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Secured Bad Credit Car Loans

Here’s how to get behind the wheel of a new car for less than you thought, even if you have bad credit.

Australians who have less-than-perfect credit history still need access to finance, and a common reason for seeking a loan is to buy a new or used car. If you fall into this category you still have a number of options to help you finance a car, and these include secured and unsecured loans. Secured loans tend to charge lower interest as it’s less of a risk for the lender to take on.

Bad credit loans you could apply for

Which of these lenders will actually accept bad credit borrowers? The lenders below will all accept borrowers who have a less than stellar credit history.

Name Product Maximum loan amount Term of Loan Turnaround time Arrears Fee Costs Fortnightly Repayment (for $1500 Loan)
Sunshine Short Term Loans
Sunshine Short Term Loans
12-20 weeks
30 minutes - conditions apply
20% of loan amount + 4% of loan amount each month
A small loan up to $3,000 that you repay over 12-20 weeks. Loans approved and funded in as little as 30 minutes. Centrelink must not be your primary income
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Fundo Small Loan
Fundo Small Loan
13 to 26 weeks
Same day - conditions apply
20% of loan amount + 4% of loan amount each month
Borrow up to $2,000 and pay it off over 20 weeks. Same day approval for eligible borrowers.
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Fair Go Finance Small Loan
Fair Go Finance Small Loan
3 to 12 months
24 to 48 hours
Establishment Fee of $60 – $400
A small loan between $500 and $2,000 that can be funded in 24 hours.
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Credit24 Short Term Loan
Credit24 Short Term Loan
4 to 12 months
Same day - conditions apply
20% of loan amount establishment fee + 4% of loan amount monthly.
Credit24 offers this loan up to $2,000 and gives you 12 months to repay. Centrelink borrowers are considered as long as Centrelink payments are not more than 50% of income.
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Credit24 Medium Term Loan (Good Credit)
12 to 24 months
Same day
$400 establishment fee + 48% p.a. interest
A small loan with long terms: Apply for up to $5,000 and have up to 2 years to repay.
Fair Go Finance Medium Personal Loan
6 to 15 months
Within 24 hours
Establishment fee of $400
A larger loan up to $5,000 you can apply for even with bad credit. Fast turnaround within 1 business day. Note: You must earn more than $500 per week.

What is a secured bad credit car loan?

A typical bad credit loan is one you apply for from a lender that doesn’t follow the same stringent lending criteria as mainstream banks and credit unions. With a secured bad credit loan, you’ll have to be purchasing a vehicle that meets the criteria of the lender. This can be a new or used car; a used car will generally need to might requirements for age and condition. If you’re looking for an older car or to purchase a caravan, motorbike or other vehicle, an unsecured bad credit loan might be an option to consider.

How you can get a secured car loan with bad credit

Having bad credit doesn’t mean you can’t get a car loan. A number of lenders in Australia are willing to offer you a loan even if you have bad credit. All you need to demonstrate is the willingness and the means to repay it. If you’re considering getting a secured car loan with bad credit, follow these steps.

  1. Compare offerings from lenders that offer secured car loans to borrowers with bad credit
  2. See if you meet the lender’s minimum eligibility requirements
  3. Work on a budget and establish how much you can afford to pay in monthly repayments
  4. If, after comparing your options, you still want to apply, submit your online application
  5. If you’re approved, the funds will be direct debited into your account after you accept the loan contract
  6. Note down the dates when you have to make repayments and make sure you have sufficient money in your account

Types of secured bad credit car loans

Depending on your needs and you meeting lender’s eligibility criteria, you can consider financing a car using any of the following:

  • Secured car loan. The car you purchase will serve as collateral for the loan.If you don’t make repayments on time or if you fail to make your repayments, the lender can repossess your car and sell it to recover its dues. Apply for a secured car loan here >>
  • Chattel mortgage. If you wish to use your new car for business, you can consider getting a chattel mortgage. This is similar to a secured car loan, but is for designed to help finance cars for business use. One key difference is you can choose to make a lump sum balloon payment to pay the loan in full. By opting to make a balloon payment at the end, you can reduce your monthly repayments.
  • Novated car lease. Some businesses give their employees the ability to buy cars using novated car leases. This involves your employer making repayments towards the lease from your pre-tax income, while the lender holds the title to the car. At the end of the lease period, you have the option of buying the car for a previously agreed upon sum or upgrading and getting a new lease.
  • Car hire purchase. If you’re self-employed, you can consider opting for a car hire purchase.Here, the lender holds the car’s title until you make the final payment, after which the title is transferred into your name.

Features and benefits of a bad credit secured car loan

If you’re thinking about getting a bad credit loan to buy a new or used car, paying attention to the following aspects can help you find a loan to meet your needs:

  • Interest rate. You get to choose between fixed rate and variable rate car loans. With fixed rate loans, you benefit from knowing that your repayments remains the same for the entire loan term. With a variable rate loan, you can benefit if there’s a drop in interest rates, but they can increase as well.
  • Loan amount. The minimum and maximum amount you can borrow depends on the lender you choose, your ability to repay and the car you wish to buy.
  • Multiple options. You will find it easier to secure a loan if you are receiving a regular income. While you can approach niche bad credit lenders, you could also consider applying for a finance loan from a car dealership.
  • Build credit. Getting a bad credit loan and repaying it on time can help you repair your credit rating. This should increase the possibility of you qualifying for additional loans down the road.
  • Own a car. With access to funds through a car loan, you don’t have to save for a car before you can buy it.

What points should you consider before applying?

Take some time to go through the following before you apply for a secured bad credit car loan.

  • Don’t overestimate your budget and don’t apply if you feel you may have trouble keeping up with repayments
  • Don’t sign up for add-ons like loan protection insurance, gap cover, and mechanical breakdown cover before you establish their functionality and use
  • Try to keep the loan term as short as possible. The longer the term, more you end up paying in interest
  • Remember that your car will depreciate in value, so don’t expect to repay the loan completely by simply selling the car
  • Find out if you can make additional repayments, if they will attract penalties and if there’s a limit to such repayments
  • Find out how much you’ll have to pay as ongoing account-keeping fees and keep a tab of all other fees and charges as well

How do you know if you’re eligible?

While there is no guarantee of approval with any bad credit loan, it is important that you meet certain basic criteria in order to apply. You should, for instance, be over 18 years of age. You will need to be a permanent resident of Australia or an Australian citizen, and you it’s likely you’ll need to have a regular source of income. Some lenders consider Centrelink payments as income, although there are restrictions on this.

Find out which lenders approve Centrelink loans

As part of the application process, prepare to show documents that can verify your identity, employment, and income. You will also have to provide details about your expenses and liabilities.

Some car loan providers give their customers the ability to get pre-approval, which helps give you an indication of how much you can borrow.

Frequently asked questions

How much time does submitting an online application take?

If you have ready access to the required information, you can usually complete your application in around 10 to 15 minutes.

How long might approval take?

Car loan providers normally go through the approval process quickly, with some offering conditional approvals in as little as two hours. In most cases, once you submit your application you can expect to hear about the status by the following business day.

If my lender repossesses the car, do I still have to pay any money?

If the money the lender gets by selling the car is less than what you owe, you might have to pay the difference.

Picture: Shutterstock

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Lead Editor

Elizabeth Barry was 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. See full bio

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Elizabeth has written 248 Finder guides across topics including:
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