What Loans Are Hard to Apply For With a Low Credit Score?

By Angela Monroe - June 14, 2019

Generally, all unsecured loans are hard to apply for when you have a low credit score.

An unsecured loan is any type of financing that does not need collateral, which is a valuable property that you as the borrower give to the lender in case of loan default. The collateral is first appraised by the lender because its monetary value affects the interest rate and terms of the loan.

Since an unsecured loan does not have collateral, lenders do not have a total assurance that they can recover their money. Thus, they have to assess your creditworthiness through your credit score and history of debt management and on-time payments. If you have a low credit score, you are considered “high risk” and will be rejected or charged with a high interest for the loan.

Types of Unsecured Loans

1. Personal Loan

A personal loan covers a variety of purposes. Its interest rate is either fixed (stays the same throughout the life of the loan) or variable (changes based on the loan market). Your credit score heavily influenced its interest rate and loan terms. Typically, the higher your credit score, the lower the interest rate that you need to pay.

Some personal loans have a pre-payment penalty, which means that if you want to complete the loan repayment earlier than the agreed term, you’ll also have to pay the penalty fee.

Personal loans may also have one-time origination fees of around 1% to 5% of the loan. This amount is taken out up front and subtracted from the lump sum.

Like credit cards, personal loans usually charge late payment fees.

2. Student Loan

Designed exclusively to help students fund their college education, student loans are often a part of the school’s financial aid program. Federal student loans have fixed interest rates that are lower than private loans. Sometimes, the government pays the interest of students who demonstrate financial need while they are in school and during some periods after school.

In Australia can be a HELP loan or a VET Student Loan.

HELP (Higher Education Loan Programs) financing include:

  • HECS-HELP. This loan helps students in Commonwealth-supported institutions pay their student services and amenities fee and repay it later without interest.
  • FEE-HELP – This financing is available to domestic fee-paying students and not subsidised by the government.
  • SA-HELP – This loan helps students pay for non-academic services, including eateries, career advice, legal assistance, and recreational activities.
  • OS-HELP – This financing is only available to eligible students who are undertaking study overseas and enrolled at a Commonwealth supported institution.

VET Student Loans are available to students who apply for higher level VET qualifications on approved courses at Diploma level or above. This loan structure has three loan cap bands of $5,000, $10,000 and $15,000. If the course costs more than the applicable loan cap, students will need to pay the difference upfront.

VET Student Loans also include the following debts incurred before 2005:

  • Higher Education Contribution Scheme (HECS)
  • Postgraduate Education Loan Scheme (PELS)
  • Open Learning Deferred Payment Scheme (OLDPS)
  • Bridging for Overseas-Trained Professionals Loan Scheme (BOTPLS) debts

3. Payday Loan

Also called cash advance loan or check advance loan, a payday loan is a type of short-term financing with high interest rates. The loan amount and interest rate are based on your income and credit profile.

Some payday lenders charge extremely high levels of interest that can range up to 500% in annual percentage yield (APR).

Unsecured Loans With A Low Credit Score

When applying for an unsecured loan, have a high credit score of 750 and above. If you fall short of this score, work on improving your credit score first. Otherwise, you will be offered one with high interest or even rejected. The hard pull into your credit history and the loan rejection that follows can greatly reduce your credit score.

Bad Credit Loans for People With Low Credit Score

If you have a low credit score and cannot get a personal loan or any other types of unsecured loans, your best financing option are bad credit loans.

Bad credit loans are designed for people with a low or bad credit score and those who do not have a credit history–anyone who is less likely to get approved for standard consumer loans.

These financings can be used for debt consolidation or purchasing an asset, such as:

  • Car
  • Boat
  • Caravan
  • Motorbike
  • Truck
  • Equipment
  • Home

Bad credit loans require collateral, which is usually the asset that you’re going to purchase with the loan money. If you fail to make on-time payments, your asset will be repossessed. Therefore, understand all the conditions of the loan agreement first before signing the contract. These include the interest rate, term and any other fees associated with the loan.


Loans for People With Bad Credit helps people with a low credit score get approved for bad credit loans. We work with many lenders and have offices in major cities in Australia, including Sydney, Melbourne, Brisbane, Perth and Adelaide. To inquire or kickstart your application, fill out the Bad Credit Loan Pre-Approval or call us on 1300 769 384.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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