A bad credit score can happen to anyone. You may end up missing a few payments, or something may happen in your personal life that will result in financial mismanagement. A lot of Australians will avoid applying for a personal loan because of a bad credit rating. It’s true that a bad credit rating will decrease your chances of approval for a personal loan or a home loan. However, just because your credit score isn’t perfect, that doesn’t mean you can’t get a personal loan from anywhere.

There are several options for personal loans with bad credit as well. But, before we take a look at the best bad credit loans in Australia, let’s take a moment to understand what a bad credit loan is and what you need to keep in mind before applying for one.

What Is a Bad Credit Score?

Your credit score is determined through your financial history. This information is used to calculate your reliability as a borrower, and the amount of risk a creditor will be exposed to if they lend you credit. This risk is reflected through your credit score.

For the uninitiated, a bad credit rating is when your credit score is below 549 (as per Experian) or 509 (as per Equifax). Bad credit can be due to several things such as:

• Late bill payments
• Multiple credit applications within a short span of time
• Late loan repayments
• Exceeding your credit card limits
• Bankruptcy
• Debt agreements

What Are the Options for a Personal Loan with Bad Credit?

A personal loan is a loan that is obtained from a bank, online lender, or a credit union. You are required to pay back this loan in the form of fixed monthly payments over a period of 2 to 5 years. Personal loans are usually provided without any additional security. However, if you have a bad credit rating, then the terms and conditions for a personal loan are significantly different. Don’t worry, though. It is fairly possible to get a personal loan even if you have a bad credit score. Many Australian lenders are willing to provide personal loans to people with bad credit. If you are looking to apply for a bad credit loan, then you will have to choose between the following options:

1.     Personal Loans with Security

These loans require you to provide collateral as a form of security in exchange for a personal loan. Collateral is any kind of valuable asset that can be pledged as security for the repayment of a loan. You can pledge your car or your home as collateral. There are other options as well, but those depend upon the kind of assets you own.

2.     Personal Loans with a Guarantee

This is another type of personal loan with bad credit. Unlike security–based loans, this loan option requires a guarantee from a third party in exchange for a loan. For instance, your relative or a business partner can provide a guarantee to the lender regarding repayment.

3.     Personal Loans by a Payday Lender

A Payday loan is a short-term loan that can provide you with loan amounts up to $2,000. The term of repayment for these loans is between 16 days to a year. There is no credit check involved, and you are not required to provide any security as well. However, the interest rate on these loans is higher than a regular personal loan. You may also have to pay an establishment fee that is 20 percent of the loan amount. Most Payday lenders also charge a monthly fee. This is 4 percent of the loan amount.

4.     Personal Loans Without Security

You can also apply for a personal loan that does not require any collateral as security. There is no credit check. Lenders will analyze your capacity to repay the loan. However, because there is still so much risk associated with this option, the interest rate is also quite high.

Best Bad Credit Loans in Australia

If you have a bad credit rating and are looking to apply for a personal loan, then the following lenders can help you out:

1.     Credit 24 Short-Term Loans

Credit 24 can provide you with a short-term loan of up to $2000. The repayment term is between 6 to 12 months. You will have to make a fortnightly payment of $396 for this loan. The establishment fee is 20 percent of the loan amount. There is a monthly fee of 4 percent of the loan amount.

2.     Wallet Wizard Loans

Wallet Wizard can also provide you with a long-term loan that can be repaid over a period of 2 years. The loan terms vary according to the amount borrowed.  If the loan amount is up to $2000, then you will have to pay a fee of 47.8 percent p.a. You will also have to make a fortnightly payment of $316.70 for this loan. For bigger loan amounts (up to $5000), the fortnightly payment is at $243.50. The fee, however, is the same (47.8 percent p.a.).

3.     Nimble Loans

Nimble also provides short-term and long-term bad credit loans. Their short-term loans are up to $2000. The repayment period is between 62 days to a year. The establishment fee is 20 percent of the loan amount. There is a monthly fee of 4 percent of the loan amount, and you will have to make a fortnightly payment of $396 for this loan.

Their long-term loans are up to $5000, and the repayment term is up to 2 years. You will be charged an application fee of $400. There is also a fee of 47.62% p.a. and you will have to make a fortnightly payment of $243.50.

To Sum It Up

There are several lenders willing to offer bad credit loans in Australia. You must choose according to the funds you need and your capacity to repay. There are other significant costs attached to these loans as well, so you must choose carefully. You cannot afford to default on these loans when you already have a bad credit rating.