Can you get a car loan with bad credit Australia?

Credit scores are usually calculated using a number from 0 -1000 with 1000 indicating an excellent credit history.  Most lenders consider a credit score of below 600 as an indicator of a bad credit history.

The simple answer to this is no. A bad credit history in the past doesn't prohibit you from accessing a car loan if you can afford it. 

The key is that your circumstances are now different from when you last defaulted on existing repayments.  As long as you meet the lenders eligibility criteria and have sufficient earnings to pay back the loan amount there are a number of lenders willing to give you a second chance. 

With that said, taking actions to improve your credit score is something we highly recommend. Starting with a bad credit car loan is a step in the right direction.  Paying back the loan on time can help improve your credit score and give you access to better rates and lower repayments in the future. 

A deposit is not required to obtain a bad credit car loan. However if you have saved a deposit this will work in your favor and also allow you to purchase a vehicle of higher value. 

As bad credit car loans are for borrowers with higher risk you can expect to pay higher rates.  At Ausloans we have partnered with several bad credit car loan lenders who offer rates from as low as 10% however in most cases be prepared to pay more. 

As with all car loans first you will need to provide and confirm confirm your contact details, address, employment details and a breakdown of your regular expenses. 

Additionally, due to responsible lending laws . you will be required to provide at a minimum 3 months  (90 days) of bank statements which you can upload digitally though the Ausloans online app.

The short answer is yes, however all lenders are different so depending upon the lender and the term of the loan you mat be subject to early exit fees. 

Refinancing any loan is always an option however before considering refinancing your bad credit car loan make sure you have been meeting both your car loan  repayments and regular bills and credit card payments without default.  When you refinance you will need to prove that your financial situation has changed and that you are now in a better position to service a loan. 

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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.

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.

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.

• 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.

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.

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.

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

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:

• Equifax
• Experian
• Illion

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.

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.

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.

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.

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.

Money.com.au want to make managing money easy and fun! By giving Australians simple tools so they can make the best decisions they can about their money.

We understand that the world of finance is complex, and offer free, extensive guides on Personal Loans, Car Loans and Business Loans, along with Financial Health tools such as Credit Score Monitoring, Bank Statement Health and our Budget Planning Spreadsheet. To help you better manage and understand personal finance.

Shaun McGowan

Shaun is the founder of Money.com.au 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 CarLoans.com.au 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.

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