How Bad Credit Car Loans Work: A Guide for Car Buyers with Poor Credit

Do you have a poor credit history and need a car loan? You’re not alone. Many Australians struggle with bad credit due to various reasons, such as unpaid bills, defaults, bankruptcy, divorce, illness, or unemployment. Having bad credit can make it hard to get approved for a car loan from traditional lenders, such as banks or credit unions. But don’t lose hope. There are still options available for you. 

Bad credit car loans are auto loans that allow people with low or no credit history to borrow money for a vehicle. These loans are offered by specialty lenders who are willing to give you a second chance. However, these loans also come with some drawbacks that you need to be aware of. 

In this article, we will explain how bad credit car loans work, what are the benefits and drawbacks of these loans, how to qualify for these loans, and how to improve your chances of getting approved. By the end of this article, you will have a better understanding of how bad credit car loans can help you achieve your car ownership goals. 

How do bad credit car loans work? 

To apply for a bad credit car loan, you need to fill out an online application form with some basic personal and financial information. You may also need to provide some documents, such as proof of income, proof of identity, proof of address, bank statements, and details of the vehicle you want to buy. 

The lender will then assess your application based on your income, expenses, assets, liabilities, employment history, personal circumstances, and credit score. They will also check the value and condition of the vehicle you want to buy. 

If you are approved, the lender will send you a loan contract with the interest rate, fees, charges, terms, and conditions of the loan. You need to read and sign the contract carefully before returning it to the lender. The lender will then transfer the funds to the seller or dealer of the vehicle.

The interest rate and terms of your bad credit car loan will depend on several factors, such as: 

• Your credit score: The lower your credit score, the higher the interest rate and fees you may have to pay. 
• Your income: The higher your income, the more likely you are to afford the loan repayments. 
• Your expenses: The lower your expenses, the more disposable income you have to repay the loan. 
• Your assets: The more assets you have, such as savings or property, the better your current financial situation will present to the lender.
• Your liabilities: The fewer liabilities you have, such as debts or obligations, the more disposable income you have to repay the loan.
• Your employment history: The longer and more stable your employment history, the more reliable you are as a borrower.
• Your personal circumstances: The more stable and positive your personal circumstances, the less likely you are to default on the loan.
• The type of vehicle: The newer and more valuable the vehicle, the lower the interest rate and fees you may have to pay. 

What are the benefits and drawbacks of bad credit car loans? 

Some of the benefits of bad credit car loans are: 

• They can help you get a car when you need it, even if you have a poor credit history. 
• They can help you improve your credit score over time, as long as you make your repayments on time and in full. 
• They can give you a second chance to prove your creditworthiness and financial responsibility. 
• They can offer you flexible and tailored solutions that suit your budget, lifestyle, and credit situation. 

Some of the drawbacks of bad credit car loans are: 

• They can have higher interest rates and fees than regular auto loans, which means you may end up paying more in the long run. 
• They can have stricter terms and conditions than regular auto loans, which means you may have less flexibility and choice in your loan options. 
• They can affect your credit score negatively, if you miss or default on your repayments. 
• They can expose you to predatory or unscrupulous lenders, who may charge you unreasonable or hidden fees, or use unfair or illegal practices to collect your debt. 

At Ausloans, we are committed to providing you with the best service and advice for your bad credit car loan. We are not like other lenders who may take advantage of your situation or treat you unfairly. We are: 

• Australia’s largest and most trusted finance broker, with over 15 years of experience and a network of over 40 lenders who can offer you flexible and tailored solutions that suit your budget, lifestyle, and credit situation. 
• Accredited by the Finance Brokers Association of Australia (FBAA) and the Commercial Asset Finance Brokers Association of Australia (CAFBA), which means we comply with the highest standards of professionalism, ethics, and compliance in the industry. 
• Rated 4.97out of 5 by over 500 customers on Google, which means we have a proven track record of delivering excellent customer service and satisfaction. 
• Dedicated to finding you the best deal for your bad credit car loan, with no hidden fees or charges, and no obligation or pressure to accept any offer. 
  

How to qualify for a bad credit car loan? 

To qualify for a bad credit car loan, you need to meet some minimum requirements, such as: 

• You must be at least 18 years old and an Australian citizen or permanent resident. 
• You must have a regular and verifiable income that is sufficient to cover the loan repayments and your living expenses. 
• You must have a valid driver’s license and the vehicle you purchase will need to be registered in your name or co-borrower's name.
• You must not be currently bankrupt or under a Part IX or Part X Debt Agreement (unless you are at least 12 months into the agreement). 

When applying for a bad credit car loan, you may need to provide some documents and information, such as: 

• Proof of income, such as payslips, bank statements, tax returns, or Centrelink statements. 
• Proof of identity, such as passport, driver’s license, birth certificate, or Medicare card. 
• Proof of address, such as utility bills, rental agreements, or phone bills. 
• Details of the vehicle you want to buy, such as make, model, year, mileage, price, and seller or dealer details.
• Details of your current and previous debts and obligations, such as credit cards, personal loans, mortgages, or child support payments. 

At Ausloans, we make the application process fast and easy for you. You can apply online or over the phone in minutes, and get a pre-approval within 24 hours. We will also provide you with a free credit score assessment and once you are approved and find a suitable car, a free car history report for your peace of mind. 

How to improve your chances of getting approved for a bad credit car loan?

To improve your chances of getting approved for a bad credit car loan, you can follow these tips and advice: 

• Check your credit score and report before applying for a loan. You can get a free copy of your credit report once a year from Equifax. You can also get a free credit score from Finder or Credit Savvy. This will help you understand your current credit situation and identify any errors or issues that may affect your application. 
• Compare different loan options from various lenders. At Ausloans, we do this for you. We have access to over 40 lenders who can offer you different interest rates, fees, terms, and features for your bad credit car loan. We will compare and negotiate on your behalf to find you the best deal for your needs and budget. 
• Provide proof of income and identity. Lenders will want to see that you have a stable and sufficient income to repay the loan. They will also want to verify your identity and address. Providing these documents will help speed up the approval process and show that you are trustworthy and reliable.
• Choose a reliable and affordable vehicle. Lenders will also check the value and condition of the vehicle you want to buy. Choosing a newer and more valuable vehicle may lower the interest rate and fees of the loan. Choosing an older and cheaper vehicle may reduce the amount of money you need to borrow. Either way, make sure that the vehicle is in good working order and has a clear title. 

We hope this article has helped you understand how bad credit car loans work and how they can help you achieve your car ownership goals. If you are looking for a bad credit car loan, you came to the right place. At Ausloans, we have a team of experienced brokers specialised in bad credit car loans. Our brokers are fully committed to sourcing the best loan options, so you can select the most suitable loan for your needs, based on your circumstances. You can rest assured you are going to be looked after.