Happy Man checking credit score on mobile Happy Man checking credit score on mobile
Happy Man checking credit score on mobile

If you have bad credit, it means that lenders deem you to be a high-risk borrower. It could be that you’ve defaulted on a loan or credit card. It could mean you’ve declared bankruptcy or undergone foreclosure. Bad credit can also result from missed payments. Either way, it reduces your chances of getting the finance you want at competitive interest rates.

But it’s not the end of the world. A bad credit loan such as those offered by Ume Loans will give you funds quickly and with minimal fuss. What’s more, these loans could help you to restore your credit and turn things around.

Understanding bad credit loans

To a lender, loans are all about risk vs reward.

A borrower with a long history of on-time payments and settled accounts is significantly more likely to meet their repayment obligations. As a result, the lender can afford to give them more competitive rates.

A borrower with a history of missed payments and financial issues is more likely to default. The lender isn’t as confident they’ll get their money back, and it’s therefore not a financially viable move for them.

This is where a bad credit loan comes in. Lenders like Ume Loans take over from these unwilling lenders and provide the funds that bad credit borrowers need. These loans typically charge a higher interest rate and have lower funding limits, but the terms are similar and if the borrower repays, they can steadily rebuild their credit.

Bad credit borrowers have a couple of other options as well, both of which aim to negate their high-risk status:

  • Secured loans: The funds are secured against an asset (such as a car) which is used as collateral.
  • Guarantor loans: An individual with better credit signs as a guarantor and assumes responsibility if repayments are missed.

Improve Credit Score

How bad credit loans can improve your credit score

A bad credit loan is not just a means of securing funding. As far as the credit reporting agencies are concerned, it’s a loan like any other, and this means it will be added to your credit report and used to calculate your credit score. It also means that the initial inquiry and the new account will reduce your score, but only slightly, and if used correctly, these loans can turn bad credit into good.

Here’s how…

Bad credit loans can improve your credit history

Your credit score is broken down into several categories and credit history is one of the biggest. It combines all of the repayments from your active accounts and looks at how frequently you are meeting those obligations.

If you miss a repayment, your score will take a hit. If you meet those repayments month after month, it proves that you’re a reliable borrower and your score will eventually reflect that.

Bad credit loans can reduce credit utilisation

Credit scores aren’t calculated based on specific monetary values. It’s all relative—one person’s debt is another person’s repayment.

To account for this, credit reporting agencies use something known as credit utilisation. It assesses the total credit available to a borrower and then calculates how much of this credit they have taken.

For instance, if you have 1 maxed-out credit card with a $10,000 limit, you have 100% credit utilisation. Conversely, if you have borrowed $10,000 but have a $100,000 limit, your credit utilisation is just 10%.

A bad credit loan—like most personal loans—isn’t included in your credit utilisation. It means that you can use the loan to stabilise your finances and even pay off some of your credit card debt. This will reduce your obligations, decrease your ratio, and improve your credit score as a result.

Bad credit loans can create more positive accounts

Turning around bad credit is a case of swapping the bad for the good—making sure there are more positive marks than negative ones. By taking out a bad credit loan and meeting the repayments, you’ll be relegating the negative marks (missed payments, defaults) to mere footnotes while the active loan takes precedence.

It takes time to turn your credit around, and the lower your credit score, the longer it will take. But as long as you make those repayments, reduce that credit utilisation, and avoid further mistakes, oversights, and issues, you’ll see your credit score climb every month.

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How to apply for a bad credit loan

Ready to apply for a bad credit loan in Australia? Here’s what you need to do.

1. Find a bad credit lender

The first step is to find an appropriate lender, one that offers the amount you need and can process the loan quickly and with no fuss. At Ume Loans, for instance, we offer bad credit Australian loans up to $25,000 with terms of between 18 and 60 months. You can apply online in minutes.

Choose a reputable lender and always read the terms to make sure you know what you’re getting. Ume Loans is fully licensed, regulated by ASIC, and has been giving bad credit borrowers second chances since 2009.

2. Prepare your application

Why do you need the money? How much do you need? Can you meet the repayments? What sort of term is best for you? Consider all of these things before starting the application process. You can apply for a bad credit loan in just a couple of minutes, but it’s something that requires a little forethought as failure to repay the loan will do even more damage to your credit score.

3. Submit your application

Once you have entered your details and confirmed the specifics, you’re ready for the next stage.

At Ume Loans, this is when one of our lending experts will call you to request further documents, provide pre-approval, and then finalise your loan.

Considering a bad credit loan? Speak to our lending specialists

Bad credit loans are a great way to get your hands on cash for a new car, caravan, motorcycle, or other major purchase even when you have bad credit. But they go much further than that. If used correctly—make all repayments, check credit utilisation—they can help to restore your credit and ensure you get more favourable terms in the future.


Ready to take control of your financial future? Look no further! At Ume Loans, we specialise in providing solutions for individuals with less-than-perfect credit. Our dedicated team is here to help you secure the loan you need, tailored to your unique circumstances. Don’t let bad credit hold you back any longer—take the first step towards financial freedom and speak to our lending specialists on: (07) 5443 3863