Bad Credit Car Loan Advice For Australians
If you’re dealing with a bad credit score, getting a bad credit car loan approved can be the first step in improving your situation and your financial future.
Bad credit car loans for Australians
Securing a loan when you have bad credit isn’t always easy. Here’s what you’ll need to keep in mind when applying for bad credit car loans:
- Show that you have enough surplus income to make the loan repayments
- Demonstrate a savings history
- Three months of responsible credit behaviour will demonstrate your intention to a lender to change your financial situation
When you show that you can meet the loan repayments on your current income, then you’re more likely to be approved for the car loan. Even if it means paying a higher interest rate at first.
By making all of your car loan repayments on time, you’ll give yourself the opportunity to improve your credit rating. Then you can refinance in the future to a car loan with lower interest rates.
Guide to getting bad credit car loans
Here’s what you need to know before you apply for a bad credit car loan:
Before you apply for a bad credit car loan
The first thing to do before you apply for a bad credit car loan is to find out what you can afford to repay. You can use a car loan calculator to work out what you can afford. You will need to know how much you are spending each week. And of course, how much you have leftover to put toward your car purchase.
Speaking with a car loan broker can help you to identify where you stand financially, and the size of car loan that you will be able to afford.
Set your loan amount
Once you know what you can afford in repayments, you can work out what you can afford to borrow. This is based on the loan term that you are willing to commit to. This will enable you to start looking for cars that will fit your budget.
Get a car loan pre-approval so that you can look for the car with certainty that you’ll be able to buy the one you want when you find it.
Choose your car
With a bad credit car loan pre-approval in place, the next task is to find a car that will fit your needs right now.
You can expect to drive the car for the duration of the loan term at least. To make sure the vehicle is right for you, make a list of all the things that you need the car to do. This will make it easier to shortlist suitable cars.
If you can afford a smaller loan amount, you’ll probably be looking for a second-hand car. This is no problem! You can buy used cars with bad credit car loans.
Secured or unsecured bad credit car loans
Secured bad credit car loans can be used to purchase cars that are less than seven years old.
If you want to purchase a car that’s older than seven years, you’ll need an unsecured car loan. Interest rates are usually a little higher for unsecured car loans, but it’s worthwhile to take a smaller loan amount and pay it back faster.
Selecting your loan term
We’d recommend taking out the shortest loan term that you can manage to get the car you need. Getting out of debt faster is to your advantage, especially when you’ve got a marked credit history.
Taking out a bad credit car loan over three to five years gives you the breathing space you need to work on improving your situation.
How to apply for a bad credit car loan
To apply for a bad credit car loan you’ll need:
- Three months of payslips
- Drivers licence and ID
- Residential history
- Access to your internet banking
- Your spending and living expenses
- Any assets and liabilities that you currently have
It’s really important that you are completely honest with your car loan broker about your spending and expenses. This will help to protect your credit file as no applications will be made for a loan that you would be rejected for.
If you don’t qualify for a car loan right now, your car loan broker will give you the steps that you need to take to become eligible.
What if your bad credit car loan application is rejected?
Sometimes you just won’t qualify for a loan. Usually, this will be because you don’t have enough surplus income to make the required loan repayments.
If this is the case, you will need to find a way to increase your income before reapplying.
Find out the reason for your bad credit car loan refusal.
Make sure you find out why your loan was refused, and what steps you would need to take to obtain an approval.
Common reasons bad credit car loans are refused
- Not enough surplus income for loan repayments
- History of gambling transactions
- High debt to income ratio
- Source of income not clear
If any of these situations apply to you, we recommend seeking a free consult with a financial planner or call the National Debt Helpline on 1800 007 007.
No situation is hopeless, and we’ve helped lots of Australians to recover from bad debt or bad credit situation, so take the steps to address your current financial issues and you will have a more secure future.
Get bad credit car loan advice
Getting started now will mean you get your car sooner and give yourself a real chance to drive forwards to a better future.
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