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](/credit-score/) and report yourself. Doing this puts you in control and means you can take steps to [improve your credit score](/credit-score/how-to-improve-your-credit-score-fast) 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](/car-loans/secured-car-loans), 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](/business-loans/abn-car-loans) and other [bad credit business loan](/business-loans/bad-credit-business-loans) options.

What is a bad credit score in Australia?

What's considered a [bad credit score ](/credit-score/bad-credit-score)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](/bank-statement-health/). 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](/car-loans/low-doc-car-loans). 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](/car-loans/private-sale-car-loans). 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 because of Australia's responsible lending laws, 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: * 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) #### Cons of bad credit car loans: * 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

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. We recommend using [Money's matching engine](/matching-engine/) to do the leg work for you. It's like applying for quotes direct with a range of lenders all at once.

Australia's Best Bad Credit Car Loans

Why compare bad credit car loans with Money

Multiple Australian lenders to choose from

Personalised rates

No credit score impact

$200 best match guarantee

Bad credit car loans in Australia: How they work

It's still possible to get a car loan with bad credit in Australia.

In fact, there are plenty of lenders in Australia who specialise exclusively in offering bad credit car loans.

The finance itself works similarly to a standard car loan: You borrow a set amount and pay it back over a fixed period, usually with a fixed rate of interest. The car you’re buying is used to secure the loan. This generally makes it cheaper than an unsecured bad credit personal loan.

But bad credit car finance has some key differences you should know about:

Higher interest rates and fees than standard loans.

Potentially a limit on the amount you can borrow (imposed by the lender to mitigate their risk).

More information and documents required by the lender to support your application.

In some instances, you may need to make a deposit

Average interest rate of 17.86% (versus 12.08% for all car loans)

Average loan amount of $22,903 (versus $34,827 for all car loans)

Average age of car purchased is 4.9 years (versus 4.2 years for all car loans)

Rate analysis correct as at February 2024 based on lenders on Money's database. Loan averages based on a sample of more than a thousand bad credit car loan requests received from Money customers.

Who offers bad credit car loans?

There are around a dozen specialist lenders in Australia offering loans for bad credit customers.

Bad credit lenders are experts at dealing with borrowers with lower credit scores, people with paid and unpaid defaults, as well as those with no credit history.

By contrast, most of the big retail banks (the likes of CBA, Westpac and large credit unions) won't accept applicants with bad credit.

But not all bad credit is created equal. Specialist lenders will pay attention to the reasons someone has bad credit before when assessing their application.

Lenders generally don't use the term ‘bad credit car loan’. Instead you may see descriptions such as ‘impaired credit’ or ‘below average credit’ to indicate that bad credit borrowers will be considered.

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 fully recovered yet.

Defaults for large amounts are a more serious issue for lenders compared to low-value defaults. The type of default matters too.

Types of credit defaults explained

Financial defaults

Like missing payments on a loan or credit card or buy now pay later account. These are a potential red flag for lenders.

Non-financial defaults

This includes the likes of missed gym membership payments or telco bills. These are generally not as problematic in the eyes of lenders.

What’s happening with your credit now is also important

Shaun McGowan, Loans Expert

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.

Shaun McGowan, Loans Expert

Are you eligible for a bad credit car loan?

What lenders want to see

You’re over 18 years old

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)

You are consistently repaying any existing loans or credit cards

If you were previously bankrupt or subject to a part IX debt agreement, you must be discharged from it for at least 12 months

Lenders will also take a detailed look through your credit history to check for any unpaid credit defaults.

Potential issues for lenders

You have large unpaid defaults.

You’re currently bankrupt or you were discharged less than 12 months ago.

There’s evidence of bad bank account conduct (missing payments, going into negative regularly).

You’re having trouble keeping up with repayments on existing loans you may have (or credit cards).

You have moved jobs or address frequently in the lead up to your loan application.

Your bank statements show too much gambling.

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.

Some applicants with bad credit may be ready to settle for any loan they can get approved for. Doing this could be a very expensive choice in the long term.

You should still compare options and look for:

1

The lowest interest rate you’re eligible for

This may not be the headline interest advertised by a lender. You'll need to get a personalised quote to know what your actual rate may be.

2

Combined with the lowest fees

The comparison rate factors in fees along with your interest rate. Note, fees are generally added to your loan amount and you'll be paying them off (with interest) over the loan term. And remember, fees may negotiable. Always ask if the fee can be lowered? Some lenders would rather lower a fee than lose a customer.

3

The ability to make extra repayments

Plus being able to pay off the loan early (or refinance it) without penalty. This could also allow your to refinance your loan if you become eligible for lower rates during the loan term.

4

The shortest loan term you can afford

Bearing in mind the regular repayments will be higher with a shorter term.

	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

Note: These are example rates and loan details only.

Here's a simple guide to applying for a car loan with bad credit:

1. Check your credit score and report

This will tell you your current situation and give the opportunity to fix errors in your credit report if there are any.

2. Pay off any unpaid defaults

Settle any outstanding credit defaults and stay on top of your current obligations in the lead up up to your application.

3. Get you bank statements into shape

Make sure your last 3-6 months of bank statements are looking healthy before applying: spend within your means, avoid gambling and don’t take on any new debt.

4. Demonstrate you can afford the loan

Calculate what your regular loan repayment would be and consider putting that amount into a savings account for a few months leading up to your application.

5. Compare bad credit car loans through a broker

If you have issues in your credit history, getting guidance from a broker could save you a lot of time and money.

6. Make an application with the lender

Importantly, only apply with one lender once you are confident you’re getting a good deal and that you will qualify. Applying with multiple lenders could further damage your credit score.

7. Consider contributing a deposit

It may not be necessary, but paying 10-20% of the car’s value up front will send a positive signal to lenders and reduce risk for them.

8. Provide as much supporting information as possible

Be completely honest and open with the lender and provide all documents requested, including payslips (or other proof of income), bank account statements and loan/credit card statements.

A bad credit car loan doesn’t have to be a long-term solution

Shaun McGowan, Loans Expert

Even if your current situation means a bad credit car loan is your only option, it’s often possible to refinance the loan to a lower rate down the line if your credit has improved. For example, if you’ve been making the repayments consistently for 12 months, it could be worth taking another look at what rates you’re eligible for at that stage. Finding a bad credit car loan with no fees for repaying the loan early will be an advantage if you plan to do that.

Shaun McGowan, Loans Expert

Money can help you find the best deal you can on a car loan in three simple steps:

1. Let us know who you are and what you're looking for

A little bit of information goes a long way in helping us find the right loans for you.