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Can you get a car loan with bad credit?

Written by

Shaun McGowan

Firstly, it’s definitely possible to get a car loan with bad credit.

There are lenders who specialise in helping people get back on track and give you a second chance.

These days lenders have access via your credit report to see:

  • Any missed payments
  • Paid or unpaid defaults

Your credit score and history shows lenders your past performance with other companies.

You'll need to be able to give the lender an understanding of why you had missed payments or defaults.

And of course, your situation may be much better than what it was previously. You may have a new job, be earning more money, paid off some defaults and kept up with all your commitments.

If this is the case, getting a car loan with bad credit should be achievable.

Not all bad credit is created equal

For instance, if you have paid your defaults off, that is looked at more favourably to unpaid defaults.

Also in this context, a default to an energy company, or a gym for instance is a lot more favourable to a default to another finance company.


credit history

So what are the hoops you have to jump through?

For people with bad credit, lenders are going to want to understand two things:

  • The history of any defaults and ultimately get comfortable with them.
  • They’re going to want to make sure you have the ability to repay the loan.

If these two things check out, a lender will be able to offer you a bad credit car loan, but it's likely going to have higher interest rates and some fees attached.

This is because you're being considered higher risk than someone who has excellent credit.

What you can do to improve your chances of getting approved

  • Pay all unpaid defaults
  • Be in regular, paid employment. The longer, the better.
  • Show that you can save the amount for a period of time that your loan repayment would be.
  • Don’t apply with everyone, all at once. Each lender will make an enquiry on your credit file which can make it worse.

If you want to see if you're eligible for any loans you should try our Money Matchmaker™ it won't affect your credit score.

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Adding a 20% deposit will be viewed favourably by lenders and significantly increase your chance of approval.

How lenders view credit history

For people looking for a car loan with a bad credit history, the good news is, there are lenders who specialise in financing cars for you.

credit history applicant

What lenders are looking for

Lenders love boring, or should we say, consistency!

They love it if you've had the same job forever and have been at the same house since you first left home.

Here's an example of how your employment history can influence your approval.

employment history applicant

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Am I eligible?

You can qualify for car loans with bad credit in Australia if you are:

  • Over the age of 18; and
  • An Australian Citizen or Permanent Resident; and
  • Are employed or have a regular source of income; and
  • Have been discharged from bankruptcy or a Part IX for a minimum of 12 months; and
  • Can show you are capable of meeting your repayments.
  • Show good bank account conduct
How to qualify for a loan in Australia

How do I know if I have bad credit?

Often people find out from a lender declining their application.

If this happens, you need to request a copy of your credit report from one of Australia’s three credit bureaus:

Once you’ve got your credit report, you’ll be able to see where any slip-ups in the past have happened.

Sometimes, you’re able to dispute these.

How your credit history affects your loan options with Money Matchmaker

What you need to look for on your credit report

Some people may even have bad credit without realising it.

Lenders will look at all defaults on your credit file when assessing an application, which will include everything from unpaid telco bills to credit card defaults and more.

There are a couple of types of bad credit and not all are created equal in the eyes of lenders:

  • Non-financial defaults - i.e anything that isn’t a financial default or insolvency. This could be gym memberships, phone bills, or power bills.
  • Financial defaults - i.e. credit cards or personal loans. Financial defaults are considered more serious than unpaid bills.

With these 2, financial defaults are frowned upon and will make it the most challenging to get a bad credit car loan.

The types of defaults lenders are interested in

The two types of defaults you need to know

There’s one more thing to keep in mind when looking at your credit file: whether any defaults are paid or unpaid.

Paid defaults show you have made an attempt to clear your debt and are taking responsibility for your finances are the preferred type of default.

With unpaid defaults, depending on what they’re for exactly, a lender may ask you to make good on this before they extend a loan to you.

Pay off your defaults to improve your credit rating

What about bankruptcy and Part IX debt agreements?

You’ll need to wait until you have been discharged from your bankruptcy or part IX debt agreement for a minimum of 12 months before you can apply for a bad credit car loan.

Can you help me get a loan anywhere in Australia?

With most bad credit car loan providers, they 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.


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About the Author

Shaun McGowan from



Shaun McGowan

Shaun is the founder of and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded and Lend.

*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.