Does a car loan cover insurance?
Does a car loan cover insurance? Learn how car loans can impact on your insurance in Australia, so you can find the best car loan for you.
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.
A pre-approval is a formal document that indicates how much a lender is willing to lend to a consumer – once that person has found the car they want to buy. A lender will assess a borrower’s credit history and financial circumstances before issuing a pre-approval. However, lenders are under no obligation to follow through on pre-approvals, so pre-approvals should be seen as statements of intent rather than rock-solid guarantees.
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.
The loan term is the amount of time the lender gives you to repay the car loan. For example, if you take out a $20,000 car loan with a five-year loan term, you would be expected to pay off the entire $20,000 (plus interest) within five years.
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.
Even if you’ve been denied a car loan before, you might still be able to get car finance. The key is to make the right application to the right lender.
The ‘right’ application is one that makes you look like an acceptable risk, which might include things like improving your credit score, increasing your savings rate and accumulating a bigger deposit.
The ‘right’ lender is one that deals with borrowers like you. For example, while some car loan lenders only deal with good credit borrowers, there are others that specialise in bad credit or poor credit borrowers.
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.
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.
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.