How can I get a car loan with bad credit?

author-avatar By on March 11, 2020
How can I get a car loan with bad credit?

Photo by Viktor Theo on Unsplash

The ads are on midday TV everywhere - bad credit or no credit car loans, but what are they? And what does a ‘bad credit car loan’ actually mean?

Bad credit car loans are essentially targeted at those who may have a history of not being able to pay off loans and other credit items. Some companies may specialise in dishing out car loans for people with bad credit, but, besides the higher interest rate, there’s not much inherently different about bad credit car loans than ‘good credit’ car loans.

Can I get a car loan with bad credit?

If you have a bad credit rating, you may find it difficult to be approved for loans from mainstream lenders.

But as a quick Google search will reveal, there are specialist lenders and car loan brokers that promise to give those with bad credit a second chance at securing finance.

However, such entities are not doing it out of the goodness of their heart. With a bad credit rating, you’re likely to be subject to a much higher interest rate than someone with excellent credit. This is because the bad credit rating suggests to the lender that you pose a higher risk of failing to repay the loan than someone who has a strong track record of consistently paying off their debt.

If you have a good or excellent credit rating, these are some of the lowest-interest, fixed-rate car loans you may be eligible for:

Advertised rate Comparison rate Monthly repayment Interest TypeVehicle TypeMaximum Vehicle AgeOngoing FeeApplication FeeTotal RepaymentEarly RepaymentInstant ApprovalOnline Application
FixedNew4 yearsMore details

Car Loan (New and Dealer Used) (< 5 years)

  • Approval in 24 hours
  • Balloon options to reduce repayments
  • No ongoing fees, no discharge fee

Car Loan (New and Dealer Used) (< 5 years)

  • Approval in 24 hours
  • Balloon options to reduce repayments
  • No ongoing fees, no discharge fee
FixedNew2 yearsMore details

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old
FixedNew, Used99 yearsMore details
  • No extra repayment or early exit fees
  • Up to $75,000 in loan amounts
  • Funding approved within 24 hours
FixedNew, Used7 yearsMore details
No ongoing fees

Plenti Car Loan (Refinance)

No ongoing fees

Rates based on a loan of $30,000 for a five-year loan term. Products sorted by advertised rate. Rates correct as of October 19, 2021. View disclaimer.

Comparatively, someone with an average or bad credit history may be limited to car loans with interest rates between 10% to 20%.

Still, there’s a few things you could do to make your profile more attractive to lenders to give yourself a better chance of securing a loan with an interest rate on the lower end of that spectrum.

How do I get a car loan with bad credit?

Like when you’re out on a first date, you’ll want to present yourself well and be honest about your situation. You wouldn’t catfish a date, nor would you catfish a financial institution. Here’s some tips for your car loan application:

  • Know your credit rating: This could prevent a shock to the system if a car financier gives you a higher interest rate than you were expecting.

  • Being honest about your bad credit when applying: Financial institutions can and will pour through your records to see if you can pay off that loan. Failing to disclose your indiscretions may result in an immediate denial so you won’t be able to get a car loan.

  • Sort your bank account out: One of the main things a lender will assess is your bank statement to examine your ability to save money - even if it’s a small amount. They will also take a look at your discretionary spending such as how much you put into your gambling account, and how much you spend on meals out, Netflix and other entertainment.

  • Be employed: A regular income is another major factor in determining your creditworthiness. A steady full-time (or equivalent) job is ideal for demonstrating your ability to pay back the loan.

  • Pay down other debts: If you have other debt, particularly unsecured debt, such as from a credit card or personal loan, it could be prudent to pay those down before applying for a car loan to demonstrate to the financial institution you have a track record of paying off debt.

Can I get a car loan if I’ve declared bankruptcy or defaulted?

Even if your credit history shows you have previously been declared bankrupt or have defaulted on a loan, you may still have a shot at being approved for a car loan - although probably only via a specialist lender at a significantly higher interest rate.

  • If you have not been discharged from bankruptcy, you will not be able to take out a car loan. The bankruptcy period ends three years and one day from when the Government accepts your bankruptcy application, or from when it accepts your statement of affairs from your creditor.

Similarly, with unpaid defaults on your report, you may also be subject to higher interest rates, sometimes in the realm of 19% or more. If you believe you have an incorrect unpaid default on your report, it is important to get that rectified - credit reporting agencies may offer investigating services.

What does my credit history show?

A credit report looks at more than just credit cards and home loans - it will likely feature any ‘credit’ items such as a postpaid mobile phone bill, utilities contract, in-store finance and more. It may also show your credit score, although you can get this separately.

There are various reporting agencies out there that can reveal your credit score. The three credit reporting bodies (CRBs) as recognised by the Government include:

  • Equifax
  • Experian
  • Illion

The scoring breakdown varies between credit rating agencies:






800 - 1,000

800 - 1,000

833 - 1,200

Very good

700 -799

700 - 799

726 - 832


500 - 699

625 - 699

622 - 725


300 - 499

550 - 624

510 - 621


1 - 299

0 - 549

0 - 509

Equifax’s site has a sample credit report so you know what to expect. You can access a copy of your credit report for free once every 12 months, or whenever a credit application was denied - you may need to provide proof of denial to the credit reporting agency. In requesting a credit correction you can also request a credit report.

Keep in mind that you don’t need a long credit history to have ‘good credit’ - applying for too much credit could actually reflect badly - but a financial institution may look at your history to see your track record of paying things off.’s two cents

If you’ve got a bad credit history, or unpaid/defaulted debts, ask yourself whether you really need that car and car loan in the first place. If you’re sure you want a new car, keep in mind that if your credit score is ‘Average’ or ‘Below Average’ you may be subject to much higher interest rates on car loans. Further, some lenders may be unwilling to lend to you at all - in this case, be wary of predatory lenders that offer extreme interest rates and high fees.

Having bad credit isn’t the end of the world. If you work to rectify the issue, such as by regularly paying down debt and limiting new debt, you can turn your bad history into ‘good’ history. If this means tightening the budget belt for a while, your discipline could pay off in the long run.


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and

Some providers' products may not be available in all states.

In the interests of full disclosure,, Performance Drive and are part of the Firstmac Group. To read about how manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Harrison is's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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