Complete guide to getting a personal loan with bad credit

Learn all there is to know about getting a personal loan with bad credit. Gaining loan approval starts by fully understanding your options...
getting a personal loan with bad credit

Struggling with a less-than-perfect credit history? You’re certainly not the only one.

Your credit score is so easy to damage and yet difficult to wipe clean. Perhaps an emergency bill came at the wrong time, a housemate skipped their rent payment, or you fell behind on debts. Whatever the reason, when your credit score takes a hit, it can make you feel trapped and judged.

Poor credit can pose obstacles when seeking loan approval, but securing a personal loan with bad credit is still possible.

Traditional banks often reject low-credit applicants, but thankfully, alternative lenders exist to help you recover financially. Learn more below in this complete guide.

How Do I Know If I Have a Bad Credit History?

Have you applied for a loan and had it knocked back? Check the feedback; the reason should be indicated. If not, check with the lender directly. You will likely have bad credit or insufficient income to service the loan amount.

Personal loans for people with bad credit histories often have higher interest rates. Therefore, it is best to fix the root of the problem.

If you’re concerned that you may have a bad credit rating, it is possible to check this prior to applying for a loan. Your credit score can be checked online for free here. You can also go into greater depth by checking what listings are dragging your credit file down.

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7 Most Common Causes of Bad Credit 

Bad credit history occurs due to a number of factors. The most common causes are:

  • Breaking your credit agreements: Late payments, missed payments, or not paying the minimum required monthly can impact your credit rating. 
  • Declaring bankruptcy: This frees you of your financial obligations on outstanding loans and lines of credit. However, it significantly impacts your credit history, often prohibiting you from borrowing for a number of years. Going bankrupt can also make getting a personal loan with bad credit difficult.
  • Making minimum credit card repayments: Paying your credit card debt off slowly doesn’t only have a negative impact on your credit score. It also means you’ll be in debt for longer and pay more in interest & fees.
  • Incorrect filing: It’s not uncommon for a creditor to wrongly stamp a black mark against your name. For example, criteria must be correctly followed in order to list a default.
  • Identity theft: Always closely monitor your accounts and immediately flag suspicious activity with your bank or lender.
  • Choosing the wrong financial product: Choosing excessive limits with high interest can make it difficult to pay off the loan. Always research before taking out a line of credit or loan and ensure you can service it properly.
  • Having no credit history: Your score may be low even if you have never borrowed or defaulted on repayments. This is simply because there is no history to rate your borrowing behaviour off.

How personal loans work

The great thing about personal loans is that you decide what you do with the money. It goes directly into your chosen bank account.

Getting a personal loan with bad credit works in exactly the same way. The only difference is a more lenient approval process. Rather than your credit score being the deciding factor, your income amount, employment stability, and current debts are the focus.

A personal loan for debt consolidation does work a little differently. Rather than receiving money into your account, the loan directly pays off any outstanding debts included in the agreement. Moving forward, you just repay the new lender each month.

personal loans for people with bad credit history

The types of bad credit personal loans – Secured vs Unsecured

The type of loan you can expect to be offered will depend on your circumstances and your lender’s capabilities. There are 2 main types of personal loans.

  • Secured personal loans with bad credit: These loans are taken out against an asset you offer as security, such as your home or car. This means better rates and loan terms, but your assets can be seized if you break the arrangement.
  • Unsecured personal loans with bad credit: A good option without the risk of losing assets. The disadvantage of this option is the higher rates and less flexible terms that usually come with the type of loan.

The top 3 benefits of personal loans with bad credit

1. A personal loan with bad credit could offer a low interest rate

There’s still a chance that those with poor credit can get personal loans with low interest rates. If you have been paying more than a 20% APR for high-interest cards, you could find a personal loan with a lower interest rate.

It will not only give you an opportunity to pay for your urgent needs, but you can also use the money to pay off high-interest debt. In the long run, this will allow you to save more money.

2. Personal loans are flexible

There is little imitation of what you can use a personal loan for.

Home renovations, a car loan, emergency bills, holidays, or consolidating debt are all good reasons to take out a personal loan with bad credit

3. You could reduce your debt burden

If you are struggling because your debts are out of control, consolidating debt with a personal loan can be a financial lifeline.

Debt consolidation simplifies your debts and enables you to better manage your loan repayments. You will only have one repayment coming out of your account at the end of each month.

Get a personal loan with bad credit

The Australian Lending Centre understands that approval can be hard to obtain when your credit score is low.

We provide nonjudgmental support and uniquely tailored personal loans with bad credit.

Get In Touch With Us Now!

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