Investment Loan With Bad Credit Australia: What's Possible in 2026?

Quick Answer: Getting an investment loan with bad credit in Australia is possible through non-conforming and specialist lenders — but LVR restrictions (typically 70–75% max), significantly higher rates, and stricter serviceability assessments make it expensive. The smarter path for most investors is to challenge any unlawfully listed defaults under the Privacy Act 1988 first. A 30–90 day credit repair process that restores access to mainstream investment lending at 6–7% instead of 9–12%+ can fundamentally change the investment case.

Property investment is a long game. The difference between a 6.8% and 9.8% rate on a $600,000 investment loan — compounded over 25 years — is not just a few extra dollars per month. It's the difference between a profitable investment and a marginal one.

If bad credit is standing between you and an investment loan, this guide explains your real options and the most cost-effective path forward.

How Investment Loan Assessment Differs From Owner-Occupier Loans

Lenders assess investment loan applications differently to home loans in several ways:

• Higher rates by default — investment loans carry a rate premium of 0.3–0.8% over equivalent owner-occupier products even with clean credit
• Lower LVR accepted — especially for borrowers with impaired credit; most non-conforming lenders cap at 70–75% LVR for investment
• Stricter serviceability — rental income is only partially credited (typically 75–80% of gross rent) in serviceability calculations
• Credit scrutiny is higher — lenders know investment loans carry more risk than owner-occupier lending; a bad credit file amplifies this concern

What an Active Default Actually Costs an Investor

Consider a $550,000 investment loan over 25 years:

At $272,000 in additional interest, the question isn't whether to fix the credit issue — it's how fast.

Real Case Study: Derek, Gold Coast — Investment Purchase Delayed 61 Days. Saved $241,000.

Derek, 44, a business owner from the Gold Coast, had identified an investment property and been pre-approved by a non-conforming lender at 10.1% p.a. on a $520,000 interest-only investment loan. His Equifax score was 452. He had two defaults: one from a business equipment finance company, one from a utilities provider.

His ACS assessment identified: the utilities default had been listed during an active Energy Ombudsman complaint — a Credit Reporting Code breach. The equipment finance default had been listed without a Section 21D notice. Both were removable.

The seller agreed to a 75-day settlement. ACS worked the two challenges simultaneously.

Equipment finance default: removed on day 38. Utilities default: removed on day 61. Derek's Equifax score moved from 452 to 697.

His mortgage broker reapplied through a second-tier bank. Approved at 7.14% p.a. investment rate.

Result: Derek's Equifax score moved from 452 to 697 in 61 days. Both defaults removed. Rate: 7.14% vs 10.1%. On $520,000 over 25 years, the interest saving was approximately $241,000. He paid only when we succeeded. Subject to individual assessment; results may vary.

Steps to Securing an Investment Loan With Bad Credit

1. Pull your full credit reports — Equifax, Experian, Illion — before approaching any lender
2. Get a professional credit assessment — identify any defaults with legal removal grounds
3. If you have a settlement window — negotiate it to allow 60–90 days for credit repair
4. If repair is not viable or time won't allow — work with a specialist mortgage broker for non-conforming investment lending; focus on lenders who accept your LVR and credit profile
5. Calculate the full cost — compare total interest over the loan term, not just the monthly repayment
6. Have your investment case documentation ready — rental appraisal, property research, financial statements

Frequently Asked Questions

Can I get an investment loan in Australia with an active default? Yes — through non-conforming and specialist lenders who cater to impaired credit applicants. The trade-off is higher rates (typically 9–12%+), lower maximum LVR (70–75%), and stricter serviceability assessment. If any active defaults were listed unlawfully under the Privacy Act 1988, removing them first and accessing mainstream investment lending at 6–7% rates is almost always the better financial decision.

What LVR can I borrow at for an investment property with bad credit? Most non-conforming lenders cap at 70–75% LVR for investment loans with impaired credit — meaning you need a 25–30% deposit. Mainstream lenders with clean credit will consider up to 90% LVR investment with appropriate LMI. The more severe the credit history, the lower the maximum LVR typically offered.

Does rental income count toward serviceability for an investment loan? Yes — but not at 100%. Most lenders credit 75–80% of gross rental income in serviceability calculations, reflecting the possibility of vacancy periods and property costs. This is true for both mainstream and non-conforming lenders.

How long should I wait after bad credit before getting an investment loan? If the defaults were listed correctly and have no removal grounds, mainstream lenders generally want to see 2+ years of clean credit history after the most recent negative event before considering an investment loan. Non-conforming lenders are more flexible. If defaults were listed unlawfully and are removed professionally, there's no mandatory waiting period — you can apply immediately after removal.

Is interest-only available on investment loans with bad credit? Sometimes — some non-conforming lenders offer interest-only terms for investment loans even with impaired credit, but LVR requirements are stricter (often 65–70% max). Mainstream lenders generally require principal and interest repayments for investment loans with any credit concerns.

Does using a mortgage broker help for investment loans with bad credit? Yes — significantly. Specialist mortgage brokers have access to non-conforming and second-tier lenders that aren't visible on comparison websites. They can match your specific credit profile to the most appropriate lender, avoiding multiple direct applications that add enquiries to your file. Always confirm the broker holds an ASIC Australian Credit Licence.

Calculate What Credit Repair Could Mean for Your Investment

A free assessment from Australian Credit Solutions identifies whether any defaults on your file were listed unlawfully — and what mainstream investment lending at mainstream rates would mean for your investment's financial performance.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has helped over 5,000 Australians clear their credit files 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 Home Loans → | Default Removal Services →