Complete Guide on Getting a Car Loan with a Bad Credit Rating
- October 20, 2021
- Bad Credit
- Posted by Swarn Sarhaddi
- Comments Off on Complete Guide on Getting a Car Loan with a Bad Credit Rating
Bad Credit Car Loan
Applicants who have a low credit score—or scores that fall within the poor credit score range—usually have trouble qualifying for personal or business car loans without a co-signer. If you wish to get a finance solution for bad credit car loan then you are at the right place. Your credit score is important if you want to buy a house, need a car loan, or are applying for a personal loan. Having a bad credit score can affect you by limiting your borrowing potential and making you appear less creditworthy to lenders. So, what is it and how can you get a bad credit car loan?
Below, we’ll discuss
- What a bad credit score is
- How to calculate if you have bad credit?
- Factors That Cause a Bad Credit Score
- Risks of Having a Bad Credit Score
- How to Improve a Bad Credit Score
- How to qualify for a car loan with bad credit
- Car Loan Finance that will get you on the road again
What is a bad credit score?
The following is the data from the three of the major credit bureaus in Australia that offer credit reporting services, and what they consider to be a bad or low credit score.
For Experian, a score between 0 to 549 is considered ‘below average’, and 550 to 624 is considered ‘fair’.
|Below Average||Fair||Good||Very Good||Excellent|
|Experian Score Range||0-549||550-624||625-699||700-799||800-1000|
For Illion, a score between 0 to 549 is considered ‘below average’, and 550 to 624 is considered ‘fair’.
|Zero Score||Low Score||Room to improve||Average||Great||Excellent|
|Illion Score Range||0||1-299||300-499||500-699||700-799||800-1000|
For Equifax, a score between 0 to 549 is considered ‘below average’, and 550 to 624 is considered ‘fair’.
|Below Average||Average||Good||Very Good||Excellent|
|Equifax Score Range||0-505||506-665||666-755||756-840||841-1200|
How to calculate if you have bad credit?
In order to calculate your credit score, you need to request a copy of your credit report from one of Australia’s three credit bureaus. Contact these credit reporting agencies for your free credit report:
- Experian: 1300 783 684
- Illion: 132 333
- Equifax: 138 332
Since different agencies can hold different information, you may have a credit report with more than one agency. Once you’ve got your credit report, you’ll be able to see where any slip-ups in the past have happened. Sometimes, you’re able to dispute these. Read below to learn how your credit score is calculated.
They will calculate:
- the amount of money you’ve borrowed
- the number of credit applications you’ve made
- whether you pay on time
Depending on the credit reporting agency, your score will be between zero and either 1,000 or 1,200. A higher score means the lender will consider you less risky. This could mean getting a better deal and saving money. A lower score will affect your ability to get a loan.
Alternatively, if you find the online enquiry procedure a little daunting, contact a financial advisor who can share with you your credit score details and also help you work on ways to improve it.
Factors That Cause a Bad Credit Score:
- Zero or Minimal credit history. If you have not maintained a long credit history, your credit score is likely to be lower than average.
- High credit utilization. The credit utilization ratio measures the percentage of credit you use versus your available credit. Because it makes up 30% of your credit score, using too much of your available credit can lower your credit score.
- Late payments. Your payment history accounts for 35% of your credit score so it’s crucial to make on-time payments. If you don’t pay your bills on time and they become 30-days past due, your creditor may report the late payment to one of the three major credit bureaus— Experian, Illion or Equifax.
- Collections. A collection can cause a significant drop in your credit score, and you may have to wait up to seven years for it to be removed from your report. When you default on a credit obligation, your original creditor may sell your debt to a debt collector or collection agency. After your debt is sent to collections, it’s usually reported to the credit bureaus. A collection can cause a significant drop in your credit score, and you may have to wait up to seven years for it to be removed from your report.
- Bankruptcy. It can negatively affect your credit score for up to 10 years. The length of time it remains on your credit report depends on whether you’ve filed for Chapter 13 (up to seven years) or Chapter 7 bankruptcy (up to 10 years).
Online Loan Repayment Calculator
Before applying for a loan, it’s wise to calculate the options available to you. Our car loan calculator will help you to test different variables such as the loan size, loan term, and interest rate and provide you with monthly loan repayment options.
If your monthly repayments are higher than your budget, you may consider reducing them by putting a larger deposit or opting for a longer loan term. However, if the loan repayments are lower than your budget, you may want to increase the loan amount in order to purchase a better-quality car or you could shorten the term to reduce the total amount of interest payable.
Risks of Having a Bad Credit Score
If you want a car loan with a bad credit score, this can harm your finances in several ways, including:
- Higher interest rates. If you’re approved for a car loan, the lender will likely charge you a higher interest rate to compensate for the increased risk. This can greatly increase your borrowing costs, reducing the amount of money you have to put toward other financial goals.
- Higher fees. In addition to higher interest rates, you may have to pay more in other fees, such as origination fees.
- Potential loan denials. When you have a bad credit score, you likely won’t meet a lender’s minimum credit score requirements. This means your loan will likely be denied unless you apply with a co-signer.
- Higher down payment and security deposit requirements. Some lenders will charge you a higher down payment amount if you don’t meet its credit score requirements.
How to Track Your Credit Score
Do not know your credit score yet but worried if it could be low? It’s time to track your score. Knowing where you are financially will give you confidence in making a better decision.
Your credit score is recorded by your personal and financial information about you and is kept in your credit report. You can access your credit score and credit report for free from various financial institutions and banks. Contact any of the three credit reporting agencies (Experian, Illion, Equifax) for your free credit report.
How to Improve a Bad Credit Score
While you may have a bad credit score for you to get a car loan, here are proven ways that you can work on in order to get fast loan approvals:
- Pay your bills on time. For both credit scoring models, payment history is a huge factor. If you repay your debt on time, it can build or improve your credit score. However, payments that are 30 days late can cause serious damage to it. One way to ensure you pay your bills on time is to enrol in autopay where your bank accounts are automatically charged for the debt before the last payment date.
- Become an authorized user on a credit card. You may take the help of another person in getting listed as an authorized user on a family member or friend’s credit card. If the person who adds you has a good payment history on the card, it can boost your score and thus, help you get a car loan.
- Apply for a loan with a co-signer. Considering applying for a loan with a co-signer must be the quickest way for you to get that car loan you’re aiming for. A co-signer who has good credit and decent income can increase your car loan finance approval odds. Repaying the loan on time can improve your score as well.
- Review your credit report. If your credit report shows negative information, it will damage your credit score. Reviewing your credit report at least once a year can help you spot and correct reporting mistakes if you have any.
How to qualify for a car loan with bad credit
In order to qualify for a bad credit car loan, consider the following requirements
- Steady Employment – You should be having constant employment for the past 6 months. – this confirms you have past any probation period, have demonstrated continuity of employment and demonstrate your ability of a consistent earnings stream to repay the car loan.
- Steady Residence – You should have lived in your current home for at least 6 months, preferably where you are noted on the lease.
- Intelligent Loan Amount – You know up to what amount of loan you are able to apply for, you’ll just get knocked back if you go past that limit.
- Deposit – This may or may not be necessary in your case, however being able to deposit a loan amount of 10% may demonstrate that you are capable of repaying the loan.
- Loan-to-Value ratio – An LVR of a range of 80% to 110% is generally accepted. Do your research and be careful of other car dealers that prey on people often trying to benefit themselves.
- Most Recent credit history – Demonstrating regular payments for a credit card can assist the car loan approval process. Make sure you pay your bills on time.
- Default Explanation – Have a clear explanation about your credit score, it will help earn the lender’s trust and assist you to demonstrate that you had intent to pay but not the ability at that time of buying.
- Serviceability – You have to be able to demonstrate your ability to service the loan by making timely repayments. Be prepared to submit a bank statement for 90 days that details all of your income and expenses.
- Honesty – It’s critical to be completely honest in every question you answer on your loan application and give more information than needed as it will ease the loan application process. If you have a poor credit history, financiers are required by law to level up the number of inquiries and will investigate your loan application closely.
Your Credit Score isn’t permanent!
You risk being denied credit or paying higher interest rates and fees, when you have the lowest credit score or even a score that falls within the lowest score range. You’ll likely pay thousands of dollars more than a borrower who has good credit over your lifetime. However, the good news is this: Your credit score isn’t permanent. You increase your qualification chances and save money on fees by taking some of the steps mentioned here to improve your credit.
Car Loan Finance that will get you on the road again
You may have a bad credit score and need a quick and easy car loan in Brisbane or Gold Coast? Get That Car Loan is your trusted, customer-focused team of experts when it comes to car loans in Queensland. Don’t be held back by your current credit score, you deserve a second chance and we are here to help.
We offer car loan finance to people who have experienced poor credit history and the like. Our Car Loan packages can be tailored to match your individual circumstances and personal financial history. We totally understand how life’s challenges can affect each person financially. When looking for car loan finance in Queensland that is fair & quick, call us today on 1300 799 225 for an obligation-free chat about bad credit car loans.
Centrelink & Pensioner Car Loans
Are you on Centrelink payments? This doesn’t mean that car loan finance must be out of reach for you, so think again. Get That Car Loan can provide bad credit car loans on Centrelink to people who are receiving Centrelink benefits or pensions
Our support team is available to guide you through the steps on how you can get bad credit car loans on Centrelink. Once approved, we can provide you with flexible, fixed rate repayment options. You’ll be behind the wheel and driving away before you know it. The minimum income or payment required to apply for a car loan is $800 per fortnight. This income can be received from Centrelink pension payments, employment income, or a combination of both.
Frequently Asked Questions
1. How can I refinance a car loan with bad credit?
It may seem impossible to get a car loan with bad credit, however, the good news is —it’s not. There’s no minimum credit score required to get a car loan, which means people with poor credit may just need to find the right lender or loan in order to get behind the wheel. We can help you get your loan approved fast.
2. How do I apply for a car loan if I have a bad credit history?
Complete our online enquiry form or call us on 1300 799 225 for an obligation-free credit application and borrowing power discussion.
3. Can I finance a car with a 450 credit score?
Getting a car loan with a credit score between 400 and 450 is possible. The interest rate from a lender that specializes in car loans for people with bad credit will likely be higher than it would be from a bank or credit union.
4. Where can I refinance my car loan with bad credit?
If you have bad credit history and are looking to refinance a car loan with bad credit in Queensland, you’re in the right place with Get That Car Loan. For us customers are the top priority, and we can help find a loan that works for them. We offer fast loan approvals and can usually obtain approvals within 4-6 hours. Ours is a small, qualified team that offers personalised services tailored to a client’s needs.
“Preferred Dealer Network” = we control our dealer’s quality.
Our Support Centre is one of the best. From the time you submit your application all the way until your loan is fully paid, you’ll be given all the help you need. We wish to offer bad credit car loans to people who are held back by a bad credit score.
5. Can I get a bad credit car loan on Centrelink?
Centrelink payments do not necessarily mean that you have bad credit or a low credit score. Bad credit car loans are loans for people who have low credit scores. Get in touch with your loan broker to find out ways how you can get a bad credit car loan on Centrelink.
6. How can I track my credit score?
You can keep track of your credit score by using credit file monitoring services by Australian agencies like Experian. You can request a free credit score from them and keep a track of your finances.
You should always check your options before you apply for a loan and ensure that you use the free resources that are available throughout Australia to assist you when borrowing funds of any nature. For information about other options for managing bills and debts, you can ring 1300 799 225 from anywhere in Australia to talk to a free and independent financial counselor. Alternatively, contact our friendly team to discuss your options.
Author: Swarn Sarhaddi, is the lead marketer at Dreamworx Marketing, a customer focussed Digital Marketing Agency serving Australian Businesses through Website Design, Social Media Management & Facebook Advertising.