Financial Hardship Loans Bad Credit Australia

A “financial hardship loan” is the umbrella term for any type of emergency loan provided to customers to cover the expenses of an unexpected event, like auto repair, funeral expenses, or divorce costs.

These loans are available even for those whose employment status has changed recently or can’t afford to pay their overflowing debts.

To make sure they can get their money back, lenders always perform a credit check on your report before approving. But what if your credit score doesn’t qualify you for a loan? Does that mean you’ve reached the end of the road?

Fortunately, many lending institutions are willing to help people in difficult times even if their reports show nothing but past mistakes and late repayments, so let’s delve more into this topic.

Financial Hardship Loans (Bad Credit) – Australia

If your score is below 670 or you don’t have a score in the first place, you can still be eligible for a financial hardship loan in Australia. Many lenders specialise in loans for those with bad credit or high debt levels.

However, since they don’t have a guarantee of your ability to repay, they consider you a high-risk borrower. They don’t offer the most appealing terms and conditions so that only those in dire need of the money and responsible enough to repay the loan will opt for them since the consequences are severe.

Usually, they offer loans with limited amounts of money, so you won’t be able to cover the expenses of home renovations, college tuition, or private school fees. But you’ll get enough money to pay for your annual home insurance, new car tires, or a part of your hospital bills.

Anyway, it won’t be in your best interest to take out a large amount of money since the interest rates will be higher than the standard, and the payment terms will be shorter, so the overall cost of the loan will be unaffordable.

There are three types of hardship loans for bad credit:

Payday Loans

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Payday loans, also known as cash advance loans, are a type of fund that you can receive on the same day of application with minimum requirements and, in most cases, no credit check at all.

However, it has the shortest terms as you’ll be required to repay it on the day of your next paycheck.

Our research indicates that, the amount of money you can borrow with a payday loan ranges from $300 to $1,000, which is enough if you’re dealing with a temporary shortfall.

However, be aware that it comes with skyrocketing interest rates that can go up to 700% in the worst case. Also, you’ll have a very short time to gather enough money to pay back your debt and its fees.

Short-term Loans

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Our findings show that, short-term loans are a lot similar to payday loans in terms of requirements, speed, and the amount of cash you can borrow. That means you can quickly be approved even with a less-than-spotless credit score.

Yet, the significant difference is that the terms of short-term loans are a bit longer. Instead of paying the loan back by the time of your next payday, you’ll be offered better terms that range from 3 to 12 months.

Usually, they come with lower interest rates since the lifetime of the loan is longer. However, this also means more time for the interest to accumulate, meaning that the more monthly repayments you have, the more interest you’ll pay over time.

So, the overall interest rates of both loan types are almost always similar; the difference is the length of the repayment terms.

Instalment Loans

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Instalment loans are the hardest to acquire with bad credit, yet not impossible! These are long-term personal loans that allow you to borrow more cash, usually up to $10,000, and pay it back in monthly instalments over the period of 12-36 months.

They come in the shape of secured or unsecured personal loans. As the name indicates, secured loans require borrowers to pledge an asset against the borrowed amount. In case of default or late payment, the lender has the right to take ownership of the asset.

Although they look riskier, secured loans are easier to obtain even with bad credit since the lender will have something to cover their loss in case you fail to repay.

On the other hand, unsecured loans require no collateral, but they come with higher interest rates. Yet, both collateralised and uncollateralised instalment loans cost less than the previous loan types. They’re also better for big-dollar financial hardships like hospital bills and gambling.

How Do I Apply for a Financial Hardship Loan with a Bad Credit?

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Based on our firsthand experience, to be approved with bad credit, you’ll have to do more than meet the primary eligibility criteria. Of course, you’ll have to provide proof that you’re 18 years or older and that you’re an Australian citizen or at least hold a permanent residency visa. A valid UK current account and telephone number will also be required.

Lenders will overlook your credit score but will ask for other documents to have an idea about your financial history and responsibility with money.

Among these documents are a read-only bank statement of your banking transfers for the past 90 days and a copy of your tax returns for a period of two years.

They’ll also ask for proof of income. However, if you’ve lost your job recently or your reason behind asking for a financial hardship loan is “unemployment,” your application can still be approved. You just have to provide an explanation letter of the hardship you have at hand and your plan of repaying the debt.

Do Financial Hardship Loans Affect My Credit History?

Financial hardship loans can cause a slight hit to your score at first, but with on-time payments and responsible credit usage afterwards, your score will recover in no time.

In fact, a bad credit loan can be an excellent opportunity to boost your hurt score, improve your credit mix, and increase your eligibility for future loans if you manage it wisely.

On the contrary, if you fail to repay on time or stop making payments altogether, your credit score will suffer, and you’ll ruin your chances of getting any future loans.

That’s why we always recommend never to take out a loan unless you’re 100% sure that you can pay it back, especially if it’s a payday or short-term loan as their interest rates are high and failing to repay will throw you in a whirlpool of increasing debts.

What If I Don’t Get Approved for a Financial Hardship Loan?

Sometimes, even if you provide the lender with all the needed documents and proofs of financial responsibility, your credit score won’t sit right with them, and your application will end up rejected. In this case, you have two options:

Find a Co-Signer

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This is a helpful solution if your financial hardship requires laying your hands on cash to pay for an emergency rather than other debts.

A co-signer is someone who agrees to apply for the loan with you and acts as your backup repayment source if you default. Having a co-signer will convince the lender to lend you the money even with bad credit. However, for the co-signer to be accepted, they have to meet the lender’s minimum requirements of credit history.

Just bear in mind that both you and your co-signer’s credit score will suffer from the consequences in case of late repayment.

Manage Your Debt in Another Way

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Suppose your financial hardship has more to do with overflowing debts than paying the expenses of an emergency. In that case, you can look for options that manage debts rather than pay them off. Among these are debt consolidation loans and debt agreements.

Debt consolidation loans are loans taken out to pay off other debts. If you have more than one creditor, multiple payments a month, and many due dates to keep up with, a consolidation loan combines all these in one loan with one monthly payment and a lower interest rate.

It’s a good method to manage your debts and give yourself some time to get your credit score back on track.

A debt agreement is another way to manage your debts but in a more severe way. In this type of settlement, your creditor agrees to lower your debt and rearrange your payments based on what you can afford, not what you owe them.

Nonetheless, keep in mind that such an agreement leaves a black mark in your already not-so-good credit report, so don’t settle for it unless you’re left with no other way out of your debts.


Sometimes unexpected events happen, but just because your savings account isn’t full to the brim and your credit score isn’t the best doesn’t mean you have no way out of your problem.

Financial hardship loans are available from many lending institutions across Australia, and many of them accept customers with bad credit.

About the Author

Lucy has over a decade of experience in finance. She is currently the content curator here at Perfect Payday.

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