using a comparison service like LoanGorilla that soft-checks multiple lenders before you formally apply avoids this problem.
What is a 'bad credit' loan and is it the same as a payday loan?
Not exactly. A bad credit personal loan is a standard unsecured personal loan from a lender willing to approve borrowers with low credit scores — just at a higher rate. A payday loan (technically a Small Amount Credit Contract) is a specific product under $2,000 with a term under 12 months, capped by law at a 20% establishment fee plus 4% monthly. Payday loans are legal but significantly more expensive and don't help rebuild your credit.
Can I get a secured personal loan with bad credit?
Yes. Using an asset — typically a car — as security reduces the lender's risk and can lower your rate meaningfully, even with a low credit score. The trade-off: the lender can repossess the asset if you default. Secured loans are worth considering if you have a clear-title asset and need a lower rate.
What are no-interest loans and who qualifies?
The No Interest Loan Scheme (NIL Scheme), operated by Good Shepherd in partnership with NAB and the federal government, provides interest-free loans up to $3,000 for eligible borrowers. Eligibility is based on holding a concession or healthcare card, or earning below an income threshold (typically around $70,000 gross for a single person). The money is paid directly to a supplier — not to you in cash — and covers essential goods, medical, and car repair costs.
Should I use a guarantor to get a better rate?
A guarantor loan lets you borrow against someone else's credit profile, which can significantly reduce your rate and increase your approval chances. The risk is real: if you miss repayments, it damages both your credit score and your guarantor's. Only use a guarantor arrangement if you're confident in your ability to repay — and make sure your guarantor fully understands what they're agreeing to.
What do lenders look at when they assess a bad credit application?
Beyond your credit score: income stability and amount, employment type (full-time, casual, self-employed), your expense-to-income ratio, 90 days of bank statements, total existing debts, and whether the issue that caused your bad credit has been resolved. Bank statement patterns — gambling, consistent overdrafts, missed direct debits — can cause a decline even with a borderline-acceptable score.
Are there specific online lenders in Australia that approve bad credit applicants?
Yes. Lenders including Plenti, Harmoney, and OurMoneyMarket use risk-based pricing models that approve applications from around 580. Specialist lenders will consider scores from approximately 500. LoanGorilla compares 30+ personal loan lenders — comparing rates before applying gives you the best chance of finding a competitive rate without damaging your score.
How long before a default stops affecting my loan application?
Defaults remain on your Australian credit file for up to five years from the date they were listed. Bankruptcies and Part IX debt agreements stay for five to seven years. An older default (3–4 years) carries less weight in a lender's assessment than a recent one, even though it's technically still on your file. Once a default drops off your file, it has zero impact on future applications.
Compare Bad Credit Personal Loans on LoanGorilla
LoanGorilla compares 30+ personal loan lenders on our panel, including online lenders and fintechs that specialise in bad credit applications. One application, one soft enquiry, and you'll see which lenders are likely to approve you and at what rate — before any hard enquiry hits your file.
[Compare bad credit personal loans → loangorilla.com.au/personal-loans]
loangorilla.com.au is an Australian Credit Representative (ACR) of Access Lending Group, Australian Credit Licence 531308. Rates and information are current as of April 2026 and subject to change. This guide is general information only and does not constitute financial advice.
Run the numbers yourself
Plug your own figures into the relevant Australian personal loan calculators before you sign anything:
- Borrowing Power Calculator
- Secured vs Unsecured Calculator
- Repayment Calculator
- Affordability Calculator
Related personal loan options
Compare current rates and lender lists for the personal loan types most relevant to this guide:
- Bad Credit Personal Loans
- Secured Personal Loans
- Debt Consolidation Loans
- Self-Employed Personal Loans