Q&A with OnlineLoans.com.au: Can You Get a Car Loan With Bad Credit?

Online Loans

March 8, 2022

You asked, we answered.

Can you get a car loan with bad credit?

In short: Yes, but there are limits.

We go over a few things to consider if you’re thinking about a car loan with bad credit. As we’ll find out, it’s typically a case-by-be-case situation.

Generally, car loans come with less risk for lenders as the funds are secured to the vehicle, meaning a lender can, as a last resort, repossess the car to sell and cover losses if a borrower doesn’t repay the loan.

This is different from a personal loan which is often not secured to anything meaning higher risk.

“Bad credit” can mean a lot of things and the term varies between different lenders.

Here’s what bad credit typically looks like

Bad credit is often represented by a credit score which rates a person’s ability to repay a loan based on their credit history.

These scores often range from 0 to 1,200 with around 550 being average. Lending institutions use these scores, along with other factors, to determine the risk of lending money to a particular person.

Below around 510 is typically considered “below average”.

In Australia, people usually generate a credit report (which contains a credit score) when they are over 18 and first apply for credit (eg. a phone plan). Your credit score will go down when actions negatively impact it and go up when positive things impact it.

Positive things that can boost a credit score include timely loan repayments over a loan term – this is often referred to as “building credit”.

Here are some things that negatively impact a credit score and result in bad credit

Applying for a car loan with bad credit can be tough so try to minimise the following which can negatively impact a credit score.

Missed loan repayments (defaults)

One of the most significant things you can do to be labelled as ‘bad credit’ is miss a repayment. These repayments might be on a personal loan, mortgage, credit card, phone bill or another form of credit.

Generally, a late payment is more than 14 days overdue and can reduce your credit score.

If more than 60 days late and the payment is more than $150, a default may be listed on your report which can lead to bad credit.

A default will remain on your report for five years.

Solution: never miss a credit repayment. If you feel you might miss a repayment, contact your lending institution! Lenders (eg. banks) can often help find a solution as they want to help their clients.

Payday loans

These are fast cash loans, typically $2,000 or less. Other than coming with huge interest rates, lenders look at them negatively because they reduce a person’s ability to repay a loan and can indicate a person as being bad with money management.

Most lenders will not approve borrowers with more than three active payday loans.

If you’re thinking about taking out a payday loan, consider all the fees and all your options.

Solution: avoid payday loans. If you’re in need of instant cash, consider all your options and even consulting professional help.

Too many enquiries 

Shopping around for the lowest interest rates might seem like a good idea, but it’s not. Each time you formally apply for a loan, it gets recorded on your credit report as a credit enquiry.

These enquiries can reduce a credit score, especially if you make multiple enquiries over a short period of time.

In other words, if someone applies to several lenders (eg. banks) within a few days to look for the best rate, their credit score will likely be reduced. That can result in getting declined upon going back to the lender with the lowest rate, defeating the whole purpose.

Solution: talk to a broker. Brokers are able to match your circumstances to lenders and loan products without affecting your credit report. Brokers have knowledge of a huge range of lenders and make the process a lot smoother.


Entering into a bankruptcy, for example a Part IX debt agreement or Part 10, can lower your credit score and result in bad credit.

Typically these remain on your report for five years from the date you became bankrupt or two years from the date you were no longer bankrupt (whichever is later).

Furthermore, court judgments against a borrower are also listed on a credit report and can mean that person is a higher risk for lenders to lend money to.

Solution: if you struggle with money management, talk to a professional as they can really offer some excellent advice. Furthermore, if you think you might miss a bill or other scheduled repayment, contact the organisation whom you make repayments to – not paying and remaining silent can result in more significant consequences.

Getting a car loan with bad credit

“Bad credit” can mean different things per lender and per borrower. If you’re in need of a vehicle and consider yourself to have bad credit, make sure to explore all your options.

Depending on the level of bad credit you might have, sometimes a lower loan amount or accepting a slightly higher interest rate is all that results.

The next step

Start by checking the numbers and grabbing a quick quote when you’re ready.

With OnlineLoans.com.au, you’ll have the ability to consider various options and, upon your selection, get the ball rolling quickly.

OnlineLoans.com.au finance covers new, used, dealer and private sale vehicles.

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