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.
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.
Saving.com.au’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.
Requirements for a bad credit car loan
The list of requirements for a car loan with bad credit will vary from lender to lender but these basics are the most common ones you can find and can help improve your chances of getting approved.
Proof of income
Stable employment or a reliable income source
Government-issued ID
Proof of residence (e.g. utility bill, lease, or similar)
Down payment
Valid auto insurance
Reasonable debt-to-income ratio
A co-signer (optional, but can help with approval and rates)
How to compared bad credit car loans
Having bad credit may narrow your options, but it doesn’t mean you should accept the first loan you’re offered. Being selective and weighing rates, fees, and terms carefully can make a big difference for your budget and your credit future.
Look beyond the interest and repayment
A loan can appear cheap with a long term or low weekly payments, but the comparison rate shows the real cost. Use it to line up loans side by side and spot which one is genuinely better value.
You should also add together the loan amount, fees, interest, and any optional extras to see what you’ll pay over the life of the loan. Sometimes, a slightly higher rate paired with a shorter term ends up costing less overall.
Saving.com.au's Car Loan Calculator can help you estimate your car loan repayments based on factors like the car price, loan term, interest rate, and payment frequency.
Looking to finance your car? Compare cheap car loan rates, repayments, fees from Australian car loan lenders using the table below.
Lender Car Loan Interest Rate Comparison Rate* Monthly Repayment Interest Type Vehicle Type Maximum Vehicle Age Ongoing Fee Upfront Fee Total Repayment Early Repayment Instant Approval Online Application Tags Features Link Compare Promoted Product Disclosure
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Review each lender’s criteria
Banks, credit unions, online lenders, and dealerships all assess bad-credit applicants differently. Some are more flexible, while others have strict score or income requirements. Knowing this upfront saves time and helps you target lenders likely to approve you.
Seek multiple pre-approval quotes
Many Australian lenders offer pre-approval with only a soft check. Gathering a few quotes lets you compare rates, fees, and terms without denting your credit score.
Check the lender’s reputation
Browse reviews and customer feedback to understand how transparent and supportive a lender is, especially toward borrowers with imperfect credit. A trustworthy lender can be worth a slightly higher rate.
Look out for red flags
Steer clear of lenders promising “guaranteed approval,” pushing unnecessary add-ons, or avoiding upfront disclosure of fees. These are common pitfalls in bad-credit car finance.
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:
| illion | Experian | Equifax |
|---|---|---|---|
Excellent | 800 - 1,000 | 800 - 1,000 | 833 - 1,200 |
Very good | 700 -799 | 700 - 799 | 726 - 832 |
Good | 500 - 699 | 625 - 699 | 622 - 725 |
Fair | 300 - 499 | 550 - 624 | 510 - 621 |
Weak | 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.
