The not-so-good news for people with bad credit

not so good news bad credit
The "not-so-good" news for people with bad credit

Hasn’t bad credit become a part of everyone’s life?

Well, perhaps not, but for Aussies, the large majority have dealt with bad credit at some point in their lives. Though it may seem like the end of the world when you've become overwhelmed with debt, it doesn’t always have to be. There are a multitude of online resources that can assist you to get back on track.

The only thing is, you best do it sooner than later because if you waltz on into a major bank with a poor credit profile asking for a loan, you’re going to get declined. Let’s be honest, there’s nothing funny about being not being able to access credit when you need it. 

Bad credit lenders are always available to assist you

That said, there are many registered lenders who are more than keen to help you out with a loan despite your bad credit record. Sure, it’s a thrill that there’s someone out there that’s willing to assist you, but just remember how you accrued that bad credit in the first place – you probably aren’t great with managing a budget, or somewhere along the line you made a bad decision and it ended up costing you. That is why even if you're lucky enough to obtain a loan, you can be sure that you’ll still appear as a higher risk than your clean record compared.

So, you’ve heard the upside – you can still qualify for a loan with bad credit. But it’s equally important to understand the downsides before completing that application form.

The downside of bad credit loans

1. You’ll be liable for more interest

When you come at a high risk as an individual, you’re essentially walking around with a little red flag above your head. What this means for banks or other registered lenders, is that they need to exercise precaution when lending you money. In doing so, they up the interest rate. When you think about it, you’ve got bad credit, you’ve approached the bank in order to get a loan to sort out your financial issues, and in the same breath end up landing yourself in deeper waters with exorbitant rates! Think twice for the simple reason that you could end up paying back much more for a longer period than you can even afford.

2. It may worsen your credit score

Well, that presents a little conundrum, doesn’t it? You have poor credit, ergo you’re applying for another line of credit, which in turn worsens your credit profile? Doesn’t add up, does it? If, however, you believe that you have drawn up a foolproof budget for your financial future and simply wish to settle your debts and manage this singular payment in a quick and efficient manner before becoming financially free, then go for it! But bear in mind that missing a payment, will drastically affect your already poor credit score if you continue the pattern with this bad credit loan.

3. The fees seem endless

Fees, fees, fees. It seems that all banks ever want to do is charge fees for everything. If it’s not bad enough that they are quite high on traditional loans, be prepared to experience elevated fees on bad credit loans.

Types of loan fees

  • Origination fee: As it states, this fee is to draw up a loan agreement should you be approved for a loan with bad credit
  • Late payment fee: Yes, this one is a bugger, we all hate it and it really isn’t ideal to incur, since the very reason you probably paid late was due to not having enough money, only for them to take a little more of the nothing you have is a harsh reality.
  • Check use fee: With certain bad credit loans you will be charged if you use a cheque instead of electronic means.

4. A bad credit loan will require security

Unfortunately, there are far more cons for the person with bad credit taking out a loan than there are pros. Another one is that you will need to offer your home or car as collateral on your bad credit loan. The reason is obvious, I’m sure. Due to your financial status which led you to this very position of applying for a bad credit loan, it’s safe to assume that generally, you aren’t a great payer, hence requiring a little security on the lender’s side.

Even though it might not be required by every lender, it’s still a great idea to prepare for it. If they don’t, they’ll most like charge an even higher interest rate. Either way, they’ll make sure that they’re covering themselves in the risk department!

If sorting your debt out is the aim and you’ve had some debt counselling from a trusted registered counsellor in Australia, then the chances of this bad credit loan helping you are great. You’ll also find the Australian Lending Centre to have people who will assist you through consultations and assessments in order to get you back on track and erase that bad credit profile!

Popular & reliable direct lenders offering Bad credit loans

  1. Jacaranda Finance Bad credit loan

    Jacaranda Finan...

    • Loans up to $15,000
    • Term up to 24 months
    • Interest up to 48%
  2. Nifty Bad credit loan


    • Loans up to $5,000
    • Term up to 12 months
    • Interest from 21.24%
  3. Cigno Loans Bad credit loan

    Cigno Loans

    • Loans up to $1,000
    • Easy application process
    • Direct payday lenders
  4. Rapid Finance Bad credit loan

    Rapid Finance

    • Loans up to $30,000
    • Term up to 7 years
    • Interest from 12%