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Bad Credit Car Loans

Having bad credit shouldn’t slam the door shut on all your car finance options. Whether you have a not-so-impeccable credit rating or a few stains in your credit history, BestFind can help you discover the best loan for you.

Use our comparison table to explore bad credit car loans and our calculator to figure out what you can afford.

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Minimum and maximum loan periods vary between 6 months and 10 years. Comparison interest rates vary between 6.55% and 19.07% p.a. Total interest repayments vary between $4,290 and $14,531 over the life of the loan. *Comparison rate is based on an unsecured loan of $30,000 for a term of 5 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. These rates can change without further notice. All rates quoted are per annum. For more information regarding fees click on "View fees & additional info +" for each product or contact the provider.

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Bad credit car loans – Get financed & improve your rating

A bad credit score can make a lender raise their eyebrow in concern, but will it stop you from getting approved for a car loan? In a nutshell, bad credit car loans are a thing, but they may not be the best product on the market in terms of rates and fees. Because of limited options, there’s also no guarantee you’ll get one, though there are plenty of tips you can use to boost your chances.

Before applying for any products in our comprehensive comparison table, find the best insights on bad credit car loans in Australia below, including how to apply.

What’s a bad credit car loan?

A bad credit car loan is one that’s suitable for borrowers with bumpy credit histories or credit scores below 549, generally speaking. This type of car loan can also be customised for other high-risk borrowers such as:

  • Borrowers with part IX debt agreements
  • Self-employed people
  • Those who can’t provide full documentation
  • Anyone who hasn’t had the chance to build up their credit score
  • Temporary Australian residents

Bad credit car loans work much the same way as traditional car finance in that you receive a lump sum, which you repay through monthly instalments that also cover interest and other fees. But because of the high-risk factor, these loans are associated with steep interest rates and fees. (Related: bad credit personal loans).

How do lenders determine if you qualify for a bad credit car loan?

There are several factors that influence the lender’s decision on your car loan application:

  • Credit history. The lender will look at the reasons behind your credit score situation. Typically, bad credit results from previous defaults, former bankruptcies, and too many new credit enquiries. If there’s a reasonable explanation for these “faults” or if they’re not too recent or sizeable, the lender might give you a chance.
  • Loan amount. The less you borrow, the easier it will be to repay the amount, and the less risk you pose.
  • Income. During most applications, you’ll need to supply details about your income or employment. Borrowers with more disposable income stand a better chance.
  • Other financial circumstances. Having more assets, fewer monthly expenses, and not many debts also boosts your chances.

What auto loans are available to bad credit borrowers?

Bad credit loans are typically available from various lenders, including banks, credit unions, car dealers, and online lenders. Most bad credit car loans are secured car loans meaning if you default, your car gets repossessed. It’s the best way to offset the lender’s risk.

That being said, borrowers with bad credit can opt for the following different types of car loans:

  • Traditional loans. Some banks and credit unions offer loans to borrowers with low credit, though getting approval may be difficult due to strict lending criteria.
  • Specialist loans. Other credit providers provide loans that are specifically tailored to high-risk borrowers. These may also be referred to as second chance loans for people who have been turned down elsewhere.
  • Dealer finance. Car dealers also provide finance. But you may be required to make a deposit upfront or a balloon payment at the end of the term.
  • Joint application loans. In this arrangement, two borrowers can both apply for the same loan if they qualify. Since both are responsible for repayments, there’s less chance of defaulting and a greater chance of approval.
  • Guarantor loans. If you’re unable to qualify for a car loan, a guarantor – usually a close family member – can seal the deal for you. However, the person should be comfortable covering for you if you’re unable to make repayments.

How does a bad credit car loan impact your rating?

In the long run, taking out a car loan can build or tear down your credit score, depending on whether you can pay off the debt as agreed. Initially, applying for credit lowers your score. That’s because when the lender does a credit check, the enquiry will show up in your credit report.

This is why you may have heard that too many applications in a short time will lower your score. Lenders may get the impression you’re not much of a responsible borrower. In any case, your credit score will spring back up if you stick to your repayment schedule and avoid missed payments.

What to consider when shopping for a bad credit auto loan

If you decide to take the plunge and apply for a bad credit auto car loan, consider the following to get the best deal:

  • Interest rate and fees. It’s typical for bad credit scores to attract high rates and fees. However, some due diligence and spending more time “shopping” can save you from the worst of it.
  • Interest rate type. The type of rate you choose determines if you’ll be able to handle your repayments well. Variable rates fluctuate and can put you in a bad financial position if rates rise. Fixed rates remain the same, but you won’t get the opportunity to save if rates fall.
  • Monthly repayments. Use our bad credit car loan calculator to investigate which repayment scenario suits your budget. It’s essential that you be able to afford your repayments since any defaults can further damage your score.
  • Other worthy features. Find out if you’ll be able to make additional repayments without penalty. Clearing your debt sooner helps reduce borrowing costs. Also, check for a redraw facility, which allows you to access your extra repayments via redraw. One other thing – make sure the repayment frequency covers weekly, fortnight, or monthly options so you can tailor your repayments to your pay cycle.

Top tips for loan approval

As mentioned earlier, lenders consider several factors in combination when deciding whether to offer you credit. Here are some things you can do to pass this scrutiny:

  • Check your credit file and fix any errors.
  • Boost your income and maintain stable employment.
  • Resist the temptation to make multiple applications in a short period.
  • Ensure you have paid off any outstanding credit.
  • Get a cosigner.
  • Have a large deposit ready.
  • Borrow a smaller amount.

How to apply

Applying for a bad credit car loan online is the quickest way to receive the cash you need to finance your vehicle purchase. Check BestFind’s comparison table above to find your preferred lender, and then click the “Go to Site” button to access their website.

Keep in mind, the usual stuff applies. You need to be at least 18 years old and a permanent Australian resident who earns a regular income. Additionally, some providers may require you to:

  • Provide documentation, such as payslips, bank statements, and proof of address.
  • Provide details about your living expenses and debts. This helps lenders determine if you’ll be able to service the loan.
  • Pay for comprehensive car insurance if the loan is secured
  • Contribute a cash deposit


Bad credit car loans can be a lifesaver to borrowers with a patchy credit score. However, if you’re applying for this product, you should expect the following:

  • Higher interest rates
  • Higher fees and charges
  • Limited borrowing power
  • In some cases, a substantial deposit may be required

The good news is, given enough time, you can employ the tips suggested in this guide to improve your credit score. This then opens the door to low interest car loans, which are more easily accessible and have better terms and more savings.

Bad credit car loan FAQs

Should I be borrowing with bad credit?

It depends on how quickly you need credit. Taking the time to reestablish your credit score brings better alternatives to the table and strengthens your application. It also gives you more time to build savings so you don’t risk taking on new debt you can’t afford.
On the other hand, it’s possible to refinance your bad credit loan once your financial situation has improved. In any case, it’s best to chat with a professional to determine your financial position before borrowing.

How much interest will I have to pay for a bad credit car loan?

The lower your score, the more risk you pose to the lender. If the lender uses a risk-based system, they will charge you a higher rate than someone with a better credit score. Rates are also affected by whether the debt is secured, how much you’re borrowing, and if the car is new or used.

Can I qualify for a bad credit car loan if I have filed for bankruptcy?

It’s possible to qualify, particularly if plenty of time has passed between the bankruptcy and your application.

Can I get pre-approval?

Yes, some lenders offer pre-approved finance, which allows you to go car shopping knowing exactly how much you have in hand. This can do wonders for your negotiating power and haggling confidence.

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