Bad credit personal loans: who lends and what it costs

Understanding Bad Credit in Australia

Life events like job loss, illness, divorce and business failure are the most common causes of a damaged credit file, as much as any financial carelessness. Your credit report is held by the credit reporting bodies (Equifax and Experian are the two main ones) and records both positive and negative events.

What goes on your report

Moneysmart sets out the rules. A payment not made within 14 days of its due date shows in your repayment history, which covers the last two years. A default can be listed when you owe $150 or more, the debt is 60 days overdue and the provider has asked you to pay; it stays for five years, or seven if the provider could not contact you. Court judgments, debt agreements and bankruptcies are listed too.

What does not

A financial hardship arrangement with your lender does not affect your credit score, and if you stick to it you are shown as up to date. Checking your own credit report is free every three months and does not count as an application.

The critical point is that credit files are not permanent records. Negative entries expire and are removed, and on-time repayments on current accounts progressively improve your recent history.

Which lenders offer personal loans to people with bad credit?

The mainstream online lenders price by credit tier and may decline a poor file; a smaller group of specialists publish that they lend to it, at a price. Checked against each lender's published page on 19 September 2026. Policies and rates change without notice; confirm with the lender or your broker before relying on them. Where a lender does not publish a figure the cell says so.

How Bad Credit Lending Works

Major banks use automated credit scoring that typically declines applicants with serious negative listings. Specialist non-bank lenders take a different approach and review applications manually.

They consider the story behind the numbers: Was the default caused by a temporary job loss that has since been resolved? Was it a medical emergency? A relationship breakdown? If your current financial position is stable, steady income, manageable expenses, and no ongoing issues, many specialist lenders will approve your application.

The assessment typically focuses on three key areas: your current income and its stability (how long in your current role, type of employment), your current expenses and debt obligations, and the trajectory of your credit behaviour, are things getting better or worse? A borrower with a default from 3 years ago who has been making all payments on time since is viewed very differently from someone with recent ongoing issues.

The price reflects the risk. Jacaranda Finance publishes 16.95% to 29.95% p.a., still well below the cost of a payday loan: Moneysmart's example of a $2,000 payday loan repaid over a year comes to about $3,360 in repayments, $1,360 more than was borrowed.

Rebuilding Your Credit Score Through Responsible Borrowing

Under comprehensive credit reporting, positive repayment information is recorded alongside negative events, so every on-time repayment adds to your record.

Some borrowers follow a deliberate two-stage plan: take the smallest loan that meets the need, make every payment on time, and once older listings have aged and the recent record is clean, refinance into a lower-rate loan. Check for early repayment fees before you sign so the second stage is not penalised.

Beyond the loan itself, these practical steps help: pay all current bills and obligations on time, reduce credit card limits to the minimum you need, avoid multiple credit applications (each creates an enquiry on your file), and check your credit report for errors. Moneysmart notes that fixing wrong information is free, and that companies charging to remove negative listings can only remove what is wrong.

Cheaper options to try first

No Interest Loans (NILs)

Up to $2,000 for essentials such as appliances, car repairs, a laptop or medical and dental costs, or $3,000 for a rental bond or disaster recovery, with no interest, fees or credit check. You need a Health Care or Pension Card, income under $70,000 single or $100,000 with a partner or dependants, or to have experienced family or domestic violence in the last 10 years, and to show you can repay; the loan is paid straight to the supplier. Call 13 64 57 or see Good Shepherd.

A Centrelink advance

If you receive a Centrelink payment, you may be able to get part of it early, interest free, repaid from your next 13 payments: up to $1,764.15 for a single pensioner and $500 on JobSeeker and most allowances. See Services Australia.

A hardship arrangement or free counselling

If existing repayments are the problem, ask your lender for a hardship arrangement, which does not affect your credit score. The National Debt Helpline's financial counsellors are free and independent: call 1800 007 007 (weekdays 9:30am to 4:30pm).

Avoiding Predatory Lenders

Australians with bad credit are often targeted with “guaranteed approval” or “no credit check” loans. Payday loans (small amount loans up to $2,000) cannot charge interest but can charge a lot in fees: Moneysmart says most charge an establishment fee of 20% of the amount borrowed and a monthly fee of 4%.

Warning signs include any lender promising “guaranteed” approval (responsible lenders always assess affordability), very short terms with high establishment fees, pressure to sign immediately, and any lender or broker without an Australian Credit Licence. Every lender on a licensed broker's panel must hold one.

If you ask to be matched, your enquiry goes to a licensed personal loan broker who meets our criteria and works with specialist lenders that offer fair terms. A good broker will tell you honestly if now is not the right time to borrow.