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Bad credit car loans Australia
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.
Who actually offers bad credit car loans?
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.
Yes, you can get a car loan with CERTAIN types of bad credit
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.
Types of credit defaults
- There are non-financial defaults (like missing a gym membership payment or an old Optus account).
- And financial defaults, like missing payments on a loan or credit card.
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.
Am I eligible for a bad credit car loan?
To figure this out, let’s look at what lenders will usually want to see in your application.
- You’re over 18
- You’re an Australian citizen or permanent resident
- You have a regular, stable income
- You can show that you will be able to afford the repayments (based on your income and other expenses)
- If previously bankrupt, you have been discharged or part IX debt agreement for at least 12 months
Lenders will also take a detailed look through your credit history.
11 tips to improve your chances of getting a bad credit car loan
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.
- Pay off any unpaid defaults in your credit record.
- Pay all your bills on time in the lead up to your application
- Spend within your means. Bad credit car lenders will review your bank statements and spending habits.
- Avoid gambling as this can be a red flag for lenders.
- Don’t take on any other debt like credit cards or payday loans.
- Wait until you’ve been there for at least three months in your current job before applying for a loan.
- Don’t change address too often. Being at the same address for at least six months is a plus for lenders and can positively affect your credit score).
- Put money into savings regularly for 6-8 weeks before applying, to show you can comfortably afford the repayment.
- Be realistic with what car you want. I know we would all like to drive the best car we can, but a bad credit car loan will attract a higher interest rate and make the car more expensive overall.
- Pay a deposit for the vehicle you’re buying (e.g. 10-20%). This will reduce the risk for lenders in giving you a loan.
- Be 100% truthful about everything on your application.
Reasons you might not be able to get a bad credit car loan
- You’re currently bankrupt (or you were discharged less than 12 months ago)
- Your bank statements show too much gambling
- You have large unpaid defaults
- There’s evidence of bad bank account conduct (constantly missing payments, going into negative regularly)
How are bad credit car loans different?
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.
Expect:
- Higher interest rates and fees
- Potentially a limit on the amount you can borrow (to match your servicing or imposed by the lender to mitigate their risk)
- To be asked to provide more information when you apply
Of course, even among bad credit car loans, some are better than others.
How do you find the best bad credit car loan?
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:
- The lowest interest rate you can find.
- Combined with the lowest fees (the comparison rate factors in fees with your interest rate).
- The ability to make extra repayments and pay off the loan early without penalty.
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.
Best bad credit car loans comparison
| Bad credit car loan A | Bad credit car loan B | |
|---|---|---|
Loan amount | $30,000 | $30,000 |
Interest rate | 18% | 15% |
Upfront fee | $900 | $450 |
Loan term | 5 years | 4 years |
Total to repay | $47,079 | $40,677 |
Saving | -$6,402 |
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GET STARTEDGET STARTEDBad credit car loans FAQ
Get help from a real-life Money Matchmaker® from start to finish.
How do I know if I have bad credit?
The worst way to find out you have bad credit is by having a loan application rejected.
It’s easy and FREE to check your credit score and report yourself.
Doing this puts you in control and means you can take steps to improve your credit score if you need to.
What kind of vehicle can I get with a bad credit car loan?
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.
If you're financing a vehicle for a business, your options will be slightly different. For example, there are specific ABN car loans and other bad credit business loan options.
What is a bad credit score in Australia?
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.
Do I need a deposit for a bad credit car loan?
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.
What documents will I need when applying for a bad credit car loan?
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.
Can I get a car loan with no credit check?
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.
What’s the minimum credit score for a car loan 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.
What are the pros and cons of getting a bad credit car loan?
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:
Pros of bad credit car loans:
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Provides an option for borrowers who are not eligible for a standard car loan because of their credit history
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Provides a structured repayment plan with predictable repayments
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Usually a range of loan terms and repayment options (weekly, fortnightly or monthly)
Cons of bad credit car loans:
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Higher interest rates and fees than car loans available to other borrowers
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Stricter credit limits may apply
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Fewer lenders to choose from compared to standard car loans
How does Money Matchmaker® help me get a bad credit car loan?
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.
Can you help me get a bad credit car loan anywhere in Australia?
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.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
AS FEATURED IN
*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.
