Applying for a Car Loan with Bad Credit

You depend on your vehicle for a magnitude of reasons, whether that’s running the children to sports practice or commuting to the office. Therefore, it is of the utmost importance that your car is reliable and running at optimal performance. 

If you’re looking to buy a brand-new personal car or used car and want a cash injection to help you with your purchase, you’re going to need a car loan provider who will help you get it quickly. 

Investing in a vehicle can be a daunting and stressful task that isn’t made easier if you have a poor credit score. There is often a misconception that once your credit history has defaulted, getting a personal or car loan approved is impossible. However, at Rapid Loans, we understand that a small financial mistake in your past or an unexpected change in circumstance may have just caused your credit rating to take a hit. 

At Rapid Loans, we’ll take your whole situation into account when assessing your application – not just your credit score.  

We offer secured online car loans from $5,000 to $25,000 and have made sure the entire application process is simple, fast and secure. 


What is a Credit Score?

Your credit file will contain your credit history such as what loans and other credit you’ve applied for (e.g. credit cards, phone plans, utility connection), what loans and credit facilities you’ve been granted and your record of repayments. Your credit score is a balanced reflection of your credit history that’s based on your payment history, the types and amounts of credit you have, the type and amounts of credit you have applied for, any bankruptcy or debt agreement information, court judgments and any other payment defaults. 

 Your individual credit score will usually sit somewhere between zero to 1,000 or zero to 1,200, depending on which credit reporting agency you obtain the report through. This number summarizes your credit worthiness and predicts your ability to pay back future loans, along with the chance of you defaulting. According to research from Finder, the average credit score in Australia is 695.6. 

Generally, the higher the score, the better your credit rating and the more credit-worthy you’ll be considered by financial institutions. Depending on the lender, this might mean you could even negotiate more favourable terms on your loan when it comes to your interest rate or term length as your score has reflected your reliable borrowing track record.

According to Finty, the below represents the average credit scores by state in Australia:

State Credit Score
Average Credit Score in Queensland 660
Average Credit Score in New South Wales 641
Average Credit Score in Victoria 668
Average Credit Score in South Australia 653
Average Credit Score in Western Australia 650
Average Credit Score in Northern Territory 664
Average Credit Score in ACT 680
Average Credit Score in TAS  643


What is a Bad Credit Rating? 

A bad credit rating means you’ve been assessed as a high-risk borrower with a greater chance of defaulting. 

If you’ve scored between 0 – 299, you’re considered the riskiest borrower group with the lowest credit rating. If you’ve scored between 300 – 499, you’re ranked as fair, however, your credit score is below average and there is some room for improvement. These scores might be given because you have previously skipped or delayed payments, or you simply haven’t paid in accordance with the terms of your credit contract.

It’s worth noting that defaults will eventually be cleared from your record, but that process takes five years.  


What is Comprehensive Credit Reporting? 

A Comprehensive Credit Report, also known as CCR, means your Australian credit report contains more detailed information that will affect your ability to borrow money or obtain credit. 

This report contains all information like your repayment history and is intended to allow lenders to more accurately assess risk, using a fuller picture of your credit history. Ultimately, it’s aimed at making it easier for lenders to form more comprehensive and balanced assessments of applicants’ credit histories.

According to Credit Smart, over 95% of consumer credit accounts currently have repayment history being reported across Australia from the likes of ANZ, Westpac and Suncorp. This means that most Australian consumers have data on their credit history being reported for at least one credit facility. 

Therefore, a Comprehensive Credit Report is excellent because if you have been paying off your credit card and loans on time, the positive history will count towards your creditworthiness. It’s great if you have been demonstrating your ability to responsibly manage debts. 

Despite these positives, it does mean that a poor credit history will be more obvious and having no debt at all will not necessarily mean you are considered more creditworthy.


Can I get a Car Loan with Bad Credit? 

We understand that sometimes bad things happen to good people, which is why we will do our best to assist you even if your credit score is not the best. We are committed to helping our customers achieve their goals, which is why we pride ourselves on providing an accessible car loan product that many Australians count on to make their vehicle purchase.

We want you to remember that even if you have a credit score on the lower end, you may not automatically be ruled out for a loan.

It would help if you could gather as much supporting information as you can to explain your previous financial history if your score is not great. Rapid Loans can also conditionally accept some government pensions and benefits. We may ask you for pay slips, bank and credit card statements, evidence of benefit payment eligibility and any other relevant evidence of your financial situation. Most of these things are now available through secure online portals, making the process seamless and pain-free.

As an intending borrower, we provide you with our Rapid Loans Credit Guide. This advises that we are prohibited from entering a credit contract or increasing the current credit limit if our assessment is that the credit contract would be unsuitable for the consumer if it is likely that the consumer will be unable to comply with their financial obligations under the contract or could only comply with substantial hardship. While this may be frustrating at the time, responsible lending practices are ultimately in place to protect you. 


How do I Improve my Credit Score? 

If you have a bad credit score, lenders will generally look at a range of factors when considering whether you are a suitable candidate for a loan. It’s worth understanding that this might mean you aren’t able to access the same loans or interest rates that a borrower with a good credit record would, and based on your credit score, some lenders may refuse to give you a loan or will charge you higher interest rates. 

Here are some ways you can look to improve your credit score.

Limit Your Loan Applications
Try to avoid applying for multiple loans at the same time as whenever a hard enquiry is made, this can affect your credit score negatively as all loan application enquiries stay on your record for five years, whether you are approved or not, and even if you don’t continue through to signing a contract. 

Instead, we recommend taking the time to understand the lender’s eligibility and assessment criteria. It may even be worth contacting the lender to make an initial enquiry as a full application is likely to be recorded on your credit history. This could save you from applying for a loan where you’re unlikely to be approved.

Pay Your Bills On Time
We recommend developing good financial habits like putting money into savings regularly and building up a record of on-time payments by automating repayments and bills to ensure you never miss a payment.

Poor payment habits can be a warning sign to potential lenders that you may be under financial stress. Financial institutions will look for red flags such as late payments, outstanding debts, tax liens and bankruptcy. Your loan repayment history stays on your record for two years and if you have missed bills that are more than $150, and have been overdue for at least 60 days, a default can be listed on your credit report which will stay there for at least 5 years.

Debt Consolidation
Debt consolidation might help you reach a more organised and financially successful situation if you have multiple outstanding debts. Having too many loans to your name isn’t a good look and can be stressful because it puts in question your ability to manage and repay all of them at once.

At Rapid Loans, we’re all about assisting you in achieving financial control and freedom, which is why we can help you find a solution for multiple debts. The way it works is that you add up your varied debts and apply for a personal loan to consolidate your debts. If approved, this means you only have to make one payment a week or fortnight instead of numerous payments.

Check Credit Report Information
Check your car loan eligibility by obtaining a free credit report from Illion, one of Australia’s leading and most comprehensive data reporting agencies. There are several credit reporting agencies who can provide you with a free copy of your credit score and credit report, including Equifax.

You’re entitled by law to get one free credit report every 12 months, or within 90 days of receiving a credit rejection.

Keep in mind that your credit score can change over time based on your financial activity, so getting an up-to-date idea of your score could help you decide whether now is the right time to apply for a loan. It’s also important to check the history of your report for accuracy to ensure there are no errors.


Applying for Car Loans with a Bad Credit Rating

If you are trying to secure the financing needed to purchase a motor vehicle, you can get started by applying for a car loan with Rapid Loans through our online application which only 2 to 3 minutes to complete. 

Although our car loan assessment process is thorough and takes your circumstance into account, the loan application process is quick and easy. We use advanced and innovative technology to process your application and funnel it through to our team efficiently to allow them to get in touch with you quickly.

Our friendly loan consultants will then ring you within two business hours to discuss your financial situation, it just takes a few minutes and there are no judgements. We encourage you to be honest about your financial situation as discrepancies between what you say and what’s in your credit file will be easily spotted by a lender.

Lower Your Application Lending Amount
As applicants with a bad credit score may not be eligible for a large car loan, instead opt for a model of car or secondhand car that fits your budget. 

A lender wants to see a realistic loan amount in the application so by lowering the loan amount you’re applying for; you might be lowering the risk. This means you might have to skip the lavish car features for now!

A car loan calculator will enable you to test variables such as loan size, loan term and interest rate and provide you with an estimated weekly, fortnightly or monthly loan repayment. Get started by simply putting in your preferred loan amount and how often you get paid. These are the only two things you need to provide to give an idea of what your loan repayments could be. Keep in mind that this is only a guide for what your loan repayment might look like, it is not the complete answer.

Think About Loan Fees
Don’t forget that interest rates aren’t the only cost when it comes to applying for a loan. Your chosen lender might also have credit fees, establishment fees and loan account-keeping fees that you’ll want to be aware of. Always read your loan contract carefully so you fully understand what and how much you’re borrowing and can expect to repay.

 

How to Help Your Approval for a Car Loan with Bad Credit

It’s worth keeping in mind that your credit score is not fixed. You can help your approval for a car loan by demonstrating regular payments for your current financial commitments and paying off any existing debts or outstanding dues. We also recommend cleaning up your credit and not taking up any additional credit obligations, if your situation allows, and consider lowering the limit on any credit cards you have.

 Be prepared to submit 90 days of bank statements that detail your income and expenses, this will show the lender how much of a burden a loan will place on your current living expenses as they don’t want to make your life significantly more difficult. This is now done through internet banking, saving you a trip to the bank or hours of scanning! 

Your lender will also look for stable employment, so it’s an advantage if you’ve been in your current job for at least 6 months. This confirms you have passed the probation period and aren’t at risk of finding yourself out of a job, have demonstrated continuity of employment and have consistent earnings to comfortably cover the loan’s repayment requirements.

You should also be aware of credit repair companies that claim they can ‘clean’ your credit report by removing information. Any correct information, even if not desirable, cannot be removed or changed.

Once you’ve done the hard work to fix a bad credit score, keep up the momentum by diligently paying all bills on time, maintaining low balances on your credit cards and only seeking out new credit when necessary.

Ultimately, Rapid Loans may be able to assist you with a loan to purchase a car or reconsolidate existing car finance, even if you have unique circumstances like bad credit history. We have years of experience responsibly providing credit to diverse customers and will work with you to do what we can to assist with your application. 

We are all about making the loan process and achieving your goals that much easier. Apply online today or give one of our dedicated loan consultants a call on 1300 727 431.