Bad credit is something that almost every Aussie struggles with at some point; the only difference is the magnitude. However, if you’re in a position where your bad credit reaches the lowest of points, then you may be affected more than you can imagine – especially if you are considering another loan.

There are several lenders out there offering loans for people with bad credit, and every one of them seems like a gift sent from above if you are looking to borrow money. Keep in mind, however, that if you have bad credit, you will not reap the same benefits as your friend with a clean credit would. The reasoning behind that is simple: the bank trusts him/her because he/she always paid his/her loans on time. You, on the other hand, will be presented as a red flag.

Here are the top downsides of loans for people with bad credit, and how you will be affected if you indeed proceed with taking out that cash.

  1. You’ll pay more in interest

As mentioned, when the bank looks at your application, all they will see is that red flag saying “risk” to them. Most of the time, you will end up paying more in interest than you would for the actual loan.

In the end, if you take out a loan as a person with bad credit, you’ll pay a lot of money for a longer time span. Where the regular loan would have been done in one year, the bad credit one may take up to three years or more to pay – and that’s money you won’t even be allowed to use.

  1. It may affect your credit score

Here’s a thought: if you borrow money, it means that you reached a point where you are so tight on cash that you can’t go forward without borrowing. Keep in mind that this money needs to be paid back in full, and then some – so imagine what would happen if you can’t pay that money when you are required to.

When it comes to loans for people with bad credit, keeping up with the monthly payments is a great challenge, so you’re bound to miss a payment or two at some point – which will show on your credit score. If that score wasn’t bad enough, imagine what would happen after you fail to repay the loan.


  1. You’ll have more fees to cover

Traditional loans have their own fees, but they do not compare with the fees that you’ll have to handle if you are going for loans for people with bad credit. These fees may include:

  • Origination fee: These fees are required to process your loan application, and also open the loan in the instance that it gets approved.
  • Late payment fee: We know, it’s unfair; you’re late because you don’t have the money, and in return, they will ask you for more money. Sadly, this is what happens. When it comes to loans for people with bad credit, if you are one minute passed your deadline, you will be charged a fee for being late. And the more you put it off, the more that fee will grow.
  • Check use fee: You read that right. Some bad credit loans will charge you an extra fee if you decide to use check withdrawal instead of the classic electronic one.

Bad credit loans sound dreamy and all that – until you have to pull out your wallet and pay up some fees that you normally wouldn’t be required to.

  1. You’ll need collateral

Just like with the interest issue, you will need to bring out some collateral when it comes to loans for people with bad credit. They will need the certainty that you will pay the loan, and that can only happen if you feel like your house, your car, or your other belongings are in danger of being confiscated by the bank.

Not all lenders ask for collateral; however, keep in mind that those who do not ask will require that you pay even more in interest.

Loans for people with bad credit can be very useful to get back on track, as long as you make peace with the downsides. At Australian Lending Centre, we are there to help you in a pinch and offer you a convenient repayment plan with competitive rates – or simply give you some advice. Contact us for a free consultation or a free assessment for a loan catered for you.