What is a bad credit personal loan?
A bad credit personal loan is a loan designed for borrowers with a poor credit history, such as missed repayments, defaults or a low credit score.
These loans work much the same as standard personal loans, with borrowers receiving a lump sum and repaying it over a set term through regular instalments, plus interest and fees.
The main difference is that lenders see bad credit borrowers as higher risk, which can affect the interest rate, fees, loan amount and eligibility criteria.
The average personal loan size requested through Savvy in 2025 was $21,785 for borrowers with bad credit, compared to $25,679 for borrowers with good credit.
How are bad credit loans different to regular loans?
| Feature | Regular personal loans | Bad credit personal loans |
|---|---|---|
| Interest rates | Usually lower for borrowers with strong credit histories | Often higher to reflect the increased lending risk |
| Fees | May include lower upfront or ongoing fees | Can come with higher fees in addition to higher interest |
| Lenders | Widely available through banks and mainstream lenders | More commonly offered by specialist, non-bank lenders |
| Borrowing limits | Higher loan amounts may be available to eligible borrowers | Maximum borrowing amounts are often lower, even for higher-income applicants |
| Loan terms | Borrowers may be eligible for longer repayment terms | Loan terms may be shorter to reduce lender risk |
| Approval criteria | Greater focus on strong credit history and financial position | Lenders may place more weight on current affordability and recent repayment behaviour |
Not all bad credit is alike
"Not every lender treats bad credit the same. Each has its own benchmarking to determine your eligibility based on your current circumstances.
As an example, if you have a bad credit score but are a property owner, one lender might still offer you their best rate, while another may treat you as a regular bad credit customer.
That’s why it’s beneficial to get your application seen by as many lenders as possible, but not by just applying to everyone."
How much will my bad credit personal loan cost?
Bad credit personal loans are generally more expensive than standard personal loans, as lenders see borrowers with poor credit histories as a higher risk and charge higher interest rates as a result. The cost of your loan is also influenced by several other factors, including:
- Loan amount: larger loans generally cost more overall because more interest is charged over time
- Loan term: longer loan terms can reduce your regular repayments, but often increase the total interest paid
- Fees and charges: establishment fees, monthly account fees and late payment fees can significantly increase the total cost of your loan
- Secured vs unsecured loans: secured loans may come with lower rates because the lender has collateral to reduce its risk
It’s important to look at the comparison rate as well as the advertised interest rate. This includes both interest and most upfront and ongoing fees, giving you a better indication of the loan’s true cost.
As an example, here’s what repayments could look like on a five-year bad credit loan at 12% p.a. across different loan amounts:
| Loan amount | Estimated monthly repayment | Estimated total repayment | Total interest paid |
|---|---|---|---|
| $10,000 | $222 | $13,347 | $3,347 |
| $20,000 | $445 | $26,693 | $6,693 |
| $30,000 | $667 | $40,040 | $10,040 |
| Amounts calculated using Savvy's personal loan repayment calculator. These examples are indicative only and do not include all fees and charges. Actual rates, fees and repayments will vary depending on the lender and your financial situation. | |||
You can use Savvy’s personal loan repayment calculator to estimate your repayments and compare different loan amounts, rates and terms.
The difference between secured and unsecured bad credit personal loans
Many personal loans are unsecured, but you’ll still have the option with some lenders to take out a secured loan. The main difference is whether you provide an asset as security for the loan.
A secured loan uses an asset, such as a car, as collateral for the lender. Because this reduces the lender’s risk, secured loans may come with lower interest rates, higher borrowing limits and longer loan terms. Offering security may also improve your chances of approval if you have bad credit.
However, secured loans usually come with conditions around the asset being used as security. For example, if you’re buying a car, lenders may require it to meet certain age, condition and value requirements before approving the loan.
An unsecured loan doesn’t require any collateral, meaning you won’t need to provide an asset to secure the finance. These loans can offer greater flexibility, particularly if you’re purchasing an older vehicle or need funds for general personal expenses. However, because the lender takes on more risk, unsecured bad credit loans often come with higher interest rates and lower borrowing limits.
What are the eligibility criteria for bad credit personal loans?
Eligibility
-
Age
You must be at least 18 years old
-
Residency
You must be an Australian citizen or permanent resident (or, in some cases, an eligible visa holder)
-
Income
You must be receiving a stable income that meets your lender’s minimum threshold
-
Employment
You must be employed on a permanent, casual or self-employed basis
-
Credit score
You must meet your lender’s minimum requirements related to your credit score and not be bankrupt or under a Part IX debt agreement
-
Contact
You must have an active phone number, email address and online bank account in your name
Documents
-
Personal information
Your full name, date of birth, address and contact details
-
Photo ID
Such as a driver's licence or passport
-
Payslips
Your last two consecutive payslips (or your last tax return if you're self-employed)
-
Assets and liabilities
Information about any assets you own (such as a car or house) and liabilities in your name (such as other loans)
-
Bank statements
90 days of bank statements may be requested, but not always
Why the type of default on your credit file matters to lenders
Lenders don’t treat all defaults the same way when assessing a bad credit personal loan application. The type of default, how recent it is, whether it has been paid and how many appear on your credit file can all affect your chances of approval.
In general, lenders tend to view unpaid finance-related defaults more seriously than non-financial defaults. Financial defaults relate to credit products such as personal loans, credit cards or buy now, pay later (BNPL) accounts, as they indicate previous difficulties managing borrowed money. Some lenders may have restrictions around how recent these defaults can be or how many unpaid finance defaults they will accept.
Non-financial defaults, such as unpaid utility bills, phone bills or rental and equipment hire debts, may be treated more leniently by some lenders. Depending on the lender’s criteria, applicants with these types of defaults may still be eligible for a loan, particularly if the defaults are older or have since been paid.
How to get a personal loan with bad credit
-
Apply online
Fill out our quick form to tell us about yourself.
-
Send your docs
Supply any necessary documents for verification of your profile.
-
Speak with your broker
One of our brokers will call you to discuss your situation.
-
Prepared, approved and signed
We’ll prepare your application, so once approved, you’ll receive the funds.
Why apply for a personal loan with Savvy?
How to increase your chances of approval for a bad credit loan
-
Improve your credit score
The better your score, the better your chances of loan approval. Things like paying bills on time, keeping credit card balances low and avoiding multiple credit applications in quick succession can help rebuild your score over time.
-
Pay off outstanding debts
Every debt you have will impact your ability to borrow. By paying them down, you’re both reducing your financial commitments and showing lenders you’re capable of paying your debts.
-
Save up a deposit
Demonstrating savings will increase a lender’s confidence in you as a borrower. On top of this, putting down a deposit reduces the required loan amount, reducing the potential risk taken on by your lender and cutting down on the interest you’ll have to pay.
-
Lower your credit limits
Lowering the limits on your credit cards decreases 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, so reducing it can improve your chances of getting a loan.
-
Try to avoid job and address changes
Lenders want to see stability. Staying in the same job for an extended period and living at the same address in the months and years leading up to your application can make a big difference.
Bad credit is far from the end
"Bad credit lenders are keen to finance your future, not your past.
If you’re trying to make amends for your previous bad history, organising a payment plan or consolidating your debts and having a clean repayment history on these will show lenders that you’re committed to improving your finances.
The same goes with employment: if you can show a stable income over six months (even casual), this will go a long way towards getting you approved."
Bad credit personal loan alternatives
Depending on your situation, there may be alternatives to a bad credit personal loan:
Guarantor personal loan
A guarantor personal loan allows you to apply with another person, usually a close family member, who agrees to guarantee the loan repayments if you default. This may improve your chances of approval or help you access a lower interest rate, as it reduces the lender’s risk.
No Interest Loans (NILs)
Good Shepherd’s NILs scheme provides eligible Australians with access to interest-free, fee-free loans for essential goods and services. The funds are paid directly to the supplier or service provider rather than as cash in hand.
Eligible borrowers may be able to access:
- Up to $2,000 for essential goods and services
- Up to $3,000 for rental bonds or natural disaster recovery
- Up to $5,000 for a vehicle
Centrelink Advance payment
If you receive eligible Centrelink payments, you may be able to apply for a Centrelink Advance through Services Australia.
This allows you to access part of your future Centrelink payments early and repay the amount gradually from your upcoming benefits. While advance amounts are limited, it may help with short-term cash flow issues or unexpected expenses without needing to take out credit.
What our customers say about their finance experience
Savvy is rated 4.9 for customer satisfaction by 479 customers.
Personal loan lenders you can compare
Frequently asked bad credit loan questions
Yes, there are specialist lenders across all finance types that will accept Centrelink payments as part of your assessable income. Not all Centrelink payments will be accepted, but many lenders are willing to work with 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 or in conjunction with Family Tax Benefit payments)
Yes, many people use bad credit personal loans to consolidate existing debts like credit cards, payday loans or other personal loans. Consolidating can help you simplify your repayments, lower your monthly costs or secure a more manageable interest rate. Just keep in mind that your eligibility and rates will still depend on factors like your income and existing debts.
No, all lenders that Savvy works with will conduct a credit check when assessing your personal loan application, regardless of your credit profile. This forms part of their responsible lending obligations and helps them assess whether the loan is suitable and affordable for you.
No, there are no legitimate personal loans with guaranteed approval in Australia. Lenders are required to follow responsible lending obligations, meaning they must assess every application individually before approving a loan to determine whether you can reasonably afford the repayments.
There’s no one set benchmark when it comes to credit scores and what is and isn’t accepted by lenders. When it comes to bad credit loans, they’re more focused on things like the nature of your bad credit (the types of late payments, defaults or debt agreements on your file), your income and the affordability of the loan.
8% of personal loans approved through Savvy in the 2025 were for customers with a bad credit rating. This is correct for those with a credit score of 460 or below, which is deemed as a “bad” rating by Equifax.
If you’re struggling to make your loan repayments, you should contact your lender as soon as possible.
Depending on your situation, they may be able to offer financial hardship assistance, such as temporarily reducing your repayments, pausing payments or adjusting your loan term.
If you need additional support, free and confidential help is available through services such as the National Debt Helpline, and Mob Strong Debt Help for Aboriginal and Torres Strait Islander People.
