Average Interest Rate for Bad Credit Car Loans

By Angela Monroe - June 30, 2020


Bad credit car loan interest rates are always a focal point. They often tend to be high and hide behind advertisements for ‘3%, 2%, ZERO% interest rates.

In this article, we go over the ins and outs of interest rates for bad credit car loans and find out the average rate.

Average Car Loan Interest Rates for Bad Credit

Random Numbers

The average interest rate in Australia for a car loan for someone with bad credit is around 15%. However, they of course vary and are impacted by different factors. Car choices are important as generally the older the car, the higher the interest rate. This is because older cars have more risk of breakdown and a lower resale value – especially true if they’re out of warranty.

Here are some typical interest rates per age of vehicle for bad credit:

Age of Vehicle Interest Rate for Bad Credit
New 12%
0-5 years 13.5%
6-9 years 15.5%
10+ years 18%+

What is Bad Credit?

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It’s easy to be confused by the term ‘bad credit’ as it gets thrown around a lot. Simply having another loan that you’re paying off doesn’t mean you have bad credit. Even if you’ve missed a few payments or are behind with your bills, it may not be viewed as ‘bad’ by lenders. 

Financial institutions understand that things crop up in life and some people struggle with bills. Interest rates vary between lenders so it’s best to talk to a broker who can select the best match without affecting your credit score.

Credit Files / Reports

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Credit files are financial history documents available from several different companies online. Credit Savvy and Equifax are two examples that provide these files. If you live in Australia, are over 18 and have previously had or applied for any form of credit, you have a credit file. They are accessed and updated by financial institutions. Almost everything you do with the money you ‘owe’ goes on your credit file. Phone plans, energy bills and credit cards are examples.

Things that negatively affect credit:

man reading burning newspaper

Bankruptcies – this means someone’s been to the court regarding unpaid debts. They have been found unable to repay a debt and usually must repay the outstanding debt in installments as instructed by a court order.

Consistently missing payments – many people miss one or two over a loan term but missing several in a row result in bad credit. Lenders often think: ‘the applicant didn’t repay their last loan so why would they repay our loan?’

Multiple enquiries – whenever you officially apply for a loan, the lender will record it on your credit file. Many people aren’t aware of this and make these ‘enquiries’ without knowing. Lenders view this as a possible risk of financial uncertainty. Use a broker to avoid this. Brokers are able to match you to a lender that specialises in your circumstances. This will allow you to avoid multiple enquiries.

Average Credit Score in Australia

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In Australia, credit scores are based on things people do with borrowed money. 

Common examples include:

  • The number of credit applications. Eg; a car loan, phone plan, etc.
  • The amount of money someone borrows.
  • Whether the loan is paid on time.

They range from 0 to 1200, however, it’s almost impossible to get a score of 1200. This is because scores are considered a scale rather than a test score. Using industry standard Equifax, the Australian average is 622 – 725.

Credit Score Scale Equifax Score Range
Excellent 833 – 1200
Very Good 726 – 832
Average 622 – 725
Fair 510 – 621
Low 0 – 509

Credit scores can be accessed for free if you allow 10 days for it to come through. Express or multiple reports may have fees attached.


woman looking through rolled paper

Uncontrollable debt can be really scary for all people so make sure you know the signs. 

Fortunately, bad credit doesn’t stop you from getting a loan. It also won’t last forever. As many people do, you can repair bad credit. Even defaults go away on credit files. 

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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