Written by Bad credit? Don’t sweat it
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.
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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Our range of bad credit loan options
How are bad credit loans different from regular loans?
Firstly, and most importantly, these loans are offered with higher interest rates and fees than those for borrowers with good to great credit scores. This is the case because interest rates are set in large part based on risk, meaning that if your lender believes you to be at greater risk of defaulting or struggling with your repayments down the track.
The second major difference between standard and bad credit loans is the greater restriction on borrowing. Because bad credit borrowers are seen as posing a greater risk of default, lenders are generally unwilling to approve loans as large as those for applicants with a strong credit history. This means that while there’s no theoretical maximum amount when it comes to car loans (dictated by the value of the car and your borrowing capacity), the absolute maximum you may be approved for is $100,000 with bad credit (though it’s usually less).
Aside from these factors, though, the function of your loan is no different: you’ll still receive a lump sum which you’ll repay in instalments over a period as agreed in your loan contract. Above all else, they can open doors for you if you’ve struggled with your credit. You can get the financing process started by applying through Savvy today for your chosen loan type.
How do I get approved for a bad credit loan with Savvy?
The process of applying and getting approved for bad credit finance will vary depending on the type of loan you’re after. For instance, the application process for car or leisure finance is different from personal and small loans. As such, it’s important to familiarise yourself with the process for the type of loan you’re looking for.
Below is the application process for a bad credit car loan with Savvy as an example (which is very similar to those for commercial and leisure finance).
- Fill out our online application form: our simple form helps us find out about you, the type of loan you’re after and your financial situation, including the nature of your credit history. By completing this application, your consultant can get to work searching for any suitable options among our panel of lenders.
- Supply any required supporting documents: as part of this process, you may be required to submit some further documentation to help us confirm your income and employment. This can be done online via our portal, which will also enable you to electronically sign other documents such as your consent form.
- Speak with your consultant about your options: once your consultant has considered the loans available among our panel, they’ll give you a call to discuss your situation and what the best offers may be in terms of their cost and suitability. They can also provide you with an indicative interest rate. From there, you can give them the go-ahead to prepare your application for formal approval.
- Have your loan approved, settled and drive away: formal approval can take as little as one business day, after which we’ll handle the settlement process once everything is signed. From there, you’ll be the owner of your new car, so you can drive away!
How to increase your chances of approval for a bad credit loan
Even with very bad credit, taking steps to start increasing your 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 reporting in the weeks and months leading up to your application.
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.
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.
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.
Lenders want to see stability in your life, as this suggests changes to your income and expenses are 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
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)
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.
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.
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.
Adding a second borrower to a loan agreement may help your approval chances, as lenders will be relying on two incomes instead of just one. However, whether you’re approved will ultimately depend on each of your borrowing profiles and how your lender assesses them.
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.
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.
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.
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.
