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
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Features to know (and ask) about bad credit car loans
Interest rates
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.
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.
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.
Loan terms
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.
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.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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.
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
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.
A growing number of Australians are taking advice on how to spend, save and invest their money from online personalities, according to new research by Finder.
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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Features to know (and ask) about bad credit car loans
Features to know (and ask) about bad credit car loans
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