How to Get a Car Loan if Your Credit Is Terrible

By Angela Monroe - May 30, 2019

Your credit score is important when applying for a car loan and any other type of financing. It helps lenders assess how much risk they would assume when granting you the money. If your credit score is terrible, most lenders will refuse to approve your application.

Nevertheless, you can still secure a car loan even if your credit is bad through subprime auto financing, a.k.a bad credit car loan.

Credit Score

Your credit score is created based on your credit profile in the credit bureaus. If you have a credit line or had loans in the past, all the information that’s related to your financial situation and payment behaviour are recorded by lenders and submitted to the credit bureaus. The credit bureaus, in turn, assign you a credit score based on the reports. This score serves as your creditworthiness metre.

Each credit bureau has a credit scoring model that may have a slight variation from the others, but the scores typically range from the lowest 300 to the highest 850. All reported delinquent payments on your debt and default loans negatively affect your credit score.

Generally, if your score falls below 630, it’s already bad and a red flag for potential lenders. If it drops further down to 580 or lower, your credit score is considered terrible and getting approved for loans becomes difficult.

Bad Credit Car Loan

Getting a bad credit car loan is often your last resort to get financing. It is designed specifically for people with various credit troubles like a bad or terrible credit score. The loan terms and rates may slightly vary according to each lender’s requirement. Generally, however, you need to provide a large down payment and pay a higher interest rate to get approved.

Money Down

Pay at least 20% down on a car and don’t go below 10%. Placing a larger down payment on a car loan is required by lenders to compensate for the risk of lending you money. Also, it will help reduce your monthly payments.

The car’s down payment is primarily used to offset the depreciation it will incur once driven off the lot. The last thing you want is paying more on tax and other fees than the car is worth.


A bad credit car loan is usually a secured type of financing. Your car serves as collateral for the loan. When you default on your repayments, the lender can repossess and sell the car.


Get a co-signer with an impressive credit score to increase your chances of approval. This person will legally commit himself or herself to the loan contract along with you. He or she will also be responsible for the repayments if you default. If neither you nor your co-signer fails to complete the repayments, both of your credit profiles will be negatively affected.


Before sealing the deal with a car loan lender, don’t forget to spend a week or two shopping around for better loan terms. While you should expect a higher interest rate for the loan because of your low credit score, do not accept excessively high Annual Percentage Rates (APR) or dealer doc fees. Always compare loan terms and rates with multiple lenders before making any final decision.

Affordable Vehicle

Your car choice also affects the terms of your loan. The car’s make and model will directly affect the interest rate on your loan, so shop around for vehicles that are perfect for your lifestyle at reasonable prices. Expect to pay a higher rate for a car that is expensive and has a low resale.


Loans For People With Bad Credit can help you get a car loan in any major capital city across Australia. Fill out the Pre-Approval form to kickstart your loan application.

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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