Bad Credit Car Loans
Don't let past credit issues stop you from getting a car. We work with specialist lenders who approve based on your current situation, not your history.
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What is a Bad Credit Car Loan?
A bad credit car loan is a specialized finance product designed for Australian borrowers who have imperfect credit histories. Unlike traditional car loans from major banks, which rely heavily on automated credit scoring and often auto-decline applications with any blemishes, bad credit car loans are assessed manually by lenders who understand that past financial difficulties don't necessarily predict future behavior.
In Australia, approximately 15-20% of credit-active adults have some form of negative credit history — defaults, late payments, bankruptcies, or court judgments. Major banks (ANZ, CBA, NAB, Westpac, etc.) typically reject these applications outright because their risk models can't accommodate exceptions. This is where specialist non-bank lenders and Kreddi come in.
Our panel includes lenders who specifically cater to "credit-impaired" or "non-conforming" borrowers. They assess your application holistically, considering:
- Current income: Can you afford the repayments now?
- Employment stability: Have you been in your current job for 3+ months?
- Living expenses: Do you have surplus income after rent/mortgage and bills?
- Savings behavior: Do you manage your bank account responsibly?
- Context of credit issues: Was it a one-time event (medical emergency, divorce, job loss) or ongoing mismanagement?
The result? Approval rates for Kreddi customers with bad credit are significantly higher than if you applied directly to a bank. We've successfully arranged car loans for customers with credit scores as low as 350 (out of 1,200), multiple defaults, and even undischarged bankruptcies.
How Do Bad Credit Car Loans Work?
The mechanics of a bad credit car loan are similar to standard car loans, but with key differences in approval criteria, interest rates, and loan terms:
1. Higher Interest Rates (But Not Unreasonable)
Bad credit car loan rates typically range from 9% to 18% p.a. (comparison rate), compared to 5-8% p.a. for borrowers with excellent credit. While this is higher, it's not predatory — it reflects the statistically higher risk of default that lenders are taking on.
For example, a $30,000 loan over 5 years at 12% p.a. results in monthly repayments of approximately $668, versus $566 at 6% p.a. That's an extra $102/month or $6,120 total over the life of the loan. While not ideal, it's often the only way to access reliable transport when banks say no.
Rate reduction tip: As you rebuild your credit by making 12-24 months of consistent repayments, your credit score will improve. At that point, you can refinance to a lower rate, potentially saving thousands in interest.
2. Larger Deposits (Usually 10-30%)
Most bad credit lenders prefer a deposit of 10-30% of the car's purchase price. This reduces their risk (lower loan-to-value ratio) and demonstrates your commitment to the purchase. A larger deposit can also secure you a better interest rate.
No deposit options: Some lenders offer 100% financing for bad credit borrowers, but expect rates at the higher end (15-18% p.a.) and stricter approval conditions (higher income requirements, newer vehicles only, etc.).
Trade-in as deposit: If you have a current vehicle to trade, its value can count as your deposit, even if you still owe money on it (subject to equity).
3. Secured Loans (The Car is Collateral)
Bad credit car loans are always secured, meaning the lender holds a security interest over the vehicle until the loan is fully repaid. This is registered on the Personal Property Securities Register (PPSR). If you default on repayments, the lender can repossess the vehicle.
This security is why bad credit car loans are more accessible than unsecured personal loans — the lender's risk is mitigated by the vehicle's value.
4. Manual Assessment (Not Automated Rejection)
Unlike banks that use algorithmic credit scoring, specialist lenders manually review your application. A real person looks at your bank statements, payslips, and credit report to understand your full story. This human element means:
- You can explain extenuating circumstances (medical emergency, relationship breakdown, etc.)
- Recent positive behavior (consistent savings, stable employment) can offset old defaults
- Lenders can make exceptions based on context, not just numbers
5. Faster Approval Timelines
Ironically, bad credit car loans often approve faster than prime loans. Because specialist lenders expect imperfect credit, they don't waste time investigating minor issues. Conditional approval typically comes within 24-48 hours, with full approval and settlement in 3-5 business days.
Who Qualifies for a Bad Credit Car Loan?
If you've been declined by a bank or worry your credit history will hurt your chances, you may qualify for a bad credit car loan if you meet these criteria:
Minimum Requirements
- Australian citizen or permanent resident
- 18+ years of age
- Earning at least $400-$500 per week (after tax)
- Employed for 3+ months (full-time, part-time, or casual)
- Can demonstrate ability to afford repayments
- Have a deposit (10-30%, though 0% options exist)
- Purchasing a vehicle less than 15 years old with under 200,000km
Credit Issues We Can Work With
- Paid defaults: Old defaults (2+ years) that have been settled
- Unpaid defaults: Recent defaults under $5,000 (some lenders require repayment first)
- Discharged bankruptcy: Bankruptcy that has been discharged (usually 3+ years ago)
- Undischarged bankruptcy: Some lenders consider if you're 2+ years into bankruptcy
- Part 9/Part 10 debt agreements: If you're making consistent payments
- Court judgments: Paid or unpaid, though paid is preferred
- Arrears: Late payments on loans, rent, or utilities
- Multiple credit enquiries: 10+ enquiries in 12 months
- Low credit score: Below 600 (or even below 400 with strong income)
Self-employed or low income? Some lenders offer "low doc" bad credit car loans where you provide bank statements instead of payslips. Centrelink income (Age Pension, Disability Support Pension) is also acceptable with some lenders, provided you have additional income sources.
Why Use a Broker for Bad Credit Car Loans?
When you have bad credit, applying directly to lenders is risky. Each application creates a hard enquiry on your credit file, and multiple enquiries in a short period can lower your score further. Worse, if you're declined, you may not know why or where to apply next.
Here's how Kreddi helps:
One Enquiry, Multiple Lenders
We submit your application to our panel of 60+ lenders using a single credit enquiry, minimizing impact on your score.
Lender Matching Expertise
We know which lenders accept which types of bad credit. We won't waste your time with lenders who will decline.
Higher Approval Rates
Our approval rate for bad credit applications is 75-80%, compared to 20-30% when applying directly to banks.
$0 Broker Fees
We're paid by lenders, not you. Our service is completely free — no upfront fees, no hidden charges.
Rebuilding your credit: Once approved and making consistent repayments, your credit score will start to improve within 6-12 months. After 12-24 months of positive repayment history, we can help you refinance to a lower rate, saving you money.
Bad Credit Doesn't Mean No Car
Apply now and get access to specialist lenders who understand your situation. 60+ lenders competing for your business.
Bad Credit Car Loan FAQs
Yes! While traditional banks often auto-decline applications with credit issues, specialist lenders assess your current financial situation, not just your credit score. At Kreddi, we work with lenders who regularly approve customers with defaults, bankruptcies, court judgments, and other credit problems. The key is demonstrating that you can afford the repayments now, regardless of what happened in the past.
There's no minimum credit score for bad credit car loans. While banks typically require scores of 600+, specialist lenders look beyond the number. They consider your current income, employment stability, living expenses, and repayment capacity. We've successfully arranged loans for customers with credit scores below 400, though interest rates will be higher to reflect the increased risk.
Bad credit car loan rates typically range from 9% to 18% p.a., compared to 5-8% p.a. for prime borrowers. The exact rate depends on the severity of your credit issues, loan amount, loan term, and deposit. A larger deposit (20-30%) can significantly reduce your rate. As you rebuild your credit by making consistent repayments, you can refinance to a better rate after 12-24 months.
Our panel of lenders considers applications from customers with: paid or unpaid defaults, discharged or undischarged bankruptcies, Part 9 or Part 10 debt agreements, court judgments, multiple credit enquiries, arrears on loans or rent, mortgage defaults, tax debts, and Centrelink debts. Each lender has different policies, which is why working with a broker gives you access to more options.
While some lenders offer 100% financing for bad credit borrowers, most prefer a deposit of 10-30%. A larger deposit improves your approval chances and reduces your interest rate. If you don't have cash savings, some lenders accept trade-ins as a deposit. The vehicle you're purchasing can also serve as security for the loan.
Bad credit car loan approvals typically take 24-48 hours for conditional approval, with full approval and settlement within 3-5 business days. Specialist lenders often move faster than banks because they assess applications manually rather than relying on automated credit scoring. If you need urgent finance, let us know and we'll prioritize lenders known for same-day decisions.
Each credit enquiry can temporarily lower your score by 5-10 points. However, when you apply through Kreddi, we submit your application to multiple lenders using a single enquiry, minimizing the impact. Additionally, if approved and you make consistent repayments, your credit score will improve over 6-12 months. We recommend avoiding multiple applications on your own, as each enquiry gets recorded separately.
Yes, some lenders accept Centrelink income (Age Pension, Disability Support Pension, Carer Payment) as long as you have additional income from part-time work, investments, or family support. Most lenders require at least $400-$500 per week in total income after rent/mortgage. We have specialist lenders who understand Centrelink income structures and assess applications fairly.