Best Loans for Bad Credit

If you’ve got bad credit, you know by now how difficult it is to get a loan. 

And, even if you do find a loan provider willing to give you the money, you can bet you won’t be getting the best loans.

However, here at Orange Loans, we can get you in touch with the best lenders there are. That way, even if you don’t have the best credit, you can still get a good loan. 

So, if you’re interested in finding out more, make sure to keep on reading. 

What this article covers:

Does Bad Credit Prevent You from Getting a Loan? 

Best Loans for Bad Credit

Not in the least. 

While you won’t be able to get a bank loan by any means, you can find private money lenders willing to loan you the money. 

Granted, not all lenders will agree to work with you. However, you shouldn’t take that to heart. From their point of view, you’re too risky of a client to take on, and honestly, their assumption is justified.  

Now, you’d think all loan providers would think the same, but that’s far from the truth. Some believe that everyone deserves a chance, even if their history isn’t particularly promising.

As such, they’ll gladly take you on as a client, bad credit and all. But is there a catch? Well, let’s take a look. 

Bad Credit Loans – the Good and the Bad 

As you well know, there’s a good and bad side to everything, and bad credit loans are no exception. So, here are the pros and cons of bad credit loans.

Pros  

The best thing about bad credit loans is that they’re incredibly easy to get.  

Once you find a lender that gives out bad credit loans, it’s all smooth sailing from there. All you need to do is fill out an online application form and wait for your approval. And don’t you worry. It’ll come alright. 

Even with an abysmal credit score, almost all loan providers will agree to give you a loan. Hell, some lenders don’t even run a credit check before approving your loan application. 

best loan bad credit

As such, in most instances, you can expect to get the money in less than 24 hours. 

Oh, and did you know that a bad credit loan can improve your credit score? That’s right. If you make all your payments on time and pay back the loan in full, your credit score will start rising bit by bit. 

So, the more bad credit loans you take out and repay, the more your credit score will rise. Eventually, it’ll reach a number that’ll qualify you for a bank loan.   

Cons  

Unfortunately, it’s not all sunshine and rainbows with bad credit loans. 

Why? Because no money lender would actually prefer to give his money to someone with bad credit. 

Generally, the lower your credit score, the more trustworthy you seem and the more risk you pose to the lender. That’s why most banks and financial institutions completely reject applicants with bad credit. 

So, why do some money lenders take such applicants? 

Well, that’s because they’ve come up with a way to minimise the risk. 

For instance, some lenders may refuse to give out a loan without collateral. Others will set high interest rates and fees.

Not just that, but most lenders refuse to give out large loans, usually staying at the $2000 mark. 

So, when it comes to bad credit loans, it’s important that you stay realistic. You won’t get the loan of your dreams, but you’ll be sure to find one that suits your current situation. 

Can Someone with Little to No Credit Apply for a Bad Credit Loan?

best personal loans bad credit

It’s not just people with less-than-desirable credit who can benefit from a bad credit loan. 

Bad credit loans are also great for people with little to no credit history. Since these individuals don’t have an established credit history, many banks and financial companies hesitate to take them on as clients. 

However, the same doesn’t apply to private money lenders.

They don’t need to check your credit history. All they need to do is make sure you make enough money to cover the loan payments. 

So, if you’ve got little to no credit history, you’ll have a much better shot at getting a loan when you go to a private lender rather than a bank. 

What Type of Loan Is a Bad Credit Loan?

Bad credit loans fall within the category of personal loans.

Now, personal loans can either be secured or unsecured. 

A secured loan is when you borrow a sum of money while pledging a valuable asset as collateral. That way, if you ever default on your loan or don’t pay it back in full, the lender has a way of retrieving their money. 

Accordingly, secured loans aren’t particularly risky for lenders. That’s why they usually have low interest rates and long loan terms. Not only that, but a secured loan will allow you to borrow larger amounts, even if you have bad credit or no credit history at all. 

Unfortunately, that’s not the case with unsecured loans. Put simply, these types of loans are too risky to the lenders. As such, they’ll usually have much higher fees and interest rates. The amount you can borrow will also be quite limited. That’s doubly true if you’ve got bad credit. 

Eligibility Criteria for a Bad Credit Loan

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Thankfully, getting a bad credit loan isn’t the impossible deed it seems.

To qualify for a bad credit loan in Australia, you simply need to:

  • Be over 18 years of age
  • Be an Australian citizen or a permanent resident of Australia
  • Have an active bank account, email, and phone number
  • Ear a regular income for at least the previous three months 

How to Apply for a Bad Credit Loan

Thankfully, it’s quite easy to apply for a bad credit loan. 

You simply fill out an online application in which you’ll detail what type of loan you want and how much money you need.

Once the lender reviews your application, he’ll call you to confirm your details. If everything’s in order, you’ll receive the loan contract. As soon as you sign it, you’ll find the money in your bank account in just a few hours (though it may take longer for particularly large sums).

Information and Documents Needed for a Bad Credit Loan Application

Most loan applications require that you share the following:

  • A copy of your ID
  • Certain personal details, such as your email, address, and phone number
  • Employment details 
  • Proof of income (payslip or income statement)
  • 90-day history of your transactions

How to Increase Your Chances of a Bad Credit Loan Approval

There are a couple of things you can do to make your loan application more appealing to the lender. 

For one, you should try to avoid job and address changes. A stable job and permanent address imply that you’re a trustworthy individual who won’t take off with the money the first chance you get. 

Also, show the lender your recent credit behaviour. If you’ve managed to pay your recent bills and loan payments on time, the lender will be more liable to approve your loan. Saving a deposit will also impart a good impression on the lender.

So in short, positive spending and saving habits will nudge the lender into accepting your application. The more responsible you seem, the less wary the lender will be and the better loan terms you’ll be able to get. 

Best Loans You Can Get With Bad Credit

best personal loan with bad credit

Generally, the terms and conditions of a bad credit loan will change according to three things:

  1. Your lender
  2. The loan amount
  3. Whether the loan is secured or not. 

Typically, small unsecured loans, ranging from $300 to $2000, will be similar across the board. That’s because all small loans are regulated by the Australian Securities & Investments Commission (ASIC), which stipulates that no lender can charge more than a 20% establishment fee and a 4% monthly maintenance fee for a small loan.  

So, good credit, bad credit, or no credit, lenders can’t charge more than this. 

As such, if you’re borrowing $1000 to be repaid in a month, you’ll end up paying:

  • Establishment fee: $200
  • Monthly maintenance fees: $40
  • Total: $1,240.00 

For medium-sized secured sums, between $2001 and $5000, the best loans will be those with an annual percentage rate of 48%. As for large sums exceeding $5000, expect an interest rate of around 21.24%. 

Still, keep in mind that you’ll probably be offered lower interest rates if you get a secured loan. You’ll also be offered longer loan terms, which typically don’t exceed 52 weeks in unsecured loans. 

So, when offered a choice, always go with a secured loan. Sure, you’ll temporarily put your possession at risk, but nothing will happen to it as long as you pay the loan back on time. 

Note: Medium and large loans will also come with an establishment fee, which typically ranges from $100 to $700. 

Note: Some lenders will have hidden charges and fees. Also, some will set late payment fees, which can come up to $7 per day. And if you default on the loan, there are default fees, which can be twice as much as the original loan. 

By When Do You Need to Repay Bad Credit Loans? 

Fortunately, most lenders allow you to choose when you’d like to repay your loan. 

As previously mentioned, most bad credit loans have to be repaid in no more than 52 weeks. As long as you repay your loan before then, you’ll be golden. 

Now, it goes without saying that the longer your loan term, the more interest will accumulate and the more you’ll eventually have to pay. As such, many people tend to choose short loan terms. 

However, that’s not always the wisest choice. 

best bad credit personal loans

You see, the shorter your loan term, the more your monthly payment will be, and vice versa. So, if your monthly income isn’t enough to cover your monthly payment, you’ll be better off with a longer loan term. That way, you can avoid late payment fees, which will ultimately cost more than the extra interest. 

So, be practical when choosing your loan terms and if you ever feel lost, be sure to discuss the matter with your lender.

Also, know that you can control the frequency of payments. You can choose weekly, fortnightly, or monthly. So, pick what makes you the most comfortable, and if you can, choose a shorter loan term to cut back on fees and interest. 

Is It Okay to Repay the Loan Before the Loan Term Is Up?

This will depend on your lender, but usually, this shouldn’t be a problem. 

In case you didn’t know, money lenders typically set their minimum loan term at 12 weeks. That’s because they need to rake in some profit in the form of interest. 

As such, some loan providers may make you pay a fee if you repay the loan before the specified time is up. They see it as compensation for the lost interest. 

However, that’s not always the case. In fact, the majority of lenders won’t make you pay an early repayment fee, especially with bad credit loans. 

Still, make sure to know the policies of your lender before proceeding with early repayment. If there’s a fee and it’s more than the remaining interest, it’ll be better to wait out the remainder of your loan term. 

What Happens If You’re Struggling to Repay the Loan?

If the time for your usual payment has come and you can’t come up with the money, the first thing you need to do is contact your lender.

Explain your situation to them thoroughly and tell them why you won’t be able to make your payment. They’ll most likely be understanding and ready to come up with a solution.

For instance, they may give you an extension or decrease your payment for this month, with the rest to be repaid later. They may even help you refinance your loan so that you can have loan terms more suitable to your current circumstances. 

Still, keep in mind that not all lenders will be so kind-hearted. Some will simply send you a warning and claim your security after a reasonable amount of time has passed.

And, of course, if your loan isn’t secured, you’ll be looking at many legal and financial repercussions.

Best Loans for Bad Credit

Yes, but it’ll probably take you some time to find a money lender willing to accept your application. 

Unfortunately, most money lenders don’t approve of clients whose income is wholly dependent on Centrelink benefits. That’s because they believe such clients will have a hard time repaying their loans. 

Still, some loan providers will accept clients who receive Centrelink payments, especially those who make more than $480/$500 per week.

So, don’t despair of getting a loan after the first rejection. Keep asking, and you’ll eventually find the right lender. On the off chance you can’t, we’ll discuss below a few other ways you can get your hands on some extra money. 

What to Do if You Can’t Find a Good Lender 

If you’re scared of dealing with a money lender or if you simply can’t find one willing to accept your application, here are a few things you can try to get money. 

No-Interest Loan 

As the name suggests, this loan has no interest, fees, or hidden charges. To top it off, the loan providers don’t even look at your credit score.

This is all thanks to the “No Interest Loans Scheme” in Australia. With it, you can borrow up to $1500, and all you need to do is pay back what you borrowed over 12-18 months. 

However, there are a few conditions for the loan. First off, the loan needs to be used for essential purposes, such as household items, educational materials, medical/dental services, and car repairs. 

Secondly, you need to either have a Health Care Card, a Pensioner Concession Card, or make an income of $45,000 per year after tax. If you don’t meet any of these conditions, you won’t be able to get a no-interest loan. 

Centrelink Advance Payment

If you’re on Centrelink and can’t find yourself a lender, you can apply for an advance payment.

Simply go on the Service Australia website and put in your application. You’ll receive your regular Centrelink payment in advance, just like that. There are no credit checks, fees, interest rates, or repayments. 

Just keep in mind that you’ll be lacking funds for the coming weeks. So, you’ll probably need to work a few extra shifts or take a second job to cover your regular expenses. 

Payday Loan

Payday loans, historically called “small amount loans”, enable you to borrow up to $2000. Generally, payday loans come with a repayment term ranging from 16 days to one year. However, they tend to have a much higher fee than personal loans. 

In return, however, they’re much easier to acquire. Even people with bad credit or no credit history are never turned away. 

Still, one thing to keep in mind about payday loans is that they’re almost never reported to credit bureaus. Accordingly, even if you pay back the loan on time, your credit score won’t improve. And honestly, if that wasn’t enough to deter you from payday loans, the ridiculous fees should do it. 

So, don’t resort to payday loans until you’ve exhausted all your options. 

compare loans for bad credit

FAQs

What’s an Establishment Fee?

When your loan is established, the lender charges you what’s called a fee. This fee covers things like credit assurance, assessment, and the verification services employed to process your application. Establishment fees need to be paid upfront, and they aren’t refundable. 

What Can You Offer as Security?

Anything of value can be offered. This includes things like cars, motorcycles, houses, jewels, bonds, shares, and even cash in a savings account. As a general rule, your asset should be of equal worth to your loan. 

What Can You Use a Bad Credit Loan for?

Since a bad credit loan is a personal loan, you can do whatever you want with the money. You can use it for car repairs, medical expenses, travel expenses, home renovations, rental bonds, etc. 

Can You Get a Bad Credit Loan if You’ve Never Gotten a Loan Before?

Certainly, being a first-time borrower won’t disqualify you from getting a bad credit loan. 

How Do You Know You’re Dealing With a Legitimate Lender?

Thankfully, all lenders on Orange Loans are reputable and trustworthy. Still, it’s always best to conduct a little online search on your lender before closing the deal. Make sure they have an Australian Credit License and good all-around reviews from previous clients. 

What’s Considered a Bad Credit Score?

est personal loan for bad credit

Most banks tend to give out personal loans for scores equal to or higher than 700. Any lower than that, and you’re considered a “high-risk” client. 

Still, some banks may approve your loan if you’re not too far off the 700 mark. However, if your score’s between 350-550, you can kiss any chance you had at getting a bank loan goodbye. 

What Affects Your Credit Score?

Numerous things can impact your credit score, including:

  • An unpaid parking ticket
  • Missed or late bill payments
  • Paying defaults
  • Bringing your accounts up to date
  • Checking your credit score too many times 
  • Co-signing for someone with bad credit
  • Applying for several credit cards and loans

How Long Does a Default Stay on Your Credit History?

When you default on part or all of your loan, the incident will stay on your credit report for five years and negatively impact your credit score throughout. If the lender deems the default to be a clearance, the default will stay on your credit for two additional years, for a total of seven whole years. 

Conclusion 

If you’ve got bad credit or little to no credit history, a bad credit loan can be just the thing you need. 

With it, you’ll be able to get the money you need without having to go through a rigorous screening process. Even better, you can use bad credit loans to improve your credit score step by step. 

Just make sure to choose a trustworthy lender. That way, you won’t be played for a fool and taken advantage of. And if you’re ever in doubt, compare the fees and charges of your loan provider before signing your contract.

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