Getting a car loan when you have bad credit is a challenge. But it's far from impossible. Bad credit borrowers have a few options:
Improve your credit score and apply for a regular car loan. Improving your credit score means sorting out late payments and unpaid debts. It can take months or even longer.
Look for bad credit car loans from specialist lenders. These loans have higher rates because you're a higher risk borrower. If you are able to use the car as security you can improve your chances of approval.
What to look for in a bad credit car loan
The interest rate. The interest rate is a percentage figure. The higher the rate, the more expensive 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.
The fees. 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.
The loan term. 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.
Secured or 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.
Calculate your bad credit car loan repayments
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Once the interest only period ends, your estimated repayments will be
Calculator Assumptions: The above calculations are worked out assuming you’re paying off a principal and interest loan where the interest rate remains the same over the life of the loan. The repayment amounts do not take into account any additional fees or charges that may be charged to your loan (e.g. application fees).
Disclaimer: Whilst every effort has been made to ensure the accuracy of this calculator, the results should be used as indication only. They are neither a quote nor a pre-qualification for a loan.
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.
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.
Alternatives to bad credit car loans
A credit card
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.
Credit cards have high interest rates once they do start charging interest, so be aware of that before you consider this option.
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.
Frequently asked questions about bad credit car loans
There is no one "lowest credit score" to buy a car in Australia. Some lenders may accept applicants in the Average and Fair credit score categories which have credit scores in the 400s and 500s, but this differs depending on a number of factors such as the car you're buying, your income and your employment situation.
Do your research. Get online and see what other people are saying about their experiences with different lenders on forums, discussion boards and review sites. Talk to people you know who have applied for bad credit car loans: what lender did they choose and was the process a success? Finally, make sure to read all the terms and conditions and shop around for the best deal.
Monthly account fees and establishment fees tend to be higher with bad credit car loans. Some loans will also include a fee for early repayment, so make sure you know the ins and outs of your loan.
If you can't resolve a problem with your credit provider, take your complaint to your provider's independent dispute resolution scheme. This will be either the Financial Ombudsman Service or the Credit and Investments Ombudsman Ltd. Both schemes can be reached by calling 1300 780 808. If you think that a credit provider has acted unlawfully or in a misleading way, you can complain to ASIC online or call ASIC's Infoline on 1300 300 630.
Elizabeth Barry is the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review.
Want to buy a classic car but don't have the ready money? There are still financing options available for classic vehicles. Find out what loans you have to choose one and which one will work best for you.
Hi my name is justin and i am a client of the state trusties and i have my case manager here with me that would give you pert mission to be able to apply for a loan to help get to a funeral and get accommodation in a hotel or motel while he is a the funeral he wants to borrow 600 dollars pls and my name is Zac
You may refer to our list of short-term loans to find the lender that suits you. Once you have chosen a particular provider, you may then click on the “Go to site” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. Hope this helps!
Ive been discharged of bankrrupcy for 6 months and I have seem a financial broker and they refused to give me a car loan.
My question is who’s a reliable and not a rip off lender that I can use?
The lenders we have listed above may consider you for a car loan. You may use our table to compare which options are more suitable for you based on cost or fortnightly repayment.
Kindly review also the eligibility criteria and the terms and conditions of the loan before clicking the “go to site” button to submit your application.
There are number of complaints about Motor Finance Wizard online. I’d recommend that you get in touch with a government body, such as LegalAid or ASIC to confirm its validity.
Please note that finder.com.au is an independent organisation. We are not owned by any Bank or Insurer and we are not a product issuer or a credit provider.
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Hi my name is justin and i am a client of the state trusties and i have my case manager here with me that would give you pert mission to be able to apply for a loan to help get to a funeral and get accommodation in a hotel or motel while he is a the funeral he wants to borrow 600 dollars pls and my name is Zac
Hi Justin,
Thank you for leaving a question.
You may refer to our list of short-term loans to find the lender that suits you. Once you have chosen a particular provider, you may then click on the “Go to site” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. Hope this helps!
Cheers,
Reggie
Hi,
Ive been discharged of bankrrupcy for 6 months and I have seem a financial broker and they refused to give me a car loan.
My question is who’s a reliable and not a rip off lender that I can use?
Hi Andrea,
Thanks for your question.
The lenders we have listed above may consider you for a car loan. You may use our table to compare which options are more suitable for you based on cost or fortnightly repayment.
Kindly review also the eligibility criteria and the terms and conditions of the loan before clicking the “go to site” button to submit your application.
Cheers,
Anndy
I am looking for a bank who will do a secured car loan for someone who is currently bankrupt.
Hi Amy,
You can find a list of lenders that consider current and discharged bankrupts through our bankrupt loans page.
I hope this helps,
Elizabeth
I need your advice on Motor Finance wizard, we are looking at getting a car through them but I am having my doubts.
Thanks
Hi Jasmine,
Thanks for your question.
There are number of complaints about Motor Finance Wizard online. I’d recommend that you get in touch with a government body, such as LegalAid or ASIC to confirm its validity.
Please note that finder.com.au is an independent organisation. We are not owned by any Bank or Insurer and we are not a product issuer or a credit provider.
Cheers,
Shirley