How to Get a Small Loan with Bad Credit?

Do you want to apply for loans but have a bad credit score? The Australian population could hugely benefit from knowing how to obtain loans with lower amounts despite having lousy credit. It is prevalent to face challenges when you need small loans with bad credit in Australia. In fact, of the 13.7 million credit card owners, 13% of them are at risk of default for several different reasons.

However, lenders in Australia also provide a few other loans to those with bad credit. But it is essential to understand what bad credit is and the different things that affect credit rating. So here is a short manual on how one gets a small loan on bad credit. 

Understanding Bad Credit

Bad credit is exceptionally subjective. This is because the scale sits between zero and 1200, making it a pretty wide range. In Australia, there are three significant ways to determine:

  • Equifax
  • Illion
  • Experian

Each of them utilises a distinct credit score range and method for determining your credit score. The higher the score, the better across all three agencies. It is easier for a person to borrow money when they have a higher credit score since they are seen as less of a risk by potential lenders. Nevertheless, anything below 500 is considered a bad credit score. Further, anything below 400 is a very bad credit score.

Things That Affect Credit Rating

A credit report comprises numerous elements, but there are a few critical factors that every credit company will look at. Here is a list of all the things that affect credit rating.

  • Your payment history
  • Your debt
  • Credit inquiries
  • Your credit history and credit age
  • Your account mix (revolving accounts, instalment accounts and open accounts)

Types Of Loans Available to Those With Bad Credit

1.  Secured loan

A secured loan is the most popular type. While most small loans are unsecured, meaning no collateral is required, specific lenders provide secured loans to people with bad credit. It is a loan in which the borrower offers asset security in exchange for the loan. If the borrower does not reimburse the lender, the lender will have a legal claim on the asset. They then utilise this to offset their losses.

2.  Bad credit small loans

Bad credit personal or small loans are the same as regular ones. In that, they are unsecured and do not require a guarantor. However, they have substantially higher interest rates and extra expenses. A bad credit personal or small loan may be the only choice if a borrower cannot provide collateral or a guarantor.

3. Guarantor loans

A guarantor loan is another alternative for borrowers with weak credit. Borrowers require someone, often an acquaintance, to guarantee they will return the loan. So if the borrower defaults, the guarantor is legally obligated to repay the rest of the loan plus interest.


Understanding the credit system is far more complex than this. However, this article summarises what bad credit constitutes. It further delves into the things that affect credit rating and briefly summarises the different types of loans people can opt for if they have a low credit score. This includes secured loans, guarantor loans, and small loans with bad credit in Australia.

Nevertheless, loans are risky business. Hence, it is best to consult a professional lender and a financial advisor before taking out a loan. 

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