In many respects, bad credit loans work in the same way as other personal loans. You borrow a fixed amount of money for a fixed term (duration) and repay it in weekly, fortnightly or monthly instalments, plus interest and fees.

The key difference is that Bad credit loans are riskier for lenders. Because of this, borrowers can generally expect to pay higher interest rates and fees, and may be limited in how much they can borrow.

The average interest rate for loans with bad credit (0-459 credit score) is 25.25% p.a. That’s according to personal loan statistics compiled by Money.com.au’s recent analysis based on real quotes provided to borrowers. The average rate for borrowers with a credit score between 460 and 660 is 20.07% p.a. but remember, your interest rate will be tailored to you and some bad credit borrowers may qualify for a lower rate. For example, if you pay a deposit towards your finance or have a guarantor, you may be able to secure a lower rate.