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How to Qualify for a Small Loan with Bad Credit in Australia

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Obtaining a small loan with bad credit can be daunting in Australia. However, it’s not impossible. Lenders will look at your credit history to determine your creditworthiness and loan repayment ability. This article will discuss qualifying for small loans with bad credit in Australia by providing options such as collateral, co-signers, and demonstrating stable income.

Know Your Credit Score

The first step towards qualifying for a small loan with bad credit is to know your credit score. You can obtain a free credit report once a year from credit reporting agencies such as Equifax, Experian, and TransUnion. Your credit score will give you an idea of your creditworthiness and help you understand what lenders might look for in a borrower. According to a recent survey, 73% or 14.6 million Australians are unaware of their credit score, and almost half (48%) have never bothered to check it.

Find a Lender that Offers Small Loans

Once you know your credit score, look for a lender specialising in lending to borrowers with bad credit. Many online lenders offer loans to people with bad credit, and they often have lower credit score requirements than traditional banks. However, be aware that these lenders may charge higher interest rates and fees to offset the risk of lending to borrowers with bad credit.

Provide Proof of Income and Employment

Providing proof of income and employment is essential when applying for a small loan with bad credit. This can help lenders determine whether you have the financial means to repay the loan. Be prepared to provide recent pay stubs, bank statements, or tax returns to show your income. If you’re self-employed, you may need to provide additional documentation, such as invoices or contracts. Providing proof of income and employment can strengthen your loan application and increase your chances of getting approved.

Consider a Secured Loan

A secured loan may be worth considering for those with bad credit in Australia. Collateral such as a car or home can back a secured loan, making the lender more willing to lend, despite the bad credit. However, it’s crucial to remember that defaulting on a secured loan may lead to collateral loss, so careful consideration is necessary.

Get a Co-signer

Another option for qualifying for a small loan with bad credit is to get a co-signer. A co-signer agrees to share responsibility for the loan if you fail to make payments. This person should have a strong credit history and be prepared to take on the loan’s risk. However, it’s essential to recognise that failing to repay the loan may negatively impact your relationship with the co-signer. Consider alternative options if you are concerned about this potential outcome.

Improve Your Credit Score

Improving your credit score is the best way to increase your chances of qualifying for a small loan with good terms. Paying your bills on time, reducing your debt-to-income ratio, and disputing errors on your credit report can all help improve your credit score. Low credit score improvements can significantly benefit loan interest rates and terms.

Expect Higher Interest Rates and Fees  

If you need better credit, you may have to pay higher interest rates and fees to qualify for a small loan. However, shop around and compare rates from multiple lenders to ensure you get the best possible deal. Some lenders may offer lower rates to borrowers who have taken steps to improve their credit scores or who have collateral to offer.


Qualifying for small loans with bad credit in Australia may be difficult, but it’s achievable. Remember to compare rates from multiple lenders and read the terms carefully before agreeing to a loan.

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