Second-Chance Car Loans
Bad credit isn’t the end of the road. Whether you’ve had a few defaults or are a discharged bankrupt, there are lenders ready to give you a second chance at car finance.
If you’ve missed repayments, collected a default or two or simply hit a rough patch financially, you’re far from alone. Research from Moneysmart found that 47% of Australian adults with debt, equivalent to around 5.8 million people, struggled to make repayments in the last 12 months. For those whose credit files reflect those struggles, it can make traditional car finance hard to access.
That’s why there are lenders out there who believe in second chances. Having a bad credit score isn’t the be-all and end-all you might think it is when it comes to financing your next vehicle. We’re partnered with providers who look beyond your credit history and focus on your current ability to repay, giving you a genuine path to car finance even if your record isn’t perfect.
How do second-chance car loans work?
The way second-chance car loans work is simple: you borrow a set amount to purchase a vehicle and repay it in regular instalments over an agreed term with interest and fees. Here are the key pointers to keep in mind:
- You can typically borrow between $5,000 and $100,000, though the amount you’re approved for will depend on your income, expenses, credit history and the value of the vehicle.
- Loan terms run from as few as one to as many as seven years.
- Interest rates are higher than standard car loans.
- Repayments are made either weekly, fortnightly or monthly.
- Car loans are usually secured, meaning the vehicle acts as collateral for the loan. If you default, your lender can repossess the car to recover the debt.
What vehicles can I buy with a second-chance car loan?
You’ll be able to finance a brand-new or used car, whether from a dealership, private seller or an auction, provided it satisfies your lender’s age and condition requirements. This includes the following car categories:
- Hatchbacks
- Sedans
- SUVs
- Utes
- 4WDs
- People movers
- Hybrids and plug-in hybrids (PHEVs)
- Electric vehicles (EVs)
How much will my second-chance car loan cost?
The biggest factor influencing the cost of your loan is your interest rate, which lenders set based on your credit history, income and overall risk profile. The table below shows how your monthly repayment and total interest bill change as rates increase on a $30,000, five-year loan:
| Interest rate | Monthly repayment | Total repaid | Interest paid |
|---|---|---|---|
| 10.00% p.a. | $637 | $38,245 | $8,245 |
| 11.50% p.a. | $660 | $39,587 | $9,587 |
| 13.00% p.a. | $683 | $40,956 | $10,956 |
| 14.50% p.a. | $706 | $42,351 | $12,351 |
| 16.00% p.a. | $730 | $43,773 | $13,773 |
Calculations and interest rates are for illustrative purposes only and exclude loan fees and other charges. Interest rates shown aren’t necessarily reflective of the rates you’ll receive on your second-chance car loan.
As you can see, a jump from 13.00% p.a. to 14.50% p.a. would cost you only $23 extra per month, but almost $1,400 more in interest overall.
However, there’s a range of other factors that can impact the cost of your car loan. These include:
- Establishment and ongoing fees: your loan’s one-off establishment fee can range from a few hundred dollars to $1,000 or more, while monthly fees can reach $10 to $15 (or be waived entirely).
- Loan amount: the more you borrow, the more interest you’ll pay over the life of the loan.
- Loan term: a longer term reduces your monthly repayments but increases the total amount of interest you pay.
- Deposit: putting money down upfront reduces the amount you need to borrow, which lowers both your repayments and your total interest cost.
- Early repayment fees: may apply if you pay out your loan ahead of schedule, as some lenders charge a break fee.
- Balloon payment: an optional lump sum due at the end of your loan term. It reduces your monthly repayments but means you’ll pay more interest and have to make a much bigger final payment.
- On-road costs: expenses such as registration, insurance and motor vehicle duty can be rolled into your loan, which is convenient upfront but increases the total you’ll repay with interest.
How to apply for a bad credit car loan with us
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1
Fill out our online application form
Tell us about yourself and your current financial situation, as well as the loan you're after.
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2
Send through any necessary documents
We'll need to see documentation to verify your current finances and your identity.
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3
Have a chat to your broker
Your broker will give you a call and discuss your loan options.
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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.
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5
Get your application submitted
Once you're happy to proceed, your broker will prepare your application for formal submission.
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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.
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7
Drive away
Simply sign off and the car is yours!
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.
Second-chance car loan 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
Top Tips
Tips for getting approved for a second-chance car loan
Check your credit report first
Knowing exactly what's on your file means there won’t be any surprises when a lender checks it. You're entitled to a free copy of your credit report through agencies like Equifax and Experian, so it's worth checking for any errors that could be dragging your score down unnecessarily.
Show stable income and employment
Lenders offering second-chance finance are primarily focused on your current ability to repay. Being in your current job for an extended period and documenting your income clearly and consistently will go a long way toward helping you secure approval.
Save a deposit if you can
Even a small deposit reduces the amount you need to borrow and shows financial discipline. Some bad credit lenders may also require one if they deem your car to be out of your price range, so having savings set aside puts you in a stronger position from the outset.
Keep your other debts and expenses low
Lenders will assess your overall financial position, not just your credit score. Paying down existing debts and avoiding new credit applications in the lead-up to your car loan application can improve how your finances look on paper.
Apply through a broker who specialises in bad credit finance
Rather than applying directly with multiple providers and racking up hard enquiries on your credit file, a broker can match you with lenders who are likely to approve your application from the start.
Common second-chance car loan questions answered
How long does the application process take?
In most cases, you can get a decision on your second-chance car loan application within one to two business days. We work with lenders who understand that speed matters, so once your documents are in order, the process can move quickly.
What documents will I need to apply?
Most lenders will ask for the following:
- 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 may be requested
If I have unpaid defaults on my credit file, can I still apply?
Yes, we work with lenders who can consider applications from borrowers with unpaid defaults, though the size, age and nature of the default will influence your options and the rate you're offered. For instance, one or two minor phone bill defaults will be treated differently to loan defaults, which may rule you out entirely.
Can I obtain bad credit financing without a credit check?
No reputable lender operating under Australian credit laws will offer finance without conducting a credit check. What sets bad credit lenders apart is that they don't rely on your credit score alone, taking your current income and expenses into account as well.
Can I get a second-chance car loan while collecting Centrelink payments?
Yes, we work with lenders who accept Centrelink payments as a form of income. Some of the payments that can be accepted include:
- Age Pension
- Disability Support Pension
- Parenting Payment
- Carer Payment
- Family Tax Benefits A and B
- JobSeeker Payment (in conjunction with wage income or family allowance payments only)
Can I get guaranteed approval for a second-chance car loan?
No lender can legally guarantee approval before assessing your application. If you come across a lender guaranteeing car loan approval, this is a major red flag.
How long after I'm discharged from my bankruptcy can I apply for a second-chance car loan?
In most cases, you can apply for a car loan as soon as you're discharged from bankruptcy. We’re partnered with lenders who consider applications from discharged bankrupts, though you'll need to demonstrate positive financial behaviour over an extended period.