Are you struggling to repay multiple debts and have a bad credit history? If so, then you may be concerned about your ability to receive a personal loan.
The good news is that you can still be approved for a personal loan – even if you have bad credit. However, you do face a tough uphill battle. The key to overcoming this hurdle is to understand the application process and know who to turn to for assistance.
Read on to find out how to apply for a personal loan, and how to increase your odds of a successful application.
Key Takeaways
- While it is possible to apply for a personal loan with bad credit, being approved on favourable terms is harder.
- High interest rates and fees can make it tough to meet the criteria for a personal loan.
What Does it Mean to Apply for a Personal Loan With Bad Credit?
When you apply for a personal loan, the lender must assess your ability to repay the loan. To do this, they request documentation from you, such as payslips to demonstrate your proof of income.
Lenders also assess your finances by performing a credit check, which requires your consent to review your credit report and score. A credit report is a summary of your credit history, while a credit score is generally a number from (0-1200) that rates your creditworthiness. The lower your credit score is, the greater risk you are to lenders. Thus, the less likely they are to approve you for a personal loan.
In essence, a personal loan with bad credit is the same as any other personal loan, except the interest rates and fees are usually much higher.
What Are the Advantages of Being Approved for a Personal Loan With Bad Credit?
Even when the odds are against you, there are many advantages to a personal loan, such as being able to:
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Consolidate multiple debts into one: Once approved for a personal loan, you can use the funds from that loan to pay off your existing debts. You then proceed to pay off the new personal loan, which means only one repayment schedule to manage and a fixed weekly amount to repay.
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Gain access to essential funds: With a personal loan, you get the necessary funds to address various financial needs, such as money for a new car or urgent home renovations or repairs.
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Save money: Ideally, the terms of the new personal loan should be more favourable than your existing debts. That should mean lower interest rates and fees, along with no early repayment penalties.
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Get a clear timeline: When managing multiple debts, it can be hard to keep up with separate due dates and amounts. A personal loan takes the hassle out of debt management, giving you one repayment schedule and a fixed deadline for when you’ll be debt-free.
How to Apply for a Personal Loan With Bad Credit
First, you must know the basic criteria for all personal loan applications. That is, you must be at least 18 years old, an Australian citizen or permanent resident, and able to provide proof of income.
From there, here are the steps to follow when you apply for a personal loan with bad credit.
1. Check Your Credit Score
To check your credit score, request a credit report from any of the three credit reporting bodies in Australia: Equifax, Experian, and Ilion.
Your credit report will summarise your credit history, including repayments, credit applications, and evidence of financial hardship, such as missed or late repayments. You’ll then receive a credit score of (between 0-1200).
The lower the score the less likely you will be approved for finance.
2. Seek Third-Party Help
Applying for a personal loan – especially with bad credit – can be stressful and confronting. For this reason, we recommend you seek the assistance of a third-party provider, such as a company that specialises in debt solutions.
At Debt Fix, we provide various debt solutions to help you achieve financial freedom. We leverage our network of lenders, who specialise in working with people with bad credit, to help you get approved for a personal loan on favourable terms. We also specialise in arranging debt agreements. This means establishing a legally binding agreement between you and your creditors, so you can repay your loan in an affordable and sustainable way. As a result, you avoid the risk of a full bankruptcy, save on high interest rates, and get creditors off your back.
3. Review the Fine Details
Before you apply for a personal loan with bad credit, review the terms to ensure you get a fair deal. When comparing personal loans, ensure yours:
- Lets you repay in an affordable and sustainable way
- Has a lower interest rate than your existing one
- Lets you make extra repayments
- Has low or no early repayment fees
4. Get Approved and Funds
Once your application is submitted and approved, the funds will be deposited into your account. You can then use these funds to pay off your existing debts and start repaying the new loan in weekly instalments.
Best Practices to Follow for Bad Credit Personal Loans
When you apply for a personal loan with bad credit, there are many risks to consider. To increase your odds of a successful application, follow these best practices.
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Avoid making multiple loan applications – When multiple lenders review your credit history, this gets flagged on your credit report and lowers your overall credit score.
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Only borrow what you can afford to repay – Use an online budget calculator to determine what you can repay in weekly instalments.
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Check for mistakes on your credit report – If you notice errors on your credit report, such as inaccurate debt amounts or missing repayments, contact the credit agency to clear up these mistakes.
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Make your repayments on time – Frequent on-time payments will help improve your credit score.
Talk to Debt Fix Today
Applying for a personal loan with bad credit can be stressful. But it doesn’t have to be. Reach out to people you can trust for sound debt advice and support.
Our friendly, knowledgeable team will be happy to chat. We can discuss your financial concerns and propose a plan tailored to your needs and lifestyle. You’ll receive all the options you need to make an informed choice.
Get started today. It takes only 30 seconds to apply and won’t impact your credit score.
Frequently Asked Questions (FAQs)
Below are commonly asked questions about personal loans.
What are the basic criteria to apply for a personal loan?
You must be at least 18 years or older, a permanent Australian resident, and receive regular income. You must meet the lenders credit criteria.
Can you get approved if you are self-employed?
You can get approved for a personal loan if you are self-employed. You just need to provide evidence of a regular income, such as invoices and receipts.
