A car shouldn’t be out of reach just because your credit isn’t where you’d like it to be. A bad credit car loan offers a way forward, helping you buy the vehicle you need with repayments that suit your situation. These loans work much like standard car loans but are tailored for borrowers with past credit issues or limited history.
At Savvy, we helped more than 500 Australians secure bad credit car loans in 2024 alone. Our experienced brokers take the time to understand your financial situation and match you with a lender that fits your profile – so whether you’re rebuilding your credit or just starting out, you can get back on track and back on the road.
Why apply for a car loan with Savvy?
How much will my bad credit car loan cost?
Just like a standard car loan, bad credit car loans use the car you’re purchasing as collateral for the loan and are repaid in regular instalments. However, because of the increased risk associated with borrowers who’ve struggled with their credit, the interest and fees you’ll be required to pay will typically be higher than on a loan for someone with good credit. Additionally, the amount you can borrow and terms you can access may be more limited.
There’s a range of factors that can impact the cost of your bad credit car loan, such as the following:
Interest rates and loan amount
As mentioned, rates will be higher on bad credit loans compared to other car loans. Because interest is calculated based on your outstanding loan balance, greater sums will result in higher overall interest outlays. The following table shows how higher rates can make a big difference to the total amount of interest you’ll have to pay on your loan. For example, on a five-year loan repaid monthly at 15.00% p.a., the total interest rises from $8,548 on a $20,000 loan to $12,822 on a $30,000 loan. Similarly, the jump from 15.00% p.a. to 16.00% p.a. could cost you over $950 on a $30,000 loan.
| Loan size | 15.00% p.a. | 16.00% p.a. | 17.00% p.a. | 18.00% p.a. |
|---|---|---|---|---|
|
$20,000
|
$8,548
|
$9,182
|
$9,824
|
$10,473
|
|
$30,000
|
$12,822
|
$13,773
|
$14,735
|
$15,709
|
|
$40,000
|
$17,096
|
$18,364
|
$19,647
|
$20,945
|
|
$50,000
|
$21,370
|
$22,955
|
$24,558
|
$26,181
|
Calculations are based on a five-year loan term and monthly instalments.
Fees
There are several fees that can be charged on your loan. These include:
- Establishment fee: a one-off fee built into your repayments which can cost up to $600 to $900.
- Monthly fees: an ongoing charge included on each repayment which can range from $5 to $15 or more.
- Early repayment fees: these may be charged if you pay out your loan ahead of schedule, with the cost depending on the size of your loan and the time left to run on your term.
- Late payment fees: these may be charged if you submit a payment late or miss it altogether. They can be costly if they stack up.
Loan term
Longer loan terms will also result in greater interest charged overall. This is because your outstanding loan balance will decrease at a slower rate, meaning interest charges will stay higher for longer. This can be seen in the following table:. By shortening your term from five years to four for the loan example listed above, you’ll be required to pay $120 extra per month (or around $30 extra per week) in return for a saving of almost $2,750.
| Loan term | Repayments | Total interest | Total saving |
|---|---|---|---|
|
Five years
|
$714
|
$12,822
|
N/A
|
|
Four years
|
$835
|
$10,077
|
$2,746
|
|
Three years
|
$1,040
|
$7,439
|
$5,384
|
|
Two years
|
$1,455
|
$4,911
|
$7,912
|
Calculations based on a $30,000 car loan repaid monthly with a 15.00% p.a. interest rate.
Extra repayments
If you’re able to make free additional repayments and not pay early termination fees, you could end up paying off your loan much sooner and for a lower cost. By paying just $50 extra per month (or around $13 extra per week), you’d clear your debt five months sooner and save over $1,300 on a loan with the terms included above – and making more repayments could save you even more.
You can see this in the table below:
| Loan term | Extra payment | Total payments | Total interest | Total saving | Total loan term |
|---|---|---|---|---|---|
|
Five years
|
$0
|
$714
|
$12,822
|
N/A
|
Five years
|
|
Five years
|
$50
|
$764
|
$11,521
|
$1,301
|
Four years, seven months
|
|
Five years
|
$100
|
$814
|
$10,467
|
$2,355
|
Four years, two months
|
Calculations based on a $30,000 car loan repaid monthly with a 15.00% p.a. interest rate.
Deposits
Paying a deposit at the point of purchase reduces the size of your loan, and therefore the interest you’ll have to pay. Even a 5% deposit on a $30,000 loan ($1,500) can save you hundreds of dollars over the course of your agreement. You can see this in the table below:
| Deposit | Loan amount | Repayments | Total interest | Total saving |
|---|---|---|---|---|
|
$0
|
$30,000
|
$714
|
$12,822
|
N/A
|
|
$1,500
|
$28,500
|
$679
|
$12,180
|
$642
|
|
$3,000
|
$27,000
|
$643
|
$11,540
|
$1,283
|
Calculations based on a car loan repaid monthly over five years with a 15.00% p.a. interest rate.
Top tips to increase your chances of bad credit car loan approval
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Demonstrate stable income
Lenders want to see that you have a reliable income, whether that's from employment, self-employment or Centrelink payments that are eligible towards your car loan, as this reassures them that you can meet your repayments.
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Put down a deposit
A larger deposit reduces the amount you need to borrow, lowering the lender’s risk. It can also improve your chances of approval and potentially secure you better loan terms.
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Borrow within your means
Buying a cheaper car and applying for a lower loan amount that comfortably fits your budget can increase your chances of approval, as it keeps your repayments manageable and reduces the lender’s risk.
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Improve your credit score
Even small improvements to your credit score can make a difference to the size and rate of the car loan you’re eligible for. Paying bills on time, reducing outstanding debts and checking your credit report for errors can all help boost your score – and your chances of approval.
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Find the right lender
Not all lenders are willing to consider borrowers with bad credit. Working with a car loan broker like Savvy can connect you with specialist lenders that offer car loans despite a bumpy credit report and help you find options suited to your financial situation.
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Use a guarantor
Having a guarantor on your car loan – someone with good credit who agrees to support your loan – can strengthen your application and improve your chances of approval. A guarantor reduces the lender’s risk, which can make it easier to secure finance even with a poor credit history.
What are the eligibility criteria for bad credit car loans?
The qualification requirements for bad credit car finance will vary depending on the lender you go with. In general, you’ll need to meet the following criteria:
-
Aged 18 or over
You must be legally old enough to apply for credit.
-
Australian citizen or permanent resident
Some lenders may also accept certain eligible visa holders.
-
Earning a stable income
Full-time, part-time, regular casual work, self-employment or eligible Centrelink payments are generally accepted. Minimum income usually ranges from $20,000 to $26,000 per year (about $400–$500 per week).
-
Clear of bankruptcy or debt agreements
You’ll generally need to have been discharged from bankruptcy or a Part IX debt agreement for at least 12 months.
However, some factors could make approval more difficult:
-
Currently bankrupt or in a Part IX debt agreement
Lenders will not approve loans if you are under a debt agreement or bankrupt.
-
Unpaid defaults
Most lenders require unpaid defaults to be cleared before they’ll assess your loan application.
-
Poor bank account conduct
Frequent overdraws, regular gambling or signs of financial stress can raise red flags.
-
Trouble keeping up with current debts
Falling behind on existing loans or bills may suggest you can’t manage more credit.
-
Instability in your situation
Frequent job changes, irregular income or moving house often can make lenders nervous.
The types of car loans you can choose from
What our customers say about their finance experience
Savvy is rated 4.9 for customer satisfaction by 4624 customers.
How to apply for a bad credit car loan with Savvy
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Fill out our simple online application form
Start by completing our easy application form. This will take no more than ten minutes and allows us to assess your profile and find the most suitable lenders for your individual situation.
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Supply any required documents
We may require additional supporting documents to further process your application, such as bank statements, which you can submit via our online portal. You can also sign any relevant documents electronically.
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Discuss your options with your consultant
Your personal consultant will call you within two hours of your application to discuss your car finance options. Once you're happy with your choice, we can prepare your application for formal approval.
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Sign your contract and drive away your new car
From there, you can expect to be formally approved within 24 hours. We'll organise settlement for you once you've signed off on the paperwork, after which you'll be able to drive away your new car!
Car Loan Lenders We Work With
Can I refinance my car loan with bad credit?
You may be able to refinance your car loan deal if you have bad credit. There are several situations where you might look to refinance your loan, such as:
- Your credit score and finances have improved: if you’ve been paying off your car loan and other bills consistently throughout your term without issue, your credit score will rise. With that higher score, you could qualify for better interest rates and lower fees, potentially saving on your loan deal overall.
- You want to adjust the length of your loan: another key reason for refinancing is to update your loan’s term to suit your new situation. If it’s improved, this may be reducing your term and paying off your loan sooner. However, if you’re facing financial pressure, you can extend your term to reduce the cost of your payments (but increase its overall cost).
- You want to remove a co-borrower or guarantor: bad credit applicants can benefit from a co-borrower or guarantor being present on their car loan. If your situation has improved sufficiently down the track, refinancing your loan can remove them from the equation.
- You want to consolidate debts: if you already have a car loan alongside other personal debts, you might consider refinancing through a debt consolidation loan. This type of loan can combine multiple repayments into one, potentially at a lower interest rate, making your debt easier to manage overall.
- Rates have fallen across the board: if you took out your car loan in a market with rates near their peak and they’ve subsequently fallen, you may wish to refinance to access the improved rate, even if your score isn’t significantly better.
However, whether you can do so will depend on your profile and lender.
First, as a borrower, you’ll need to show potential lenders that:
- You’ve consistently made repayments on time and in full
- You’ve decreased or eliminated other bad debts
- You’ve continued to have stability in your life, such as employment, income and residential history
If you've managed to achieve the above, then you could be considered by financiers to have “correctable credit”. This means that you’re capable of taking positive steps towards a better financial situation and are considered a lower risk than you were previously. Someone with “correctable credit” is much more likely to be approved for future loans than someone without it.
Second, and crucially, is applying with the right lender. Most financiers on the market won’t work with applicants with bad credit, even if they’ve taken steps to improve it. However, there are plenty of specialist lenders ready to provide finance to those who’ve struggled in the past. It’s imperative that you avoid unnecessary enquiries and rejections on your credit file, which is where a car finance broker can help.
