Can I Get a Personal Loan With a Default in Australia?

Yes — but the answer depends on one specific distinction: whether your default is paid or unpaid. A paid default puts your application in the Possible — lender dependent band. An unpaid default puts it in the Unlikely — needs improvement band. Those are not the same outcome, and they require different responses.

The classification at a glance

This table applies regardless of your credit score, income, or employment — the default classification sets a floor on your outcome. You cannot reach Strong likelihood with any default on your file, paid or unpaid.

Paid default — what outcome to expect

A paid default is a default that has been listed on your credit file and subsequently settled. The debt is cleared, but the record remains on your file for five years from the date it was listed — not from the date you paid it.

Outcome: Possible — lender dependent.

Definition — paid default: A paid default is a record on your Australian credit file showing that a debt was overdue by 60 days or more, the required notice was issued by the creditor, and the debt has since been settled in full. The record remains for five years regardless of when it was paid.

What "Possible — lender dependent" means in practice:

• Some lenders will assess your application in full. Others will not look past the default record at all.
• The age of the default matters. A paid default from 4 years ago is treated very differently from one recorded 6 months ago. Older paid defaults carry less weight in a lender's assessment.
• The size of the default matters. A $500 utility default is assessed differently from a $15,000 personal loan default.
• The type of default matters. A telecommunications or utility default is generally viewed as less serious than a credit product default (personal loan, credit card, mortgage).

What this means for your application: With a paid default, you are not in a dead end — you are in a category that requires the right lender. A broker who works across a wide panel of lenders knows which ones will assess paid defaults and under what conditions. Submitting directly to a lender who does not accept paid defaults results in a decline and a hard enquiry on your credit file for nothing.

The other factors in your application — your credit score, income, DTI, employment duration, and bank statement history — still matter and can strengthen or weaken the outcome within the Possible — lender dependent band.

Unpaid default — what outcome to expect

An unpaid default is a default that has been listed on your credit file and the debt has not been settled. The creditor issued the required notice, the payment was not made, and the record is on your file with the debt still outstanding.

Outcome: Unlikely — needs improvement.

Definition — unpaid default: An unpaid default is a record on your Australian credit file showing that a debt was overdue by 60 days or more, the required notice was issued, and the debt remains outstanding. It is the most significant adverse credit event short of bankruptcy.

What "Unlikely — needs improvement" means in practice:

• The vast majority of lenders will not proceed with an application that includes an unpaid default. This is not lender-by-lender discretion — it is a standard exclusion across most of the Australian personal loan market.
• An active payment plan changes how the situation is assessed. If you have a formal, documented repayment arrangement with the creditor, this is a materially different position from an unaddressed unpaid default. Some lenders will consider an application where an unpaid default is being actively managed. The outcome remains Unlikely — needs improvement, but the path forward exists.
• Settling the debt is the single most effective action. Once the unpaid default is paid, it becomes a paid default — which moves your outcome from Unlikely to Possible — lender dependent.

For a full breakdown of unpaid defaults, what changes when you establish a payment plan, and what documentation lenders require: see Can I Get Approved With an Unpaid Default?

What else lenders assess alongside the default

The default classification sets your floor, but the other factors in your application determine where you land within that band. For applicants in the Possible — lender dependent range, these factors can strengthen or undermine your position significantly.

Credit score (Equifax 0–1,200)

Your Equifax credit score reflects your full credit history — repayment behaviour, enquiries, account age, and the default itself. With a paid default, your score has already taken a hit. Where it sits now matters:

• 650 and above: Assessable alongside the paid default.
• 500–649: Still assessable, but the combination of a below-650 score and a paid default means more factors need to be in your favour.
• Below 500: Very limited lender options even without a default. With a paid default, this combination is difficult to navigate without specialist assistance.

Debt-to-income ratio (DTI)

Lenders cap DTI at 50% — your total monthly debt repayments (existing plus proposed new loan) divided by your gross monthly income. This applies whether or not you have a default. If your DTI is above 50%, the application will not pass affordability assessment regardless of the default status.

Definition — debt-to-income ratio (DTI): DTI is calculated as total monthly debt obligations ÷ gross monthly income × 100. Credit card limits count as 3% of the total limit per month, regardless of the balance carried. A DTI above 50% is a standard decline trigger.

Employment and income stability

Employment thresholds still apply in full. Self-employed under 12 months is Possible — lender dependent on employment alone. Casual under 4 months is Unlikely — needs improvement on employment alone. These thresholds compound with the default classification — they do not cancel each other out.

Bank statement patterns

Lenders assess the past 3 months of bank statements for high-risk transaction patterns. Payday loans, wage advances, and combined ATM/gambling spending above 25% of net income each carry their own classification consequences. If any of these are present alongside a default, the combination makes a favourable outcome harder.

How long does a default stay on your credit file?

Five years from the date it was listed — not from the date it was paid, and not from the date the underlying debt was incurred.

Definition — credit file default duration: Under Australian credit reporting law (Privacy Act 1988, Schedule 1), a default remains on your credit file for five years from the date it was listed by the credit provider. Payment does not remove it. Only the passage of five years removes a default automatically.

Practical implications:

• A default listed in April 2022 drops off in April 2027 — whether you paid it in May 2022 or not until 2026.
• A default listed six months ago will be on your file for another four and a half years. Waiting it out is rarely the right approach when there are other options.
• Once a default reaches the four-year mark, many lenders treat it with less weight in their assessment — particularly for paid defaults.

If you are unsure when your default was listed, your credit file will show the listing date. You can access your Equifax credit file for free every three months at myequifax.com.au.

Test your scenario in our approval calculator — Loan Approval Calculator

Enter your full situation — default status, credit score, income, employment type, and existing debts — and get a specific outcome classification with an explanation of what is helping and what is hurting your application.

How to improve your position before applying

If you have a paid default:

1. Check the listing date. If it is approaching the four-year mark, some lenders will treat it less severely. If it is recent, focus on strengthening the other factors first.
2. Check your credit score. Access your free Equifax report to see where your score currently sits. Understand what is dragging it down beyond the default itself.
3. Reduce your DTI. Lower credit card limits you are not using — even an unused $5,000 limit counts as $150 per month in your DTI calculation.
4. Keep bank statements clean. No payday loans, no wage advances, and keep ATM and gambling spending well below 25% of net income for the 3 months before you apply.
5. Use a broker. A broker with a wide lender panel knows which lenders assess paid defaults and what their specific requirements are. Submitting blind to lenders who do not accept paid defaults wastes enquiries and harms your credit file.

If you have an unpaid default:

1. Prioritise settling the debt. This is the single highest-impact action. Once paid, your outcome classification moves from Unlikely to Possible — lender dependent.
2. If you cannot pay in full, establish a payment plan. Contact the creditor and formalise a repayment arrangement. Get written confirmation. This is a different position from an unaddressed default.
3. Do not apply while the default is unpaid unless you have spoken to a specialist first. A decline from an unpaid default adds a hard enquiry to your file with no benefit.
4. Read the companion article. Can I Get Approved With an Unpaid Default? covers the payment plan process, what documentation lenders require, and the realistic timeframes involved.

Frequently asked questions

Can a default be removed from my credit file before 5 years?

In limited circumstances. If the default was listed incorrectly — the debt was not yours, the amount is wrong, or the required notice was not properly issued — you can dispute it with the credit provider and Equifax directly. Correctly listed defaults cannot be removed early, even if they are paid.

Does paying an unpaid default immediately change my loan outcome?

Not immediately — but it changes the classification. A paid default is Possible — lender dependent, which gives you a path through the right lender. The change takes a short time to be reflected on your credit file after the creditor updates the record. Allow a few weeks before applying.

Will applying for a loan with a default on my file make things worse?

Each application generates a hard enquiry on your credit file. If your application is in the Unlikely — needs improvement band due to an unpaid default, a decline adds a hard enquiry for no benefit. Multiple hard enquiries within a short period make subsequent applications harder. Assess your position before applying.

What is the difference between a default and a serious credit infringement?

A default is a record of a debt overdue by 60 days or more. A serious credit infringement (also called a clearout) is a more severe record that indicates the credit provider could not locate the borrower — it suggests the borrower intentionally avoided contact. Serious credit infringements stay on your credit file for seven years (not five) and are treated more severely by lenders.

Can I get a personal loan with a default if I have a high income?

Income alone does not override a default. The default sets the outcome floor — Possible for paid, Unlikely for unpaid — regardless of income level. A high income improves your DTI and serviceability position, which strengthens your application within the band, but it does not move you from Unlikely to Possible or from Possible to Strong likelihood.

Does a default affect my interest rate as well as my approval odds?

Yes. Even where a lender will assess an application with a paid default, the rate offered will typically be higher than what a borrower without a default would receive. The rate reflects the lender's risk assessment — a default on file is a signal of prior financial difficulty, and lenders price for that risk.

Related articles and tools

• Defaults hub — all articles on defaults, credit file records, and how lenders assess prior credit events
• Can I Get Approved With an Unpaid Default? — what changes when you have a payment plan, documentation lenders need, realistic timelines
• Why Was I Declined for a Personal Loan? — the full list of decline factors beyond the default
• Equifax Credit Score Australia Explained — how your score interacts with a default on file
• Loan Approval Calculator — enter your full situation including default status for a specific outcome classification
• Speak to a Specialist — a broker with experience in non-standard applications can navigate the Possible — lender dependent band

This is general information only and not financial advice. Results are indicative and may vary by lender.