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How to apply for a car loan with a bad credit history?

Apr 23, 2021 | Finance Tips

Have a bad credit history but need a car? Never fear, you may still have options. Here’s how you could get a car loan with a bad credit history.

Need money for a new car but have a bad credit history?

Don’t despair. There are several avenues you could pursue to apply for a loan despite having a credit rating that is less than perfect.

Here’s some helpful info about bad credit and how you could get a car loan with a bad credit history.

Bad Credit explained

You may end up with a bad credit rating if your history of repaying loans and paying bills tags you as unreliable. This can happen very easily and sometimes it may be because of a bill you aren’t even aware of, for example because you moved house and forgot to update your address details.

A bad credit history can be remedied in time but if you need a loan right now, it could be a problem. Many lenders, particularly banks, may see you as too great a risk and won’t provide you with a suitable option for borrowing.

This is not the end of the road though, especially if you are looking to upgrade your vehicle. There are several options for car loans for people with a bad credit history.

How to apply for a car loan with a bad credit history

  • A secured car loan: A secured car loan uses your new vehicle as security. This simply means that if you can’t make your repayments, the lender can take your car. This is a way that could help the lender to lower their risks but could work out well for you to the same time. If you have worked out your finances and can make the repayments, the car could eventually be yours. The worst case scenario if you can’t make your repayments is that you may have to hand the car over to your lender to reduce your debt, but you may not be out of pocket, potentially just out of a car. If they have taken possession of your car, you may still have to repay any debt outstanding on the loan, if there is any.
  • Guarantor: Using a guarantor can be a great choice for young people or students who have no credit history at all, and it may be just as effective for someone with a bad credit history.
  • Bad Credit Car Loans: Some lenders have specific car loans for people who have a bad credit history but have the capacity and a willingness to pay and improve their credit history. Be aware though that “bad credit car loans” may have higher interest rates and one or two other terms in the fine print that make them less desirable than other car loans.

When applying for any type of loan, make sure to spend the time to talk it’s terms and conditions through thoroughly with your lender. This particularly applies to “bad credit car loans”. If you choose a reliable and ethical lender, you may be able to discuss what you need at length to find the most manageable repayments for you.

It is important to be 100% confident that you can make your repayments when you get a car loan so that you can improve your credit score and hopefully have more flexibility and borrowing ‘power’ in the future.

So, got a bad credit history and need a car? If you’re having trouble getting a loan through a bank or larger lender, get in touch with Finance One to find out how we may be able to help.

Finance One is a non-bank lender that provides opportunities for everyday Australians to rebuild their credit rating and improve their lifestyle.

If you’re having trouble getting a loan through a bank or larger lender, get in touch with Finance One to find out how we may be able to help.

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances.  We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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WRITTEN BY

WRITTEN BY

Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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