Can I get a personal loan if I have bad credit?

person with bad credit looking at how to get a personal loan

While having bad credit will never work in your favour, it does not necessarily mean you are ineligible for a personal loan. There are plenty of loans available to people with bad credit or marks on their credit history - things might just look a little different.

Let’s get started with a few key questions:

What is a credit history? What is a credit score? What is a credit report?

Credit can be confusing to understand, because there are a lot of terms to understand.

Essentially, your credit history is your history of being creditworthy - your track record of paying debts and being in good stead with lenders. This is recorded in multiple ways.

The first is a credit report, which is a comprehensive record of your credit history and contains detail. The second is your credit score. This is a number between 0 and 1000 (or sometimes 1200, depending on the credit report), and is a quicker summary of your creditworthiness where a higher number indicates better credit.

When applying for a loan or credit card, the lender will check your credit score to determine how reliable a borrower you are based on your rating. So, having bad credit can be a red flag for lenders.

What is a bad credit score?

If you've had a credit check, locate your score on this table to see where you sit on the credit scale. Each agency has their own credit reporting scale, but as a general guideline, this should help!

Credit ScoreCredit Ranking
833 - 1,200Excellent
726 - 832Very Good
622 - 725Good
510 - 621Average
0 - 509Below Average

If you've had your credit checked and found yourself coming up short, never fear. Keep reading to find out what to do when it comes to borrowing money when you have bad credit.

What kind of personal loan can I qualify for if I have bad credit?

It may be more challenging to qualify for a personal loan if you have a poor credit history than an applicant with stellar credit.

You also might find yourself offered a significantly higher interest rate and fees than someone with a good credit score would. This is because many lenders use a risk-based pricing model, and borrowers with worse credit represent more risk to a lender than a borrower with a good credit history. This pricing usually works in tiers, with lower rates on the tiers for borrowers with better credit.

It is also important to keep in mind that lenders may require more intense application processes and financial verification procedures for applicants with poor credit. This is to ensure that you can handle the loan repayments. 

You may also find that if you have bad credit, you might be required to provide security for a loan. You may be subject to additional restrictions on how much you can borrow.

If these things do not sound appealing to you, you can do some serious work to improve your credit score. This is not easy, but it can earn you a better rate on a loan and may make the loans process feel smoother with less restrictions.

What about payday loans?

There are some types of online loans that may not require credit checks and offer instant money transfers, known as payday loans. Payday loans may also be known as small amount loans, and allow you to borrow up to $2,000.

Mozo does not endorse these types of loans as they are potentially very risky due to their high interest rates.

Find out more about all types of loans available to apply online at the Mozo online loan hub.

How can I get a good personal loan with bad credit?

As it can be extremely difficult to be approved for a good interest rate personal loan with bad credit, the best approach is often to try and improve your credit score.

Otherwise, you may find yourself faced with much higher interest rates or restrictive access to loans - only able to to access secured loans or loans with low borrowing limits. Find out the difference between secured and unsecured loans to see if this will suit your needs. 

How can I fix my bad credit score?

Improving your credit score is not an overnight process, but it is extremely worthwhile. Not only will a better credit score improve the personal loans on offer, but it will also help in any potential future applications for borrowing products (like credit cards or home loans).

The first step is to get a copy of your credit report from one of the main credit reporting bodies in Australia, such as Equifax or Experian. Then, check your report for errors or possible identity fraud, as you do not want to be blindsided by inaccurate information during a credit check.

Once you have combed through your report, it’s time to get your finances in order. You will need to pay off any outstanding debts. Any bills that have gone into default will be listed on your report for five years, but will be marked as paid when you pay them. So, although defaulted bills are still a mark against you, they’re better paid late than not at all. You also should try to set up direct debit payment systems to prevent any further late payments.

Finally, limit your credit applications. Each time you do, a lender does a ‘hard enquiry’, which goes onto your credit report. Too many hard enquiries will negatively affect your credit rating.

To learn more about improving your credit history before applying for a personal loan, check out Mozo’s step-by-step guide to improving your credit.

What is the best loan for bad credit?

There is no one loan that will answer this question, as the best loan will depend on your personal and financial circumstances. Compare loans using Mozo's personal loan comparison calculator to help work out which loan suits you best. This will help you work out your repayments and interest in order to find a loan you are confident with.

It's important that you stay on top of your loan repayments, as any slip ups may further damage your credit score.

If you do need more help in terms of financial hardship, there are places to turn - instead of opting for loans that may put you into deeper debt. While there are low income personal loan options, you may also want to look to Moneysmart's options for free financial counselling or contact the National debt helpline.

Before taking out a personal loan, it is critical to do your research and learn what is going to work best for your situation. Start by checking out Mozo’s personal loan hub for more information.

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 252 personal loans.
Last updated 20 June 2024 Important disclosures and comparison rate warning*
  • Mozo Expert Choice Badge
    Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.75% p.a.to 26.95% p.a.
    6.75% p.a.to 26.95% p.a.based on $30,000
    over 5 years

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023 & 2024^'

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.

    Compare
    Details
  • Mozo Expert Choice Badge
    Low Rate Personal Loan

    Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.48% p.a.
    7.19% p.a.to 8.84% p.a.based on $30,000
    over 5 years

    Competitive low rates for borrowers with excellent credit on 1-7 year loans from $2,001 up to $75,000, plus free extra repayments. Winner of Mozo's Experts Choice Excellent Credit Unsecured Personal Loan 2024 and Excellent Credit Secured Personal Loan 2024 awards ^. Min. income of 25k after tax, to apply.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.

    Compare
    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.55% p.a.to 24.98% p.a.based on $30,000
    over 5 years

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.

    Compare
    Details
  • Holiday Loan

    Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.48% p.a.
    7.19% p.a.to 8.84% p.a.based on $30,000
    over 5 years

    Travel the globe with competitive low rates for borrowers with excellent credit on 1-7 year loans from $2,001 up to $75,000, plus free extra repayments. Winner of Mozo's Experts Choice award for 2024 ^. Min. income of 25k after tax, to apply.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.

    Compare
    Details
  • Express Personal Loan

    Secured

    interest rate
    comparison rate
    Monthly repayment
    14.95% p.a.to 27.95% p.a.
    29.30% p.a.to 42.8% p.a.based on $10,000
    over 3 years

    Access fast finance on loans from $3,000 to $25,000 with a Jacaranda Finance Personal Loan. Terms from 25-48 months. Check if you qualify with no impact on your credit score. Enjoy a speedy, online approval.

    Repayment terms from 2 years to 4 years. Representative example: a 3 year $10,000 loan at 14.95% would cost $14,324.71 including fees.

    Compare
    Details

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

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