Although it can be challenging, securing a car loan with bad credit in Australia is possible, as many lenders are willing to work with those with less-than-perfect credit. Car loans are a significant part of consumer credit in the country, with outstanding car loans totalling approximately AUD 44.2 billion as of August 2023. You can follow several tips and tricks to increase your approval chances. And this article will explore the options for those with bad credit, including bad credit car loans in Australia.
So, the top five things you need to be aware of are as follows:
1. Understand Your Credit Score
It is essential to check your credit score beforehand to increase your chances of getting approved for a car loan with bad credit in Australia. Lenders use credit scores to determine the likelihood of repayment, and scores range from 0 to 1200, with higher scores indicating better creditworthiness. According to a recent survey, around 26% of Australians with lousy credit could secure a car loan, with some even getting interest rates as low as 5.5%. If your credit score is low, paying off outstanding debts and making on-time payments are some steps you can take to improve it.
2. Consider a Secured Loan
If you have bad credit, you may find it challenging to get approved for an unsecured car loan in Australia, which is a loan that does not require collateral. In this case, a secured car loan may be a better option. A secured loan is a loan that requires collateral, such as the car you are purchasing, which can help reduce the risk for the lender. Remember that if you default on the loan, the lender may repossess your car. Fortunately, there are lenders in Australia who offer secured bad car loans in Australia, which can be a viable option for those with poor credit.
3. Look for a Cosigner
Another option for getting a car loan with bad credit in Australia is to find a cosigner. A cosigner agrees to take responsibility for the loan if you cannot make the payments. This can reduce the risk for the lender and increase your chances of getting approved for a car loan, including bad credit car loans in Australia. Remember that if you default on the loan, the cosigner will be responsible for making the payments. Choosing a cosigner with a good credit history and who is financially responsible is essential.
4. Shop Around for Lenders
To increase your chances of getting approved for a car loan with bad credit in Australia, it is essential to shop around for lenders, as they may have different approval criteria. As of August 2023, the average interest rate for a car loan was around 6.1%, but rates can range from 4% to 12% or more for borrowers with bad credit. It’s essential to compare interest rates and loan terms from multiple lenders to find the best option.
5. Consider a Car Loan Broker
If you have difficulty finding a lender who will approve you for a car loan with bad credit, consider working with a car loan broker. A car loan broker is a professional who can help you find a lender willing to work with individuals with bad credit. Remember that car loan brokers may charge a fee for their services, so be sure to factor this into the overall cost of the loan.
Getting a car loan with bad credit in Australia can be challenging but not impossible. By understanding your credit score, considering a secured loan, finding a cosigner, shopping around for lenders, and considering a car loan broker, you can increase your chances of getting approved for a car loan. Meanwhile, remember to take the time to research your options and compare interest rates and loan terms from multiple lenders to find the best option for your situation.