Can I get a car loan with bad credit?

Can I get a car loan with bad credit?

Getting a car loan when you have bad credit

Financing a car when you have bad credit can seem like an uphill struggle at times. But don’t let having bad credit drive you to despair. There might be financing options available to you, even if your credit rating isn’t squeaky clean.

At RateCity we never tire of aiming to help you make the best financial decisions possible for your circumstances, so here we’ll outline some possible routes for you to take that could help you get back on the road, and put you back in the driving seat in terms of your finances.

Where can I get a car loan when I have bad credit?

There are several lenders who specialise in bad credit car loans. Unfortunately, having a bad credit rating means that you are more of a risk to lenders, which often results in higher interest rates. However, you may find that car loans have lower interest rates than some personal loans for bad credit, as your loan can often be secured against the car, hence reducing your rate.

The lenders you can approach for a car loan, and the rate you’ll subsequently receive may vary depending on your credit score and circumstances. One option is to approach a lender for a personalised rate based on your unique circumstances.

What is a secured car loan?

A secured car loan is a loan that is secured against your vehicle. This means that if you default on your loan or can’t afford your repayments, the lender can claim your car as compensation. This reduces the risk to lenders and allows them to subsequently reduce their interest rates, as opposed to if the loan was unsecured.

You can also secure car loans through a guarantor.

What is a guarantor car loan?

Guarantor loans for cars are loans which are secured by someone who guarantees the repayments for you. This may be a parent, relative or a close friend. Having a guarantor may mean that your application is more likely to be approved, and/or that you are able to secure a loan with a lower rate.

Guarantor car loans might be particularly useful for young people and students. Students may not have spent much time being financially independent and therefore have a low credit score due to having little credit history.

Some students may even have no credit score, though checking your credit score is still important, as even small things like paying your phone bill can impact your credit rating.

Having no credit can in many ways hinder you just as much as having bad credit. While your score isn’t bad, it also isn’t good, and you are a wild card to lenders. Luckily, there are student car loans available.

Can I get a car loan if I’m on Centrelink payments?

Loans for people on Centrelink payments, for example car loans for single parents, or car loans for pensioners, may be available to you.

How can I get a bad credit car loan?

Getting a car loan with a bad credit history can be made easier by contacting loan providers that specialise in bad credit car loans. These companies are set up to cater to individuals with bad credit ratings, the self-employed and first time borrowers who may find it hard to prove to traditional lenders that they are reliable borrowers.

Of course there are catches in going through these providers, the main one being that the interest rate on the loan will be higher than average. The high interest rate is used to mitigate the risk the lender takes on by allowing you to take out a loan with a bad credit rating.

Where can I get advice on car loans for bad credit?

Another path you can go down is to consult a finance broker. There are two main advantages with using a broker:

  • Brokers generally don’t charge for their services (instead, they receive commission payments from lenders)
  • They are able to able to recommend car loans from a range of lenders (as opposed to you approaching lenders directly, who will only recommend their own products)

Finance brokers are qualified professionals who are required to follow the National Credit Code and to observe responsible lending practices.




What is bad credit?

Credit ratings are scored out of 1200:

  • 0 to 509 – below average or bad
  • 510 to 621 – average
  • 622 to 725 – good
  • 726 to 832 – very good
  • 833 to 1200 – excellent

Bad credit affects over 2 million Australians, over 600,000 of whom are at “high” to “extreme” risk, so if you’re struggling for a car loan and you have bad credit, you’re not alone.

A bad credit score can happen to anyone and you may have just been unlucky – find out more about how credit scores work and how to improve them.

You can find out what your credit rating is by contacting a credit bureau such as Equifax, Dun & Bradstreet and Experian and asking to access your credit file.

Why do I have a bad credit rating?

Once you retrieve your credit history you may notice that there are some factors that could add up to you having a bad credit rating. These may include:

  • Missed repayments on money borrowed
  • Delayed repayments on money borrowed
  • Defaulting on a loan
  • Having declare bankruptcy in the past
  • An excess of credit enquiries

Stay in the know

It is important to stay in the know about your credit history, so that small mistakes don’t end up putting you in a worse financial position. If you want to check your credit history, go to

Final thoughts

Be careful not to apply to too many lenders as this will also have a negative impact on your credit history, and you don’t want to drive your credit rating further down. Visit our bad credit page for more information on bad credit.

Another important thing to remember is to never take out a loan that you don’t think you will be able to repay. Use a car loan calculator to estimate what the repayments will be, and then budget them into your normal ingoing and outgoing expenses.

If you don’t think you can comfortably make the repayments and wouldn’t be able to keep up the repayments if you experienced a change in circumstances, you might want to rethink taking out the loan.

For more support managing your personal finances, check Moneysmart, or contact the National Debt Helpline on 1800 007 007.

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Learn more about car loans

Can I get a car loan with bad credit?

Yes, you can get a car loan with bad credit, although you’ll probably find the process trickier and dearer than that experienced by people who have good credit histories.

You can find a number of lenders that specialise in bad credit car loans. However, make sure you compare bad credit car loans before you sign on the dotted line, because not all car loans are alike and having bad credit may mean you are more likely to be hit with higher fees and interest rates.

If you have bad credit, it’s important not to take out a car loan unless you can afford the repayments because a default could further damage your credit rating. Conversely, if you make all the repayments and repay the loan successfully, your credit rating might improve.

What is a bad credit car loan?

A bad credit car loan is a car loan for borrowers who have ‘bad credit’ or a bad credit history.

Some lenders refuse to offer bad credit car loans, because they believe there is an excessive risk that bad credit borrowers will not repay their loans. However, other lenders are willing to provide bad credit car loans.

Generally, these lenders charge higher interest rates for bad credit car loans than ‘prime’ car loans, reflecting the higher level of risk. Bad credit car loans may also have higher fees than prime car loans.

However, the big advantage of a bad credit car loan is that it allows borrowers with bad credit to access finance. Another advantage is that it could help bad credit borrowers improve their credit rating, assuming they make all their repayments on time.

Who provides bad credit car loans?

Lenders that provide bad credit car loans tend to be smaller challenger lenders rather than the bigger banks.

Bad credit car loans are a niche product. The bigger banks tend to focus on mainstream car loan finance for borrowers with better credit histories. That’s why smaller lenders tend to be the ones that provide bad credit car loans.

Bad credit car loans can have high interest rates and fees, so it’s important to compare options before submitting an application.

Are bad credit car loans legit?

Bad credit car loans are legit, although not all lenders and products are created equal.

Some car loan lenders refuse to do business with borrowers who have bad credit histories, but there are others that are willing to provide bad credit. There is a catch, though: some bad credit lenders are disreputable, while some bad credit loans have extremely high interest rates and fees.

That’s why it’s important to do your research and compare bad credit car loans before you submit an application.


Do I need good credit to get a car loan?

You don’t need good credit to get a car loan, although the worse your credit history, the harder and more expensive it’s likely to be.

Some lenders will do business only with borrowers who have good credit. However, there are other lenders that are willing to offer car loans to borrowers who don’t have good credit. The catch, though, is that they may charge higher interest rates and fees, and also require more paperwork.

If you don’t have good credit and want a car loan immediately, you can search for lenders that work with bad credit borrowers. If you are able to wait, you can work to improve your credit score and then apply for a car loan once you have good credit.

Can I get a no credit check car loan?

Even if you have bad credit or no credit history there are loans that are available to you through specialised lenders. Some lenders in Australia advertise car loan offers without running credit checks, however, the Australian National Consumer Credit Protection act requires lenders to loan money responsibly, so credit checks are normally required by all responsible lenders. 

Can I get a no credit check car loan?

You may be able to get a no credit check car loan in certain circumstances, although it’s important to weigh up your options before doing so.

Most lenders refuse to provide no credit check car loans, because they don’t want to give loans to borrowers without first confirming that they have a track record of repaying debts. So any lenders that do provide no credit check car loans would take measures to protect themselves against the risk of default.

That’s why no credit check car loans have higher interest rates than other car loans. Also, borrowers often have to provide security and put down a larger deposit.

Can I get a car loan with poor credit?

Poor credit doesn’t necessarily mean you won’t be able to get finance for your car purchase, though your options aren’t likely to be the same as someone with good credit.

In fact, a number of specialist lenders exist offering car finance for customers with poor credit, able to provide access to bad credit car loans.

However having a history of poor credit will likely mark you as a potential risk to lenders, so your car financing needs could see higher fees and interest rates. Alternatively, consider a secured car loan, which is a type of loan that uses the car you purchase as collateral, reducing the risk.

Other options include getting someone close to act as a guarantor for your car loan, or to talk to a broker about a personalised rate specific to your circumstances.

Do low interest no credit check car loans exist?

Some companies will advertise no credit check car loans, however under the Australian National Consumer Credit Protection act, credit checks are required by all responsible lenders, so such lenders are likely to have high interest rates. Depending on your income and credit history, you may qualify for a low interest StepUP loan from Good Shepherd Microfinance.

What is a guarantor on a car loan?

A guarantor on a car loan is a third party, usually a relative or friend, who guarantees to meet the repayments of a loan for the purchase of a car, if the borrower/owner of the car defaults on the loan.

Guarantor car loans can be useful for people who would otherwise struggle in being accepted for credit to purchase a vehicle. These may include people with bad credit, students and young people who may have no credit history, as well as some pensioners.

Many lenders offer guarantor car loans, guarantor personal loans and guarantor home loans, because of the significantly reduced risk to the lender.

Where can I find lenders who offer no credit check car loans?

There are companies that claim to offer no credit check car loans. However, you may find that companies that offer no credit check car loans have high fees and high interest rates.

You might be better off finding a specialist lender who will look at your credit history and income, who will decide whether or not you are able to responsibility pay back the loan. Alternatively, you could contact a car finance broker.

Where can I find lenders who offer no credit check car loans?

You can find lenders who offer no credit check car loans through comparison sites like RateCity or by doing an online search.

One thing to bear in mind is that lenders who offer no credit check car loans are likely to charge higher interest rates and higher fees than on car loans that include a credit check. Also, lenders who no credit check car loans might expect you to pay a higher deposit. You might also be expected to provide security.

Lenders regard no credit check car loans as riskier than other car loans, which is why it’s a niche product that often features special conditions.

What is a credit score?

Your credit score is a number that represents how credit-worthy you are. The higher your credit score, the more credit-worthy you are and the more likely you are to receive loans from credit providers.

There is no industry standard for credit scores – different credit reporting bodies use different methodologies. For example, Equifax gives consumers scores between 0 and 1,200; Illion (through the Credit Simple service) gives scores between 0 and 1,000; and Experian gives scores between 0 and 999.

When it comes to car loans, lenders tend to offer lower interest rates to borrowers with better credit score. There are steps you can take to improve your credit score, including paying bills on time and paying off existing loans.

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments.