How to Get Car Financing With a Low Credit Score

By Angela Monroe - June 7, 2019

Getting approved for car financing is not easy if you have a low credit score. Most lenders will reject your loan application, citing creditworthiness issues. Even if you finally find one that gives the thumbs up, you’ll still be likely charged with high interest rate and unfavourable loan terms.

To help increase your chances of approval, have an adequate understanding of your borrowing capacity and shop around for car loans first before signing the contract.

1. Know your borrowing power.

It’s not enough to know your credit score. You should also know where you stand in the credit community. Understanding your credit score and borrowing capacity helps you negotiate for better car loan terms and avoid add-ons and scams.

It will also give you an insight into what areas you can improve in your credit profile to get into a more favourable position with the lenders.

Credit Score

Your credit score is a quantitative measure of your creditworthiness. It is assigned to you by the credit bureaus after reviewing your credit reports. These are records of your financial and credit history, which are submitted by lenders that you have dealt with in the past.

Your credit score is greatly affected by records of previous credit card and loan defaults, late debt repayments, bankruptcy and car repossession. Too many loan inquiries also cause your score to plummet. Also, if you have no credit history, your credit score is low because lenders cannot gauge your creditworthiness because you have not had experience with debt management.

Credit scores typically range from the lowest 300 to the highest 850. To get approved for a car loan, you need a score of around 750 or higher to get a new approved for a new car financing or 655 for used cars. Use this Free Credit Check form to get a copy of your latest credit report and credit score.

Borrowing Power

While a credit score affects your chances of getting approved for a car loan, the amount of money that you get will be influenced by your borrowing power. Your borrowing power is determined using your credit score as well as all your incoming and outgoing financial matters, including employment and family status.

When assessing your borrowing power, loan providers will consider all incoming and outgoing financial matters, plus any other life factors that may affect your finances, including employment and family status. How much savings you have in the bank and how much you are currently earning will also be weighed.

If you have a less than stellar borrowing power, you might not get approved for the loan amount you need to buy the car you really want. Instead, you’ll be offered less. In this case, you will have to settle for a more affordable vehicle.

2. Compare car loan offers before settling down on one.

Begin your car loan shopping after having a good understanding of how loans work and where you stand in the borrowing world.

Inquire about car loans from different lenders. Request for a quote or get a car loan pre-approval to compare the interest rates, terms and any other associated fees.

Which car financing has the lowest interest rate at the shortest loan term possible? Choose a short-term car loan when you have a low credit score to avoid paying more in interest. While you may need to pay a bigger amount for monthly repayments, the short duration of the loan means that you can complete your obligation early and avoid getting underwater.

2-Week Car Loan Shopping

Limit your car loan shopping to only 2 weeks. When you inquire for a car loan from a lender, they will pull out your credit reports from the credit reporting agencies. The credit bureaus, in turn, will record who access your credit reports then place that record on your reports. Inquiries that are related to a new loan application are “hard inquiries”, which negatively affect your credit score.

Business Investigation

As you do your car loan shopping, don’t forget to research the lending companies that you’re dealing with. Get information about them online and offline. Check for client reviews. What are people saying about them? Do the positive comments outweigh negative criticisms? Reviews and feedback say a lot about how each lender do their business. Be wary of the ones that have very low review scores.

3. Get a co-signer.

Some lenders approve car loan applications from borrowers with low credit scores as long as they have a co-signer. This person must have a high credit score of 750 or higher and stable source of income to qualify.

Your co-signer has great convincing power at the negotiating table. Not only will you get approved for the loan, but you can also negotiate a lower interest rate and favourable terms. This is because he or she is equally responsible for the loan and his or her involvement will reduce much of the risk for lenders.

Your co-signer takes over the responsibility of repayments should you fail to do it. If you stop paying the loan and the co-signer does nothing about it, the loan will default. This will not only affect both of your credit scores but also your personal relationship.

4. Get a bad credit car loan.

When your low credit score keeps you getting rejected for a car financing even when you bring in a co-signer,  your best alternative is to get a bad credit car loan. Also called a subprime auto loan, it is designed specifically for borrowers with low and bad credit scores.

Be aware, however, that your low credit score has deemed you a high risk for lenders. To compensate for this risk, you will pay a higher interest rate and less favourable terms. You might also need to provide a large down payment to secure the loan.


Loans for People With Bad Credit can help secure car low credit score car financing at reasonable interest rates and terms in major capital cities across Australia. Call us on 1300 769 384 to get an exact quote.

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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