Close this search box.

Bad Credit Interest Rates Explained

Bad credit interest rates are always higher than standard loan rates. Find out why bad credit interest rates are higher and what you can do about it here.
Bad Credit Interest Rates

Have you applied for a loan and were knocked back due to having bad credit? Perhaps you did your research and discovered there are still options for you via lending experts such as those at Bad Credit Loans. Yet these loans come with significantly higher interest than you expected. Bad credit interest rates are always higher than standard loan rates. Whether it’s a small personal loan or a home loan, the higher rates will be applied. Having bad credit interest rates explained may help you understand why this is.

Bad Credit Interest Rates Explained

Banks and financial institutions will always check your credit score prior to approving a loan application. If you have a low credit score, you are considered high risk. Banks and most lenders are risk-averse. They will either deny you a loan outright or offset the risks via higher fees and interest. Limitations to the amount you can borrow will also apply.

Can I avoid High-Interest Rates?

You cannot always avoid bad credit interest rates, the best thing is to avoid getting bad credit in the first place. However, if you need to apply for a bad credit loan, it is important to shop around via a specialist lender. A bad credit score could see you paying anywhere as high as 25% interest. Specialist lenders will usually charge between 2-2.5% higher interest on bad credit loans than a standard loan. Whilst higher than banks on good credit loans, this is often still manageable.

There are lenders out there who will want to take advantage of your poor credit score. These ‘loan sharks’ do not have your best interests in mind. Unlicensed, illegal lenders such as loan sharks make money off hidden fees, unrealistic repayment schedules, and exorbitant interest. They can create situations where your financial situation becomes even more precarious. Loan sharks will also be ruthless in recouping the debt, utilizing intimidation, and often illegal measures. Actively avoid them at all costs.

bad credit interest

How Can I Get Better Interest Rates?

At Bad Credit Loans, the specialist team members are experts in finding you the right loan product. We understand that bad credit can happen to anyone. We are sympathetic and non-judgemental. In order to help you secure the best rate possible on a bad credit loan, there are some steps you can take. Where possible we recommend improving your credit score prior to making an application. You can do this by:

  • Engaging specialist support for credit repair to remove disputable, unfair or contestable black marks from your record. Things such as identity theft, default judgements or duplicate filings.
  • Paying down all existing lines of credit.
  • Ensuring all bills such as utilities and phone on time, every time.
  • Lower your credit card limits.
  • Pay your rent or mortgage on time.

It will take time to improve your credit score, however with small changes you can see improvement in as little as 30 days. If you continue with good habits, it may be possible to refinance to lower interests rates into the future. The important thing is to not continue to apply for loans if you are knocked back as this will further damage your credit score. The difference between good and bad credit and what that means for interests rates should not be understated.

You can sometimes secure competitive interest rates despite your credit history if:

  • Your employment history is stable.
  • You are employed in a high-income, professional capacity such as a doctor or lawyer.
  • The purpose of your loan is to purchase a low-risk investment such as property in a sought after area.
  • Your credit history is low due to small scale defaults under $1000.

Specialist lenders determine interest rates on a case-by-case basis.

bad credit interest rates

Choose A Specialist Lender And Avoid Excessive Bad Credit Interest Rates

Just because the banks will not lend to you, doesn’t mean you cannot secure approval for a loan. Unlike banks, specialist lenders, also known as non-conformist lenders, look beyond the simple scoring of your credit rating. A small or one-off mistake shouldn’t prohibit you from borrowing and won’t always mean exorbitant interest rates. At Bad Credit Loans, we look deeper into your circumstances to more adequately assess your suitability for a loan. As a specialist lender, we will often consider lending even to those with:

  • Excessive credit enquiries
  • Mortgage defaults
  • Debt consolidation
  • Tax debts
  • Defaults
  • Discharged bankruptcy
  • Court writs
  • Default judgements and more

We can select the most appropriate loan for your situation, doing what we can to tailor it to your needs. Bad Credit Loans Australia are fully licensed and compliant with all relevant regulatory guidelines. Our aim is to help you get ahead and not risk further damage to your financial future through a poor loan choice.

If you have bad credit and want to secure a loan with the most competitive bad credit interest rates, contact Bad Credit Loans today on 1300 123 328.