Bad credit car loan interest rates
Rates correct as of 9 October 2026.
Something to keep in mind with interest rates on bad credit car loans is that they aren’t always very clear when it comes to what lenders will offer. Typically, they’ll advertise a rate range, such as 6.59% p.a. to 17.59% p.a. The high end of that range is usually reserved for bad credit. Even then, though, there’s no guarantee that you’ll be approved.
How do bad credit car loans work?
A bad credit car loan works in much the same way as a standard car loan. The only real difference is that you’ll typically have a smaller pool of lenders that you’re eligible for. These lenders usually specialise in assessing borrowers with past credit issues, limited credit history and previous defaults.
However, because these borrowers represent more risk to a lender, bad credit car loans typically come with higher interest rates and fees, as well as a lower maximum borrowing limit than for someone taking out regular car finance with good credit.
What counts as bad credit?
Credit scores are measured on a scale of 0 to 1,200 through Equifax, one of the country’s main credit reporting bodies. A score of 459 or below falls into Equifax’s “below average” band, which is typically considered bad credit. If you’re sitting in this range, you’re more likely to be declined by mainstream lenders and may need to look at a specialist bad credit lender instead.
| Credit rating | Credit score |
|---|---|
| Below average | 0-459 |
| Average | 460-660 |
| Good | 661-734 |
| Very good | 735-852 |
| Excellent | 853-1200 |
Those who may be a discharged or undischarged bankrupt or have a current or discharged Part IX debt agreement are also considered bad credit. Although such agreements may make it difficult to get approved for a car loan, we work with lenders who can approve loans for applicants who are currently under a Part IX debt agreement and even some who work with undischarged bankrupts.
How brokers can help bad credit car loan applicants
Brokers can be very beneficial when it comes to dealing with bad credit car finance for several reasons:
- Brokers have access to more than one lender. Just think of it as having more options to choose from. While one lender might say no based on your credit score alone, others have more flexible lending policies for cars.
- A good broker will know which of their lending partners is most likely to offer you the best deal. Their existing relationships with lenders on their panel means they’ll not only understand their qualification criteria better but also be able to go in to bat for you as your application is being assessed.
- A soft credit check (which won’t affect your credit score) allows a preliminary assessment to see what your credit score is and what’s on your file. Think of it as a safety mechanism so that if there is something troublesome on your file, it can be stopped before applying. This isn’t available if you apply to a bank or lender directly, as a check will hit your credit file immediately.
What happens if my credit score is better than I thought?
It might have been some time since you last checked your credit file. If it’s improved without you realising, but you’ve indicated on your car loan application that you have bad credit, it’s not the end of the world.
This is something that happens regularly with Savvy and is another benefit of using a broker.
A good broker will let you know that your credit score is better than you expected, which could result in any of a better interest rate, more available lenders or a higher chance of approval.
Why apply for a car loan with Savvy?
Top tips to improve your bad credit application
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Demonstrate stable income
More than anything, lenders want to see that you’re earning enough to support your car loan repayments. Whether that’s from your employment including casual work or eligible Centrelink payments, the more consistency there is, the better your chances of approval usually are.
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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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Improve your credit score
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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Use a co-borrower or guarantor
Having a co-borrower like your partner or a guarantor on your car loan (someone with a stronger financial profile who agrees to back up your loan) can strengthen your bad credit application. Both options reduce the burden on you, with lenders often feeling more confident with an extra person either paying the loan or adding a layer of security.
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Pay off debts and close any unnecessary lines of credit
The less debt on your plate when you apply for your loan, the better. This means clearing debts, including those that you’re behind on, and reducing any credit limits. If you have credit cards or other lines of credit that you don’t use, they’re actively impacting your borrowing power.
Critical pitfalls that destroy your chances
"The fastest ways to destroy your car loan application are wage advances or cash loans, excessive gambling, poor bank account conduct and recent unaddressed defaults. Rushing into applications with these issues virtually guarantees rejection with most lenders and further credit score damage. A skilled broker can assess your profile honestly and identify which issues need addressing before applying and risking rejection."
Car dealerships and bad credit
An alternative option to comparing car loans online is to purchase your vehicle at a dealership and take out finance through them. However, having bad credit and walking into a dealership without knowing if you can get finance is a bit like being held over a barrel.
If they can get you approved for car finance, you can also lose your negotiating power, as they know if you up and leave, your credit file has already been hit, making it tougher again to get the green light.
- Balloon payments: while balloon or residual payments can be a useful tool, they can also be a trap, especially for bad credit. The balloon payment will allow you to have a cheaper regular repayment, but come the end of your loan, you’ll owe a steep fee. You’ll have to consider your own financial responsibility and the car’s depreciation.
- Watch out for extras: due to your credit situation, you may also be more vulnerable to be pushed into add-on insurance and warranties that may not be worth the money on used cars.
- Consider where you’d be if the car breaks down: if you’re buying a used car that isn’t covered by a manufacturer warranty, you’ll still be covered by a short dealer warranty. If it suffers a major mechanical issue, you’ll not only have to pay for repairs but continue paying off the car simultaneously.
How to apply for a bad credit car loan with Savvy
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Fill out our simple online application form
Tell us about your financial situation and the amount you’re looking to borrow.
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Send through your documents
We’ll need to see your ID and financial documents to verify your identity and income.
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Speak to your broker
Your Savvy broker will give you a call to discuss your situation and finance options.
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Pick your car
If you haven’t chosen your car yet, our in-house car broker can help you find one at a competitive price.
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Have your application submitted and get approved
When you’re ready to proceed, your broker will prepare and submit your application to your lender.
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Sign off and get your car
Once you’re formally approved, sign off on the final loan documents and we’ll handle settlement. From there, the car is yours!
Bad credit car loan eligibility and documentation requirements
Eligibility
- You must be at least 18 years of age.
- You must be an Australian citizen or permanent resident (or, in some cases, an eligible visa holder).
- You must be earning a stable income that is enough to comfortably support your repayments. This can start from as little as $480 per week and include certain Centrelink benefits.
- You must be earning a consistent income from your employment and/or Centrelink benefits.
- You must meet your lender’s requirements related to paid or unpaid defaults and bankruptcy.
- Your car must meet your lender’s requirements related to type, age and condition.
Documentation
- Front and back of your driver’s licence (or another form of government-issued ID)
- Your last two consecutive payslips (or your last tax return if you’re self-employed)
- Information about your car, such as its age, is handy to have
- 90 days of bank statements and/or Centrelink income statements may be requested, but not always
How much can I borrow for a car if I have bad credit?
The average bad credit car loan taken out through Savvy in the 2025-26 financial year was $30,905 at 17.47% p.a. However, the amount you can still borrow still largely comes down to your ability to repay the loan.
On average, those with good credit borrowed a bit over $37,300. Because lenders consider your entire financial situation, it isn’t as simple as saying you’ll be given $10,000 less to borrow for a car because you have bad credit. While one lender may restrict you to $20,000, another lender may be willing to give $50,000 to the exact same credit profile.
Almost 1 in 10 of approved car loan applicants through Savvy in the 2025-26 financial year had a credit score of 460 or lower.
Car dealerships and bad credit
An alternative option to comparing car loan deals online is to purchase your vehicle at a dealership and take out finance through them. However, while this might seem convenient, there are a few things to keep in mind when financing a car through a dealership when you have bad credit:
- Watch out for steep balloon payments: a balloon or residual payment is a lump sum payment to be made at the end of your car loan. A car loan through a dealership may appear cheap month-to-month but have an unaffordable balloon payment attached at the end that you need to fork out tens of thousands of dollars to cover.
- Keep an eye on added extras: car dealership representatives will often suggest optional extras like add-on insurance. Consider these carefully and evaluate whether you want the cover or if it’s worthwhile.
- Consider where you’d be if the car breaks down: if you’re buying a used car that isn’t covered by a manufacturer warranty, you’ll still be covered by a short dealer warranty. However, if it breaks down outside both, think about whether you’ll be able to manage a high interest loan on a long term without a working car.
Another important factor to keep in mind is depreciation. Your car’s value will decrease over time, meaning the balloon you’re signed up to pay at the end of your loan could be substantially higher than the vehicle’s sale price.
For example, you could get a $35,000 loan for a new car taken out over five years with a 45% balloon payment ($15,750) from a dealership. However, if the car is only worth 40% of the original price after five years ($14,000), you’d have to pay $1,750 out of pocket if you wanted to sell the car and cover the balloon.
How can a broker help me get approved for a car loan if I have bad credit?
Brokers can be very beneficial when it comes to dealing with bad credit applications for several reasons:
- A good broker will have a wide and diverse panel of lenders, which gives them more options to choose from to accommodate your profile and needs.
- Because brokers have existing relationships with their partnered lenders, they’ll often understand qualification requirements and help argue your case.
- By taking a deep dive into your credit file, they can identify where the issues lie and provide guidance on the best course of action. This can include advising you on any debts or defaults that need to be addressed before the application can proceed.
- While applying for a car loan with a lender will automatically trigger a hard credit check, going through a broker like Savvy will only come with a soft-touch credit check initially (which doesn’t impact your score) before moving into the formal process with your chosen lender.
Can I refinance my car loan with bad credit?
Yes, 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, such as if your credit score and finances have improved, you need to increase your loan term to lower your repayments or you want to remove a co-borrower or guarantor.
However, if you’re switching to a new loan and your credit hasn’t improved, you risk being hit with a higher interest rate and potentially steep exit fees for your current loan and setup fees for your new one. This is especially the case if you’re removing a guarantor and your situation hasn’t improved or has worsened.
The decision may be taken out of your hands, though, if you can’t show lenders that you’ve been able to do each of the following:
- 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
Let’s take a look at this scenario:
Matthew needs to buy a new car but has bad credit. He finds a lender who can offer him the $30,000 loan he needs over seven years, but he has to repay it with a 18.00% p.a. interest rate. His repayments are $631 per month.
Matthew repays his loan for two years without any issues, during which his past defaults are removed from his credit file. His current loan balance is $24,831 and he’s repaid $9,963 in interest in the first two years of his loan.
He starts looking around for other loan options and finds one that he can refinance to with a 9.00% p.a. rate. However, they are only willing to approve a five-year loan of $21,000, as his car has decreased in value by 30% over those two years. This means he’ll have to pay the remaining $3,831 out of pocket if he refinances his loan.
Matthew works out the cost of sticking with his current loan compared to refinancing to a new one:
| Loan | Loan amount | Deposit | Interest rate | Monthly payment | Total interest | Total after seven years |
|---|---|---|---|---|---|---|
| Bad credit car loan | $24,831 | $0 | 18.00% p.a. | $631 | $22,965 | $52,965 |
| New car loan | $21,000 | $3,831 | 9.00% p.a. | $436 | $15,119 | $45,119 |
| Interest rates and calculations are for illustrative purposes only and may not be reflective of the car loan deals you are offered. Total after seven years for new car loan includes a deposit of $3,831 to cover the car’s negative equity. Costs do not include early break fees, which may apply to the old loan, and setup fees, which may apply to the new loan. | ||||||
Even though Matthew will have to fork out just over $3,800 out of his savings, he sees that he’ll still save around $7,850 if he refinances his car loan to access the reduced rate.
