How to Get a Car Loan with Bad Credit

While every application is different, the process of getting a bad credit car loan typically follows the same general steps. Here’s how it typically unfolds:

1. Think about your budget

Before you apply, it’s worth taking stock of your current incomings and outgoings to get a sense of what you can comfortably afford to repay each month. If you’re not sure where to start, don’t worry too much, as your lender or broker will be able to work this out with you as part of the application process.

2. Apply with your lender or broker

You can apply directly with a lender or through a broker who specialises in bad credit car loans. Applying through a broker gives you access to a panel of specialist lenders, rather than focusing your energies on just one, and takes the guesswork out of finding the right one for your situation.

3. Provide the necessary info and documents

You’ll need to provide some basic information and supporting documents, such as proof of identity, proof of income and recent bank statements. Having these ready to go can help speed up the process. When applying with us, we’ll ask for the following documents:

• A valid driver’s licence, front and back (passports can also be accepted) 
• Your two most recent consecutive payslips
• 90 days of bank statements and/or Centrelink income statements

4. Receive pre-approval

Once your information has been assessed, you may receive pre-approval, which gives you a general idea of how much you could borrow and the terms you’re likely to be offered. If you’re applying through a broker, this is the stage where they’ll talk you through your available finance options and connect you with the most suitable lender on their panel.

5. Buy your car

With pre-approval in hand, you can start shopping for your vehicle with a clear budget in mind. Having a pre-approval in place gives you a firmer negotiating hand when it comes to your vehicle, as sellers can clearly see that you’re a serious buyer with a set upper limit.

6. Submit your application and get formal approval

Once you’ve chosen your vehicle, your lender will conduct a full assessment and, if everything checks out, provide formal approval on your loan.

7. Settle your loan deal and drive away

With formal approval confirmed, your loan is settled and the funds are used to purchase your vehicle. From here, you’ll begin making repayments under the agreed terms and drive away in your new car.

Each lender will have its own eligibility criteria when it comes to bad credit car loans, but you can expect the following requirements to be in place for your application:

• You must be 18 years of age or older
• You must be an Australian citizen, permanent resident or eligible visa holder
• You must be employed and earning a stable income that supports your car loan payments, which can start from as little as $480 per week
• Your chosen car must satisfy your lender’s vehicle eligibility criteria in terms of age and condition

Not all bad credit is made alike, either. Here’s how lenders typically treat different types of credit issues:

Your car loan borrowing power as a bad credit applicant will depend on the specifics of your situation, but as a general guide, they’re available from as little as $5,000 up to as much as $150,000 with some lenders. 

The amount you’re ultimately approved for will come down to several key variables, including:

• The nature and severity of your bad credit, such as whether you have minor defaults or a more serious issue like bankruptcy
• Your income and regular living expenses (including whether you’re receiving Centrelink benefits)
• Your existing financial commitments, such as outstanding debts or other loans
• Whether you’re able to put down a deposit
• The type, age and condition of the vehicle you’re looking to purchase
• The lender you’re approved with, as borrowing caps vary

All applications are subject to lender assessment, so the amount you’re eligible to borrow will likely differ from the next person’s. Speaking to a broker before you apply can give you a clearer picture of what’s realistically available to you.