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Bad Credit Debt Consolidation Loans in Australia

Get a personalised quote for a bad credit debt consolidation loan.

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Why get a bad credit debt consolidation loan through Money.com.au?

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Personalised rates

Get rates tailored to your specific circumstances

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No credit score impact

Your credit score won't be impacted when you get a rate quote

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 amountMonthly 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

The table above shows the potential difference in costs between the best debt consolidation loan rates and rates at the upper end of the scale. These examples are calculated using monthly repayments with a fixed interest rate on a 5-year term. They do not include any fees that may be charged by a lender in addition to interest.

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?

The main differences between debt consolidation bad credit loans and standard loans are:
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Limited access to lenders

You’ll need to apply with a specialist lender (banks and credit unions generally look for a good credit score).

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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.

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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).

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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

Money's asset finance expert, Phil Collard

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.

Bad credit debt consolidation loan defaults

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)

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.

Ready to get a debt consolidation loan?

There's no obligation if you check your rates and it won't impact your credit score.

Personal loan guides & resources

Not sure about the next steps? Our guides and resources can help.

More FAQs

There’s no such thing as guaranteed loan approval in Australia, including on bad credit debt consolidation loans. That’s because lenders must comply with responsible lending laws that require them to take steps to verify the borrower’s financial situation before approving a loan.

In the short term, making new credit applications can cause a dip in your credit score. But if you make the repayments on the loan over time and don’t take on any new debt or miss repayments elsewhere, your credit score should improve.

To get approved, it can take 1-2 days as long as you're able to provide all the information that the lender requests. Some lenders may promote speedy approval times with access to same-day funds but it will ultimately depend on how strong your application is.

In some instances you may be able to find a debt consolidation loan with an interest rate that's lower than a typical credit card rate (the average credit card interest rate is 18.51% p.a. on outstanding balances). But remember, in some cases bad credit borrowers may pay very high rates on loans (up to 30% p.a. in some cases). But remember bad credit borrowers usually pay higher rates on loans.

You may be denied for a debt consolidation loan if your credit score is too low, you have a high debt-to-income ratio, or if you’ve recently missed payments or had defaults. Lenders want to ensure you can afford the new loan, and a poor financial history can signal a higher risk of non-repayment.

Jared Mullane is a finance writer with more than eight years of experience at some of Australia’s biggest finance and consumer brands. His areas of expertise include energy, home loans, personal finance and insurance. Jared is qualified with a Certificate IV in Finance and Mortgage Broking (FNS40821).

Sean Callery is the Editor of Money.com.au. He has over 15 years of international experience. He is qualified with a Certificate IV in Finance and Mortgage Broking (FNS40821) and is compliant to provide general advice in Tier 1 General Insurance (RG 146) products.

Important Disclosures

Unless otherwise stated, personal loan comparison rates are calculated based on a loan amount of $30,000 repaid over a 5-year term. The comparison rates only apply to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you.

For offers from Money.com.au lending partners, we will match you with lenders and rates based on the information you provide us. This won't affect your credit score. Some lenders displayed are not current Money.com.au partners and we can't guarantee rates from a specific lender.

General information only The information on this page is general in nature and has been prepared without considering your objectives, financial situation or needs. You should consider whether the information provided and the nature of any personal loan product is suitable for you and seek independent financial advice if necessary.

We are not providing you with a recommendation or suggestion about a particular personal loan. You should read the relevant disclosure statements or other offer documents before deciding whether to apply for or continue to use a particular product.

What products, features and information are shown While we make every effort to ensure all personal loans available in Australia are shown in our comparison tables, we do not guarantee that all products are included. Our product comparisons may not compare all personal loan features and attributes relevant to you.

Product information, such as interest rates, fees and charges, is subject to change without notice. We include a link to each provider on our table for you to also be able to see the relevant product information direct with the lender.

How personal loans are sorted and filtered by default Users can easily change the sort order and apply product filters to our product comparison tables. However, when you arrive on a page initially, by default personal loans are sorted by:

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  • Lowest loan interest rate, then;
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  • Provider name (A-Z)

Our tables feature all personal loans available from lenders on our database that match the search criteria selected. Lenders do not pay to feature in our tables, nor do we earn commission if you click to visit a lender’s website. The order of the products in the table is not influenced by any commercial arrangements.

If you get a personal loan as a result of visiting this page, we may earn a commission.

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Assumptions:

  • The calculations do not account for changes in interest rates or other market conditions that may occur.
  • Results are approximations and may differ from actual payment schedules or amounts.
  • The calculator does not include all fees and charges that you may incur in relation to a financial product.

Limitation

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