Getting a Car Loan with Bad Credit History

Your credit rating determines your eligibility to get a loan. Therefore, if a lender sees a bad credit history, they can reject your application. It is more common than you think, but it shouldn’t stop you from getting your dream car.

The good news is, there is a way. According to the Federal Chamber of Automotive Industries (FCAI), new car sales have increased significantly. The recent 4.7% increase in car finance loan commitments further validates this fact.

So, how do you get a car loan with bad credit?

Different Ways of Getting a Bad Credit Car Loan

When an applicant with a bad credit score applies for a car loan, it is known as a bad credit car loan. Bad credits can happen due to delay in repayment of loans and bills. It may not always even be your fault, and you might have misplaced a bill. Often, forgetting to update the address details while moving out is a common reason behind bad credit.

There are ways to recover from bad credit, but it takes time. The problem arises if you require a vehicle before your credit history improves. You may appear as a risk to the lenders, which will force them to refuse your loan application.

Fortunately, the Australian system allows each lender to calculate your credit score as per their own guidelines. So, even if some lenders refuse you, others might not. There are three ways to get a car loan with bad credit.

Secured Car Loans

In a secured car loan policy, your security is the new vehicle you plan to purchase. In simple terms, if you can’t repay in time, the lender will possess your car. If you want a car loan with a bad credit history, this is a way to help the lender put faith in you. That will also lower the risks, and once you clear the payments, you get full possession of the car.

Bad Credit Car Loans

You can find specific car loans from lenders who cater to borrowers with a bad credit history. However, you need to prove your willingness and capacity to repay.

Once the lender is convinced that you want to improve your credit history, they may lend you the money. The only drawback is that these loans have a much higher interest rate compared to other car loans. They also come with some additional terms and conditions.

Through a Guarantor

It is the best solution, especially if you are a student or a young person without any credit history. Of course, people with bad credit history too can use a guarantor to ensure reduced risk while applying for a car loan.


When applying for a car loan with bad credit history, you must be fully confident about making the repayments. Not only will it ensure an easier application process, but it will also help improve your bad credit score.

Just make sure that you buy a car that is not beyond your budget, or else you will end up in another bad credit. Also, compared to regular loans, these loans have higher interest rates to ensure minimal risk. So, make sure you find a lender who is willing to let you make affordable regular payments.