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Can you get a debt consolidation loan with bad credit?
Whether you can get a debt consolidation loan with bad credit will depend on your situation, but in general it is possible.
In fact, there are lenders in Australia who specialise in helping borrowers with bad credit, including by offering debt consolidation loans.
These lenders will assess your application for a bad credit debt consolidation loan based on your situation as a whole – not just your credit history. For example, being able to prove you are on top of your current loan commitments will be a big help.
If you're in this position, understanding where you can get a bad credit debt consolidation loan is a good place to start. It also helps to be aware of the application process and the risks to watch out for.
Lenders generally don’t use the words ‘bad credit’ when describing their loans. But phrases like ‘below average credit’ and ‘poor credit considered’ may indicate a lender is open to bad credit applications.
Why consolidate debt if you have bad credit?
Consolidating debt when you have bad credit can be a particularly appealing option for getting on top of debt. If handled carefully, a debt consolidation loan could even play a part in helping rebuild your credit score.
The whole idea behind consolidating debt is that it helps make credit repayments more manageable, allowing you to repay debt more consistently and faster. This may help your credit score to improve over time.
Some other reasons why borrowers choose to consolidate their debt include:
- You’ll have a single debt repayment instead of several
- You may be able to get a lower interest rate than what you currently pay
- There’s a fixed term for the loan, meaning a set date for paying it off
- Repayments can be weekly, fortnightly or monthly to match your salary payments
Based on data from real Money.com.au customers, the average debt consolidation loan for borrowers with bad credit is $11,100. This is about half the size of the typical debt consolidation loan request in our database, which is $22,573.
What are the interest rates on bad credit debt consolidation loans?
Bad credit debt consolidation loan interest rates in Australia typically start from around 15-20% p.a. but can be higher depending on the borrower and their situation.
Analysis by Money shows the average personal loan interest rate quoted to borrowers with the lowest credit scores (less than 460) is 25.25% p.a. That's compared to the average interest rate of 14.64% p.a. for debt consolidation loans among all borrowers.
As the table below shows, the interest rate can make a significant difference to the regular repayments on a bad credit debt consolidation loan. Finding the best rate could save you thousands over the life of your loan.
Bad credit debt consolidation loan interest rates example
Loan amount | $5,000 |
---|---|
Monthly repayment (15% p.a. interest rate) | $118.95 |
Monthly repayment (20% p.a. interest rate) | $132.47 |
Monthly repayment (25% p.a. interest rate) | $146.76 |
Loan amount | $10,000 |
Monthly repayment (15% p.a. interest rate) | $237.90 |
Monthly repayment (20% p.a. interest rate) | $264.94 |
Monthly repayment (25% p.a. interest rate) | $293.50 |
Loan amount | $15,000 |
Monthly repayment (15% p.a. interest rate) | $356.85 |
Monthly repayment (20% p.a. interest rate) | $397.41 |
Monthly repayment (25% p.a. interest rate) | $440.27 |
Loan amount | $20,000 |
Monthly repayment (15% p.a. interest rate) | $475.80 |
Monthly repayment (20% p.a. interest rate) | $529.88 |
Monthly repayment (25% p.a. interest rate) | $587.03 |
Loan amount | $25,000 |
Monthly repayment (15% p.a. interest rate) | $594.75 |
Monthly repayment (20% p.a. interest rate) | $662.35 |
Monthly repayment (25% p.a. interest rate) | $733.78 |
Loan amount | $30,000 |
Monthly repayment (15% p.a. interest rate) | $713.70 |
Monthly repayment (20% p.a. interest rate) | $794.82 |
Monthly repayment (25% p.a. interest rate) | $880.54 |
Loan amount | Monthly repayment (15% p.a. interest rate) | Monthly repayment (20% p.a. interest rate) | Monthly repayment (25% p.a. interest rate) |
---|---|---|---|
$5,000 | $118.95 | $132.47 | $146.76 |
$10,000 | $237.90 | $264.94 | $293.50 |
$15,000 | $356.85 | $397.41 | $440.27 |
$20,000 | $475.80 | $529.88 | $587.03 |
$25,000 | $594.75 | $662.35 | $733.78 |
$30,000 | $713.70 | $794.82 | $880.54 |
How do bad credit debt consolidation loans work?
With a bad credit debt consolidation loan, you’re combining multiple debts into a single loan. This could include credit cards, car loans, other personal loans and buy now pay later accounts.
Bad credit debt consolidation loans, as the name suggests, are aimed at borrowers with a low credit score. But once the loan is established, it will work just like any other kind of personal loan, with regular repayments over a fixed term.
That said, there are some important differences with bad credit debt consolidation loans.
How are debt consolidation loans for bad credit different?
Limited access to lenders
You’ll need to apply with a specialist lender (banks and credit unions generally look for a good credit score).
A more detailed application process
You may be asked for extra information on your credit history and finances when applying. It likely won't be just a simple credit score check.
Borrowing limits will likely apply
If you're consolidating debt with bad credit, there may be a lower limit on how much you can borrow (e.g. up to $30,000).
Higher rates and fees
Bad credit debt consolidation loans often have higher interest rates and may include additional fees, such as a 'risk fee' charged by some lenders.
How to compare bad credit debt consolidation loans
1
Compare interest rates
Debt consolidation loans for bad credit borrowers can come with higher rates than other loans. The key is making sure your rate is as low as possible. And ideally, that it’s lower than the rates on the debts you’re consolidating.
2
Look for low fees
For debt consolidation to be worthwhile, it’s important to avoid high fees. Aim to minimise the upfront and ongoing fees you’ll pay with the new lender. Remember there may also be fees for closing out your old loans and extra ‘risk fees’ for bad credit borrowers.
3
Check the comparison rate
The comparison rate will give you an idea of the actual cost of your bad credit debt consolidation loan per year, including interest and fees. Don’t be fooled by a low interest rate that seems too good to be true.
4
Consider the loan term
Repaying your bad credit debt consolidation loan as soon as possible may be the priority. Just be sure to balance that with being able to afford the higher regular repayments on a shorter term. Some loans also allow you to choose a longer term but make extra repayments and pay it off early if you can afford to pay more.
5
Calculate the total cost of the loan
Knowing your regular repayment amount is one thing. But be sure to also work out the total cost of the loans you’re comparing over the full term. Ultimately, you want to make sure that your new loan won’t end up costing you more.
Do I qualify for a bad credit debt consolidation loan?
You can generally apply for a debt consolidation loan in Australia if you are:
- Over the age of 18; and
- An Australian citizen or permanent resident; and
- Employed or have a regular source of income; and
- Able to show the lender that you can afford the loan repayments and will be able to service the loan for the duration of the term.
How lenders assess bad credit debt consolidation applications

Phil Collard, Money.com.au's Personal Loans Expert
"The lender will look at your income and other expenses to make sure you can afford to repay the loan comfortably. Of course, they will look at your credit history too. This is why it can be a good idea to do a free credit score check before applying so you know what kind of position you're in. But unlike a traditional lender, bad credit lenders take a closer look at why exactly you have bad credit. They'll also consider what you have been doing to improve it."
Phil Collard, Money.com.au's Personal Loans Expert
Financial vs non-financial defaults
Financial defaults, such as missing credit card payments or loan repayments, are more of a red flag than non-financial defaults, like missing payments on a streaming subscription or falling behind on energy bills.
This is because financial defaults directly impact your ability to manage credit and debt, which is a key factor in assessing your financial stability. Non-financial defaults, while still relevant, typically don’t reflect the same level of risk to lenders, as they are less likely to affect your overall creditworthiness.

Paid vs unpaid defaults
If you have since paid off your defaults, or are making steady progress towards paying them, a specialist bad credit lender will take that into account.
Most lenders won't give you a bad credit debt consolidation loan until you have been discharged for at least 12 months.
In most instances, bad credit debt consolidation loans are unsecured personal loans. But some lenders may be more likely to approve your loan if you provide an asset you own as security, like a car.
In short, if your credit record suggests that you’re struggling to meet the repayments on your current debt, the lender may be reluctant to help you consolidate them. The situation is similar if you are currently bankrupt or in a Part IX debt agreement.
How to apply for a bad credit debt consolidation loan
When assessing applications for a bad credit debt consolidation loan, lenders will ask for information about your financial and living situation. This includes:
- Income and employment verification (i.e. employment contract, payslips)
- Bank statements for up to six months
- Valid ID (e.g. driver licence or passport)
- Proof of address (note: the longer you’ve been at the same address, the better)
- Details of the debts you are consolidating (loan and credit card statements)
Are bad credit debt consolidation loans worth it?
Debt can be expensive if you have bad credit, and unpaid debts can further damage your credit score over time. But applying for a new loan that isn’t suitable could also affect your credit score. For example:
Your application could be declined
If you’re not eligible and declined by the lender as a result, this could damage your credit score. It could also be an unpleasant and frustrating experience.
You might be approved but struggle to keep up with the repayments
For instance, if the new loan has a shorter term, leading to higher regular repayments compared to your existing debt.
If you’re not sure whether consolidating your debt is a good idea, consider getting professional advice. The National Debt Helpline is available to offer guidance and advice on your options if you're struggling with debt.
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