Bad credit car loans Australia
You can still get a car loan if you have bad credit, but you might need to meet extra criteria. Find out what you need to know.
If you need to replace your current car or are looking to make a new purchase, unless you have the cash to pay outright, you should consider your car finance options. This can be tricky if you have a mark on your credit file or a low credit score.
You can still get a car loan if you have bad credit.
In fact, lenders may be more willing to provide bad credit car finance because they can use the car as security for the loan.
3 things to know about bad credit car loans
- You may have to attach the car as security to the loan, meaning it can be repossessed if you miss a repayment or default
- The bad credit car loan may come with higher interest loan and fees than standard car loans
- You may not be able to borrow a large amount of money with a bad credit car loan
Features to know (and ask) about bad credit car loans
The interest rate charged will be a percentage and affects how much your repayments will be. You can compare the rate to other loans to find out how competitive it is. Remember that with bad credit car loans, interest rates are usually higher and therefore less competitive.
Your rate will either be fixed and so remain unchanged over the term of your loan, or variable, where it will be able to change.
Some lenders charge a monthly account fee or administration fee on their bad credit car loans, which generally range from $5 to $15 per month. Many will also charge an establishment fee to create your loan, and this fee can be as little as $100 or as high as $600 or greater.
Finally, some loans will also include a fee if you repay any or all of the loan before the agreed loan term date. If you intend to make extra repayments to pay your debt off sooner, check how much you might be charged. You want a loan that doesn't penalise you for paying off your debts because, otherwise, all these fees can add up and significantly increase how much you pay over the term of the loan.
Secured vs unsecured
Bad credit car loans can be either secured or unsecured. Secured loans can be easier to be approved for because they are less of a risk for the lender; if you default on the loan, the lender is able to take your security (the vehicle you purchase) from you to cover its losses. Because of this, secured loans may come with lower interest rates and fees.
This is how long you have to repay your loan and varies between lenders, but it can be as little as 6 months up to 7 years. Shorter loan terms mean higher repayments because you have less time to pay off the loan. A longer loan term will give you lower repayments but also means you pay more in interest because interest is charged each year.
You can use the car loan repayments calculator here to see how loan terms affect what you pay over the life of the loan.
Loan flexibility and repayments
Bad credit car loans come with different levels of flexibility that might help you pay them off more easily and quickly. For example, can you make extra repayments and pay your loan off early without incurring a fee?
Will you need to take out insurance?
As the lender will be using your car as security for your loan, they may require that the vehicle be insured until the loan is fully repaid.
It's also a good idea to use the loan calculator below to calculate how much you'll be paying back on a weekly, fortnightly or monthly basis. In order to get the best deal, the calculator also gives you a comparison feature for various loan options.Back to top
Bad credit car loan for large loans
Calculate your bad credit car loan amounts
Simply enter your details in the calculator below to get an idea of where you stand with your borrowing power.Back to top
What to avoid with your bad credit car loan
Unfortunately, a lot of dodgy and unlicensed lenders operate in the bad credit lending space. Make sure you know exactly what you're getting into before you sign up for a bad credit car loan. Here's what to avoid:
- Unlicensed lenders
- Unnecessary or exorbitant fees (compare with similar lenders to see what is reasonable)
- Unnecessary contract stipulations
Check review sites where other consumers have rated the performance of car loan lenders, peruse discussion boards on car sales websites and car enthusiast sites to see what other people have to say about certain lenders, or ask the advice of people you know who've been in a similar position when financing a car purchase. You can also look up the lender's licence numbers to check they are legit and check their customer service numbers are working before you submit your application.Back to top
Alternatives to bad credit car loans
If a bad credit car loan isn't the right choice for you, there are other options to consider. You could, for example, use a credit card to buy a car. The main way to pay for a car purchase is to use a low interest rate or 0% offer, which could let you pay off the balance gradually without the hefty charges associated with a regular credit card or personal loan. Read our guide to paying for a car with a credit card here.
Another way to avoid going down the bad credit car loan route is to wait until the bad marks on your credit file are gone. You can also work to improve your credit rating by making regular repayments on your current debt, removing incorrect listings on your file, paying your bills on time and more. You can see more in our guide here.
Frequently asked questions about bad credit car loans
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