Car Loans for Bad Credit and Defaults

Financial setbacks can happen to anyone. Whether it’s a missed bill during a tough stretch, a relationship breakdown or a period of unemployment, a default on your credit file doesn’t have to define your financial future.

The good news is that having bad credit or a default on your file won’t automatically rule you out of getting a car loan. Specialist lenders understand that credit histories aren’t always straightforward, and many are willing to look beyond a blemished credit file to assess your overall financial situation.

Can I get a car loan with bad credit or defaults in Australia?

Yes, you can get a car loan in Australia even if you have bad credit and defaults on your file. A default is recorded when you miss a payment on a debt worth $150 or more, such as a credit card, personal loan or utility bill, by 60 days or more. It typically stays on your credit file for five years.

While having one or more defaults may rule you out with certain mainstream lenders, such as banks, specialist lenders in this space are used to working with borrowers who have a less than perfect credit history and are looking for a second chance.

Rather than focusing on your credit score, they’ll look at your overall financial situation, including your income, expenses and ability to meet repayments. That said, your options are likely to be more limited than those for someone with a clean credit file, and you can expect higher rates and fees as a result.

What types of defaults can be accepted on a bad credit car loan application?

Not all defaults are viewed the same way by lenders, and a few key distinctions can make a real difference to your chances of approval:

Paid vs unpaid defaults

A paid default, where you’ve gone on to settle the outstanding debt, is generally viewed far more favourably than one that remains unpaid. Lenders see a paid default as a sign that you’ve taken steps to amend the issue.

Unpaid defaults are riskier from a lender’s perspective, as there’s no guarantee the debt will ever be settled, but they can still be workable depending on the lender and your current financial position.

Finance vs non-finance defaults

Defaults related to finance, such as those on a car loan, personal loan or mortgage, tend to be treated more seriously than non-finance defaults, such as those on a utility bill or phone account. This is because finance defaults suggest a higher risk of missing future loan repayments, whereas a default on a phone bill doesn’t necessarily reflect how you’d manage a car loan.

As a general rule, minor non-finance defaults are the easiest to work around, while major unpaid finance defaults or multiple defaults of any kind can make approval more difficult.

How many defaults can I have on my file?

Different lenders have different criteria when it comes to the number of defaults that can be accepted on a bad credit car loan application. In terms of non-finance defaults, there’s usually no upper limit on the number that can be accepted, regardless of whether they’re paid or unpaid.

However, lenders will typically cap the number of finance defaults that you can have within a certain timeframe. This is often no more than two within the last 24 months, but they may not accept any car or vehicle finance defaults in that same period. Applying with a broker who specialises in bad credit lending can put you in the best position to have your application in front of a suitable lender.

How much can I borrow for a car loan with defaults?

Depending on the nature of your defaults, you could borrow as much as $75,000 for your car loan, though this will vary depending on your specific circumstances. Not all specialist lenders will offer loans as large as this, with others only extending their loans up to $50,000 or less.

Lenders will likely cap your borrowing power at a lower maximum if you have one or more serious defaults, like an unpaid finance default. The amount you’re ultimately approved for will be determined by several key variables, including:

The number, size and severity of the defaults on your file
Whether your defaults are paid or unpaid
Whether there are any other issues on your file, such as a discharged or undischarged bankruptcy
Your income and regular living expenses
Any existing financial commitments, such as outstanding debts or other loans
Whether you’re a property owner, which can boost your borrowing power

All applications are subject to lender assessment, so borrowing power will vary from person to person.

How to apply for a car loan with unpaid defaults

1

Fill out our online application form

Tell us about yourself and your current financial situation, as well as the loan you're after.
2

Send through any necessary documents

We'll need to see documentation to verify your current finances and your identity.
3

Have a chat to your broker

Your broker will give you a call and discuss your loan options.
4

Lock in your chosen car

If you haven't already, we can help you find your car through our in-house car broker's national dealer network.
5

Get your application submitted

Once you're happy to proceed, your broker will prepare your application for formal submission.
6

Receive approval and settle your loan

You can be approved as soon as within one business day, after which we'll handle loan settlement.
7

Drive away

Simply sign off and the car is yours!

Apply now

Why Us?

Fast loan approval

We work hard behind the scenes to match you with a suitable lender and have your loan approved and funded in as few as 48 hours.

100% online

Where ever you are across Australia, you can apply for a bad credit car loan using your laptop or even a smartphone.

Trusted brand

For more than a decade, we've been helping borrowers with bad credit get approved for their car loans across Australia.

Car loan eligibility and documentation

Eligibility

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
You mustn't currently be bankrupt
Your chosen car must satisfy your lender's vehicle eligibility criteria

Documentation

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

Top Tips

Top tips for maximising your car loan approval chances with bad credit and defaults

Pay off any outstanding defaults

Clearing a default doesn't remove it from your file, but it does change its status from unpaid to paid, which lenders view far more favourably. If you're able to settle a default before applying, it's worth doing so.

Save for a deposit

Putting down a deposit reduces the amount you need to borrow, which can make your application more attractive to lenders and may help you access a better interest rate. You can borrow up to 100% of your car’s purchase price if you’re unable to do so, though.

Avoid applying with multiple lenders at once

Each application can leave a mark on your credit file, and too many in a short period can make you look like a higher risk borrower. Working with a broker can help you avoid this by matching you with the right lender the first time.

Common questions about bad credit car loans with defaults answered

Will getting a car loan help improve my credit score?

It can, provided you make your repayments on time and in full. Consistent repayment history is one of the most effective ways to build or rebuild your credit score over time.

What happens if I default on my car loan?

Defaulting on your car loan means you’ll be issued with a default notice and, if you fail to repay the debt within 30 days, your car can be repossessed by your lender and sold to recoup their lost funds. If you're struggling to meet your repayments, contact your lender as soon as possible to discuss potential hardship provisions like repayment pauses to help you get your finances back in order.

Should I apply for my car loan with my partner?

Applying with a partner who has a stronger credit profile or higher income can improve your chances of approval, though you’ll likely still be assessed based on the weaker of the two credit profiles. Keep in mind that both of you will be equally responsible for the debt, so it's worth discussing the decision carefully before applying together.

Will I be able to pay off my car loan early?

Yes, you can pay off your car loan early. We work with lenders who don't charge early repayment fees, so you can clear your debt ahead of schedule without being penalised for doing so.

Will my car loan interest rate stay the same across my loan term?

Yes, car loan interest rates are fixed, meaning the rate you're approved at won't change for the life of your loan. This gives you certainty over your repayments, as they'll stay the same each month regardless of any changes in the broader interest rate environment.

Can I finance a new or used car with a bad credit car loan?

Yes, we can help you finance both brand-new cars and used vehicles up to 20 years or older with a bad credit car loan, whether you're buying from a dealer or a private seller.

Sources

What is a default? – Equifax