How to Get a Loan With Bad Credit Australia (2026 Guide)

Quick Answer: Getting a loan with bad credit in Australia is possible through specialist and non-conforming lenders — but rates are typically 2–5x higher than mainstream lending. The smarter path for most people is to first check whether any defaults on your credit file were listed unlawfully under the Privacy Act 1988. If so, professional removal typically takes 30–90 days and can unlock mainstream lending at rates that save tens of thousands of dollars across the loan term.

Bad credit doesn't mean you can't borrow. It means you need to think carefully about whether borrowing right now — at the rates available to you right now — is actually in your interest. Sometimes it is. Often, there's a better path.

This guide covers all the real loan options available to Australians with bad credit, what they actually cost, and when it makes more sense to fix the file before you apply.

Why Bad Credit Makes Loans Expensive

Every loan you're offered is priced to reflect the lender's perception of your repayment risk. A clean credit file signals low risk — and earns low rates. A file with defaults, court judgements, or excessive enquiries signals higher risk — and lenders charge accordingly.

The rate difference is not small. On a $400,000 home loan, moving from 6.5% to 9.5% adds approximately $270,000 in interest over 30 years. On a $30,000 car loan, the gap between 8% and 22% over 5 years is roughly $15,800. This is why the decision of whether to apply now or fix first is worth thinking through carefully before you do anything.

Your Loan Options With Bad Credit in Australia

These ranges are indicative. Your actual rate depends on the severity of your credit history, your income and serviceability, the loan type and amount, your equity or security, and how recently the negative entries were listed.

Option 1 — Fix the Credit File First (Recommended for Most People)

If your bad credit is caused by defaults that were listed in breach of the Privacy Act 1988 or Credit Reporting Code, professional removal typically takes 30–90 days. Once removed, mainstream lending opens up at rates that make a material difference to your total cost of borrowing.

The most common removal grounds are: no Section 21D pre-listing notice was issued, the debt was disputed when the default was listed, the amount listed is incorrect, or the debt is statute-barred. A free credit assessment from ACS determines viability within 24 hours at no cost.

For detail on each loan type after credit repair, see:

• Bad credit car loans →
• Bad credit home loans →
• Personal loans with bad credit →

Option 2 — Specialist / Non-Conforming Lender

Specialist lenders assess applications that mainstream banks decline. They look beyond the credit score to income stability, employment history, equity position, and genuine ability to repay. The trade-off is cost — rates are higher, terms can be shorter, and fees are often greater.

This option makes sense when: the loan is genuinely urgent, the financial benefit outweighs the rate premium, or the credit issue cannot be removed (lawfully listed and not yet expired).

Work with a mortgage or finance broker who has experience with non-conforming products. Always compare comparison rates, not headline rates — the difference is often significant.

Option 3 — Secured Borrowing (Use Assets to Lower Your Rate)

Pledging an asset as security reduces the lender's risk and often lowers the rate available to you — even with bad credit. A car loan secured against the vehicle, a home loan secured against the property, or a personal loan secured against savings are all lower-risk for lenders than unsecured products.

If you have equity in property, even a modest amount can meaningfully improve your options and rates with non-conforming lenders.

Option 4 — Guarantor Loan

A close family member with a clean credit file acting as guarantor can help you access mainstream lending even with bad credit. The guarantor assumes liability if you default — so this requires genuine trust and financial transparency on both sides. Most mainstream banks offer guarantor products for home loans; they're less common for personal and car loans.

Option 5 — Credit Union or Mutual Bank

Credit unions and mutual banks (Heritage, People's Choice, Teachers Mutual) take a more holistic view of applications than the major banks. They don't have the same automated decline rules and assess applications with more human judgment. If your credit issue is minor or dated, they can be worth approaching directly.

Real Case Study: Ryan, Sunshine Coast — Chose to Wait 53 Days. Saved $22,600.

Ryan, 36, a carpenter from the Sunshine Coast, needed a $35,000 personal loan to fund a business equipment purchase. He'd been quoted 24.9% p.a. by a specialist lender — the only approval he'd received across four applications. Each application had added another hard enquiry to his already impaired file.

His Equifax score was 438. His file showed a $620 default from a telecommunications company — listed, he found out during his ACS assessment, while a formal complaint he'd lodged with the Telecommunications Industry Ombudsman was still open. That was a direct breach of the Credit Reporting Code.

We challenged the listing. The telco acknowledged the breach within 19 days. The default was removed on day 31. Ryan's Equifax score moved from 438 to 694.

He stopped all new loan applications immediately after engaging ACS. Once the default was removed, he applied through a credit union and was approved at 10.4% p.a.

Result: Ryan's Equifax score moved from 438 to 694 in 31 days. On a $35,000 personal loan over 5 years, the difference between 24.9% and 10.4% p.a. saved him approximately $22,600 in interest. He waited 53 days from first contact with ACS to loan approval. He only paid when we succeeded. Subject to individual assessment; results may vary.

How to Strengthen Any Loan Application With Bad Credit

Regardless of which path you take, these steps improve your chances:

1. Get all three credit reports first — know exactly what lenders will see before they see it
2. Stop all new credit applications — each one adds a hard enquiry and signals desperation
3. Demonstrate income stability — six months of consistent payslips or bank statements
4. Reduce existing debt balances — lower utilisation signals lower financial stress
5. Offer security where possible — even modest assets reduce lender risk
6. Work with a specialist broker — access lenders not visible on comparison sites; find ASIC-licensed brokers at asic.gov.au

Frequently Asked Questions

Can I get a loan with bad credit in Australia? Yes. Specialist and non-conforming lenders will consider loan applications from Australians with active defaults, court judgements, or low credit scores — but at significantly higher rates than mainstream lenders charge. If any negative entries on your file were listed unlawfully under the Privacy Act 1988, removing them before applying can save thousands across the loan term.

What is the easiest loan to get with bad credit in Australia? Secured loans are generally easier to obtain with bad credit than unsecured ones, because the asset provides security for the lender. A car loan secured against the vehicle or a personal loan secured against savings is viewed as lower risk. Payday loans have minimal credit checks but charge extremely high effective rates and should be a last resort.

Will applying for a loan hurt my credit score? Yes — each formal application creates a hard enquiry that stays on your file for 5 years and reduces your score. If you've already had several rejections, applying again immediately makes your situation worse. Get your credit file assessed, understand why you're being declined, and fix the underlying issue before applying again.

How long does bad credit last in Australia? Most negative entries — defaults and court judgements — stay for 5 years from the listing date. They do not reset when you pay them. Professional removal under the Privacy Act 1988 is the only way to clear them before the 5-year expiry. See our default removal services for detail.

What credit score do I need to get a loan in Australia? For mainstream unsecured personal loans: typically Equifax 650+. For home loans: 660+ (Good band). For specialist and non-conforming lenders: scores below 500 are considered. The presence of an active default is often a harder barrier than the score itself — many lenders have automatic rules that decline applications with any active default regardless of score.

Is it worth fixing my credit before applying for a loan? In most cases, yes — particularly if the loan is not immediately urgent. The interest rate difference between bad-credit and mainstream lending is substantial. A 30–90 day wait for credit repair, when it results in a 5–15% rate reduction over years of repayments, almost always produces a better financial outcome than accepting the specialist rate.

Find Out What You Qualify For After Credit Repair

A free assessment from Australian Credit Solutions tells you within 24 hours whether any entries on your file can be challenged — and what the realistic loan options look like once they're gone.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has helped over 5,000 Australians access better lending since 2014. No Win No Fee. 98% success rate on accepted cases.

Get My Free Assessment → 📞 0489 265 737 🛡️ ASIC Licensed ACL 532003 | ⭐ 4.9/5 from 976+ Reviews | 🏆 Award Winner 2022–2024

Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. This article provides general information only and does not constitute legal or financial advice.

Related reading: Bad Credit Car Loans → | Bad Credit Home Loans → | Personal Loans Bad Credit →