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In our bad credit car loans guide:
It can still be relatively easy to get a car loan with bad credit.
In fact, there are plenty of lenders in Australia who specialise in offering bad credit car loans.
They’re experts at dealing with borrowers with lower credit scores and people with paid and unpaid defaults.
The big difference with bad credit car finance is the interest rate. You’ll need to accept a higher one to get approved.
Here, I’ll share everything I know about getting a bad credit car loan, based on years working in the industry plus data from thousands of real bad credit loan requests.
There are around 12 specialist lenders in Australia offering loans for bad credit customers. They generally charge higher interest rates than other lenders on account of the increased risk they’re taking on.
By contrast, most of the retail banks (the likes of CBA, Westpac and large credit unions) won't accept applicants with bad credit.
These lenders view bad credit applicants as a bigger risk than someone with good credit. But not all bad credit is created equal and specialist lenders will pay attention to the reasons someone has bad credit before when assessing their application.
If you have defaults on your credit history, lenders would prefer that you have paid those defaults off. Or you’re making progress to pay them off, even if your credit score hasn’t recovered yet.
The type of default matters too.
Financial defaults are viewed more seriously and will weaken your application more.
What’s happening with your credit now is also important. A bad credit score reflects the past. But things can change quickly.
You may have started a new job, repaid other debts and been keeping up with all your commitments. A specialist lender will take that into account.
Remember too that your credit history is just one part of a car loan application.
To figure this out, let’s look at what lenders will usually want to see in your application.
Lenders will also take a detailed look through your credit history.
Applying for a bad credit car loan before you’re ready could mean you get declined. This could damage your credit score further. Before applying, consider these steps.
Let’s say you are eligible for a bad credit car loan. In many ways it will be the same as any other car loan.
You borrow a set amount and pay it back plus interest and fees over a fixed period. The car you’re buying is used to secure the loan. This generally makes it much cheaper than an unsecured bad credit personal loan.
But bad credit car finance has some fairly major differences you should know about.
Of course, even among bad credit car loans, some are better than others.
I’ve seen some applicants with bad credit who were ready to settle for any loan they could get approved for. Doing this could be a very expensive choice in the long term.
You should still compare options and look for:
Applying for car loan pre-approval can also be a good way of finding out if you're eligible and how much you can borrow, before going ahead with a full application.
|Bad credit car loan A||Bad credit car loan B|
Total to repay
If you’re approved for a bad credit car loan, you can usually use it for new or used cars, as well as SUVs, utes, electric cars and other road vehicles.
With a secured car loan, there is usually an upper age limit on the vehicle you can buy. This varies, but up to 15 years is a common limit among lenders.
This varies as there are three major credit rating companies in Australia that lenders use. Each of these has its own scoring levels.
But across all three, anything below 549 is considered ‘below average’ or a ‘low score’.
Separately, lenders also have their own cut offs for what they consider a bad credit applicant, but they typically do not disclose this publicly.
Not necessarily. But if you do have a deposit it could mean having a better chance of being approved for the loan. A deposit of between 10 and 20% could help your application as it reduces risk for the lender.
First up, when applying you’ll need to submit proof of your income and expenses.
This usually means at least three months worth of payslips and bank statements. But don’t be surprised if the lender asks for documentation covering a longer period of time. They might also ask for other financial evidence to support the application, including tax records and an employment contract.
If you are self-employed and cannot provide payslips, you could consider a low doc car loan.
If approved, you will also need to provide details for the car you’re buying, such as a sale invoice issued by the seller, or a registration certificate if you’re buying a car privately. You’ll typically also need to provide evidence that the vehicle has been insured.
Some lenders promise 'no credit check car loans'.
BUT even if a lender does not check your credit history when assessing your application, they WILL need to check that you can afford the loan repayments, based on your income and expenses.
There is no such thing as guaranteed-approval bad credit car loans in Australia.
There is no industry minimum credit score for car loans in Australia.
Some of the big banks will only lend to borrowers with a credit score of 600 or higher but other lenders have lower limits and some won’t apply limits at all.
Only you can decide if getting a bad credit car loan is right for you. Here are some of the main pros and cons to think about:
Provides an option for borrowers who are not eligible for a standard car loan because of their credit history
Provides a structured repayment plan with predictable repayments
Usually a range of loan terms and repayment options (weekly, fortnightly or monthly)
Higher interest rates and fees than car loans available to other borrowers
Stricter credit limits may apply
Fewer lenders to choose from compared to standard car loans
Money Matchmaker® connects you with lenders you match with based on a few pieces of information you provide, including about your credit history.
It’s a powerful tool that combines our knowledge and experience, with lender policies, rates and fees, to match borrowers with suitable lenders.
If you need further help, our team of human Money Matchmakers is on hand to guide you through the process.
Money.com.au may receive a referral fee from the lender if you choose to take out a loan.
Most bad credit car loan providers operate across the country. Most are located in major capital cities like Perth, Sydney, Melbourne, Brisbane, Adelaide and Hobart.
All the lenders we work with all have Australian-based teams. So rest assured, when arranging your loan you'll be working with a lender in Australia.
Shopping around for the right loan can save you thousands of dollars in interest and fees.
Car Loans guides and resources
Where to next? Read our other car loan guides to understand more about your options for financing your next car.
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.