You may qualify for a bad credit car loan if you:

• Have defaults or missed repayments
• Have previously been bankrupt or in a Part IX debt agreement
• Are self-employed, casual or part-time
• Have little to no credit history
• Have been declined by a bank

Each lender has different guidelines and risk criteria, which is why comparing multiple lender policies can improve your chances of finding a suitable option.

Secured bad credit car loans

Most bad credit car loans are secured against the vehicle being financed. This gives the lender added protection and can improve approval prospects compared to unsecured finance.

Secured loans are commonly used for used cars and can suit borrowers who have experienced past credit challenges but can demonstrate current affordability.

Second-chance car loans

Second-chance car loans are designed for applicants who are rebuilding their credit profile. These loans focus more heavily on your current income and ability to repay, rather than past financial setbacks.

For many borrowers, they can act as a stepping stone toward refinancing at a more competitive rate after demonstrating consistent repayments.

To apply, you’ll typically be asked to provide:

• Identification and contact details
• Employment and income information
• A breakdown of living expenses
• At least 90 days of bank statements

Additional documentation may be required depending on your employment type, credit history or lender policies. This forms part of responsible lending requirements to ensure the loan is affordable.

Making regular repayments without default is one of the most effective ways to demonstrate improved financial behaviour. Lenders and credit reporting agencies look at repayment history, so a clean track record can strengthen your credit position.

Many borrowers refinance after 12–24 months of consistent repayments to access more competitive rates and lower overall costs.

Because lenders are taking on more risk, interest rates for bad credit car loans are typically higher than mainstream bank rates.

The exact rate depends on your income, credit history, loan amount, vehicle choice and lender policy. Over time, consistent repayments may allow you to refinance to a more competitive rate.

Beyond the interest rate, car loans can include setup fees, account-keeping charges, and sometimes early repayment penalties. Ausloans helps you understand the true cost by showing comparison rates, which factor in most fees and charges. We’ll help you avoid hidden costs by comparing real offers from Australia’s top lenders — all in one place.

Most lenders allow early repayment, either partially or in full. However, some loans may include early repayment or exit fees.

Always review your loan agreement to understand any potential costs before making additional payments.

Many borrowers refinance after demonstrating improved financial stability. Lenders will generally look for:

• Consistent on-time repayments
• Reduced or cleared defaults
• Stable employment
• An improved credit profile

Refinancing may help reduce repayments, improve your interest rate and lower the overall cost of the loan.

Credit scores vary between reporting agencies, but many lenders consider scores below 600 as higher risk.

However, lenders assess your full credit file — including repayment history, defaults, and your current financial position — not just a number. Your recent behaviour often matters more than older credit issues.

You don’t need perfect credit to apply. Many specialist lenders assess whether you can afford repayments now, rather than requiring a spotless credit history.

That said, taking steps to improve your credit profile — such as paying bills on time and reducing outstanding debts — can strengthen your application.

No lender can guarantee approval. Every application must meet responsible lending standards and demonstrate that repayments are affordable.

All legitimate lenders must assess suitability before offering finance.