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If you’ve been turned down for a loan because of your credit score, you’re not alone. In Australia, over 1.2 million adults have a credit score below 500 - the official threshold for what lenders call "bad credit." But that doesn’t mean you’re out of options. The right lender can still work with you, even if your history includes missed payments, defaults, or a past bankruptcy. The key isn’t finding a lender who doesn’t care about your credit - it’s finding one who understands your situation and offers fair terms.

What "bad credit" really means in Australia

Your credit score in Australia isn’t just a number. It’s a snapshot of how you’ve handled debt over the last five years. A score under 500 usually means you’ve had one or more of these: a missed credit card payment, a defaulted loan, a court judgment, or a debt agreement. Some people have it because of medical emergencies, job loss, or even identity theft. It’s not always careless spending.

Lenders don’t all treat bad credit the same way. Some will outright reject you. Others will approve you but charge sky-high interest - sometimes over 30% p.a. The best lenders for bad credit don’t just see your past. They look at your present: your income, your job stability, and whether you’ve started rebuilding.

Who actually offers fair loans to people with bad credit?

Not every lender claiming to help people with bad credit is trustworthy. Some are predatory. Others are legit but have hidden fees or short repayment terms that trap you. Here are the top three lenders in Australia right now that consistently get good feedback from borrowers with poor credit histories:

  • MoneyMe - Offers personal loans from $2,000 to $50,000 with rates starting at 11.99% p.a. (variable). They don’t have a strict minimum credit score. Instead, they look at your income, employment history, and bank statements. Many users with scores as low as 350 have been approved.
  • Fair Go Finance - Specialises in bad credit loans with no credit check required. They use alternative data like utility payments and rental history. Loan amounts range from $2,000 to $10,000. Interest rates start at 19.9% p.a., which is high but far below the 48% some payday lenders charge.
  • Plenti - A peer-to-peer lender that connects borrowers with individual investors. They don’t use traditional credit scores. Instead, they use their own algorithm that considers your spending habits and income consistency. Rates start at 12.99% p.a. for eligible borrowers, even with a score under 500.

These three stand out because they don’t just approve you - they give you a real shot at rebuilding. MoneyMe lets you repay early without penalties. Fair Go Finance reports your on-time payments to credit bureaus, which helps your score improve. Plenti gives you a clear repayment plan with no surprise fees.

Contrasting images of predatory payday lending versus fair loan approval in a modern office.

What to avoid like the plague

There are lenders out there who prey on desperation. Watch out for:

  • Payday lenders - They offer quick cash but charge $30 per $100 borrowed, which equals over 400% p.a. If you can’t repay in two weeks, the debt rolls over and explodes.
  • Unlicensed lenders - If a lender doesn’t have an Australian Credit Licence (ACL) number, walk away. You can check their licence on the ASIC website.
  • Loans with upfront fees - Legit lenders don’t ask you to pay a fee before they give you the money. If someone says "pay $200 to unlock your loan," it’s a scam.

One real example: A woman in Adelaide took out a $3,000 payday loan in 2024. She was told she’d pay back $3,600 over six months. After missing one payment, fees piled up. Within nine months, she owed $7,200. She ended up in a debt agreement. That’s the trap.

How to pick the right lender for your situation

You don’t need to take the first offer. Here’s how to compare smartly:

  1. Check the comparison rate - This includes fees and interest. A loan with a 15% interest rate but $500 in fees might be worse than a 17% loan with no fees.
  2. Look at repayment terms - Aim for 12 to 36 months. Anything shorter than 12 months will crush your budget. Anything longer than 5 years means you’ll pay way more in interest.
  3. Ask about credit reporting - Does the lender report your on-time payments to Equifax or Illion? If yes, this loan can actually improve your score.
  4. Read the fine print on early repayment - Some lenders charge you for paying off early. Avoid them.

One borrower in Perth got approved for $8,000 with MoneyMe. He had a score of 412. He chose a 24-month term, paid $372 a month, and made every payment on time. Within 14 months, his credit score jumped to 610. He refinanced and saved $1,200 in interest.

A car key placed beside a loan agreement, symbolizing secured lending and financial recovery.

What if you’re still rejected?

Sometimes, even the best lenders say no. That doesn’t mean you’re stuck. Try these steps:

  • Apply with a co-borrower - A spouse, parent, or friend with good credit can apply with you. Their score helps you get better rates.
  • Use a guarantor loan - A guarantor promises to repay if you can’t. This is common in Australia for people with bad credit. Fair Go Finance and some credit unions offer this.
  • Start with a secured loan - If you own a car worth $5,000 or more, you can use it as collateral. Rates are lower because the lender has something to fall back on.
  • Fix your credit first - Pay off small debts, dispute errors on your report, and get on a payment plan with creditors. Even 60 days of on-time payments can make a difference.

Final tip: Don’t rush

It’s tempting to take the first loan you’re offered - especially if you’re in a bind. But rushing leads to worse debt. Take a week. Compare at least three lenders. Use a free credit check service like Credit Simple or Wisr to see what’s on your report. If you’re unsure, talk to a free financial counsellor through the National Debt Helpline (1800 007 007). They don’t sell loans. They just help you find the right path.

Bad credit isn’t a life sentence. It’s a chapter. And with the right lender, you can turn it into a comeback story.

Can I get a personal loan with a credit score below 500?

Yes. Lenders like MoneyMe, Fair Go Finance, and Plenti approve borrowers with scores as low as 350. They don’t rely on traditional credit scores alone. Instead, they look at your income, job stability, and bank transaction history to assess your ability to repay.

What’s the lowest interest rate for bad credit loans in Australia?

As of early 2026, the lowest advertised rates for bad credit personal loans start at 11.99% p.a. (MoneyMe) and 12.99% p.a. (Plenti). These rates are available to borrowers who meet their income and employment criteria, even with a credit score under 500. Avoid lenders offering rates below 10% - they’re likely too good to be true or come with hidden traps.

Do bad credit lenders check my bank account?

Many do. Lenders like MoneyMe and Plenti use bank statement analysis to see your income, regular expenses, and spending patterns. This helps them decide if you can afford repayments without falling behind. It’s not a credit check - it’s a cash flow check. You’ll usually need to give them secure access to your online banking.

Will applying for a bad credit loan hurt my credit score?

A hard credit check will temporarily lower your score by 5-10 points. But if you apply to multiple lenders within 30 days, most credit bureaus treat it as one inquiry. That’s called "rate shopping" and it’s allowed. The bigger risk? Getting approved for a loan you can’t repay. That will hurt your score far more.

Can I improve my credit score while repaying a bad credit loan?

Absolutely. Lenders like Fair Go Finance report your on-time payments to Equifax and Illion. If you pay every installment on time for 6-12 months, your score can rise by 50-100 points. It’s one of the most effective ways to rebuild credit - if you stick to the plan.