A bad credit loan refers to a loan that can be obtained by people with bad credit histories.

Unfortunately, the number of lenders who will borrow to someone with bad credit is only a fraction of the number of lenders on the market. This is because large banks, credit unions, peer-to-peer lenders and even many online lenders will only lend to someone who has good credit and therefore a history of making their debt repayments.

The defining feature of a bad credit loan is that it typically has a high interest and will most likely require the customer to offer up some form of security.

Types of Bad Credit Loans

A bad credit loan may be both secured and unsecured but, if it's unsecured will carry a significantly higher interest rate. A secured bad credit loan is simply one that requires the customer to put up collateral - either in the form of equity in a property or a vehicle.

The big advantage of the secured form is that it will allow you to secure a lower interest rate which means that you will save a lot of money in the long run. In addition, many lenders will only allow someone with bad credit to apply for a loan if they can offer up security.

There are, however, many lenders who will offer you an unsecured loan for bad credit, however, they will carry a higher interest rate and will only offer a small to medium loan amount.

A Secured Bad Credit Loan is for you if:

  • You own your home or have 70% or more equity in your home
  • You own your motor vehicle
  • You want to borrow a large amount of money
  • You need a longer loan term
  • You want to save money

An Unsecured Bad Credit Loan is for you if:

  • You do not own your home or vehicle
  • You’ve been denied a loan elsewhere
  • You are looking to borrow a small amount of money
  • You can afford to repay the loan in a shorter term
  • You’re prepared to pay a higher interest rate

Where can I get a Bad Credit Loan?

Bad credit loans are offered primarily by alternative online lenders and pawn brokers. Online lenders generally offer lower loan amounts and shorter loan terms but, there is a great deal of flexibility and you can most certainly find a lender that offers you the ideal mix.

These online lenders are able to process and approve loans without ever meeting the customer face to face. This means that in addition to overlooking a bad credit record they are able to offer you a fully comprehensive online service and quick turnaround times. We've collated a comprehensive list of lenders who offer loans to people who have poor credit or are blacklisted and you can easily compare these lenders online.

Basic Application Requirements

In order to secure a quick loan you need to be able to prove that despite your history of non-payment you can afford to make the repayments using your monthly or weekly income. The lending requirements for most bad credit lenders are as follows:

  • 18 years or older
  • A citizen or permanent resident of NZ
  • Are employed or self-employed
  • You earn above a set amount per week (usually $3000)
  • You have a bank account and an email address

Bad Credit Loans - will they affect my credit?

Bad credit loans are just like any other type of personal loan and can have both a positive and negative effect on your credit. It goes without saying that if you don’t really need the loan or can access cash by borrowing from a friend or family member then you should not attempt to get a bad credit loan.

The important thing to note is that even though the lender brands the loans as "designed for those with poor credit" there is no indication of this on your credit file and it will appear as any other form of credit. The good news is that a bad credit loan can actually improve your credit if you keep up with the necessary repayments but, should you default your credit will certainly be affected.

If you need a loan and are also looking for a way to improve your credit - this type of loan will serve both purposes.

Is it Worth making a Bad Credit Loan Comparison?

Many people who have been refused credit or know that their credit is not looking good believe that high interest and unfavorable loan terms simply come with the territory but, this isn't true. Even with poor credit you can find a loan that is competitive amongst the rest and offers you flexible terms, rates and conditions.

To compare a bad credit loan you can use the interest rates offered in conjunction with the loan amounts and loan terms that the lender provides. You should also factor additional costs such as application and loan management fees which some lenders charge and other don’t.

Tips for Comparing Bad Credit Loans

When it comes to high interest loans it's almost always worth it to go the extra mile and do a complete loan comparison between multiple lenders.

This can be done on a select few comparison platforms that include loans for blacklisted and loans for people with bad credit. Another tip that will make it worth your while is to search for lenders offering a pre-approval; since you can find out in a matter of minutes if you can indeed take out the loan without making a formal application which will require a credit check.

If you make a formal application the lender is required by law to run a credit check and if you're refused the credit this will leave a stain on your credit file. If you really want to avoid any credit checks you can choose a pawn broker who can offer you cash in exchange for an item of value with absolutely no credit check.