How to get a car loan when you've got poor credit

In the current economic condition where jobs have dwindled and businesses are forced to close, some people have lost their ability to maintain a clean slate in their credit record. Credit ratings have dropped as a result, approval for car loans in Australia has tightened as finance companies and banks protect themselves from perceived risks that repayment will not be met. Hence, people with a poor credit rating applying for car finance loans are automatically rejected. Don’t let this dissuade you from trying. There are still several safe ways of obtaining a car loan approval despite poor credit. You will just have to make the extra effort and adopt a resourceful attitude to work your way around getting one.

Check credit score yourself Checking the credit score yourself is the most logical first step to take. Ensure that the score in the credit record is accurate since mistakes do happen sometimes. Any discrepancy in the entry or information can affect the score and, subsequently, the amount to pay on a loan. While obtaining a poor credit guaranteed loan can be possible, the high cost of interest is often the ultimate price to pay for those who have low credit scores. Consequently, the idea of shopping around for competitive rates will be extremely limited.

Be realistic If you do have a poor credit rating, the next thing to do is to be realistic. There are plenty of lenders out there who advertise poor credit loans, but the way they mitigate the risk is to charge a higher interest rate as a safety net if you default on your repayment. Again, be realistic. Learn to accept this fact and make it work to your end instead. Your goal is to get a car loan approval first. You may have to pay for higher interest rates, but then accept the terms and work on improving your credit score by paying on time and in full. After a year or so, you can then refinance your car by obtaining a car loan with a lower interest rate. It’s killing two birds with one stone. By being realistic, you will have your car and an improved credit record. You will find it easier to apply for loans in the future so long as you work at improving your credit score.

Provide a co-signer A co-signer with a good credit history is another way to boost your chances to get an approved car loan in Perth and around Australia despite having a poor credit score. The co-signer will be responsible in the event you fail to make repayments. Lenders are disposed to having co-signers since this will most obviously lessen the risk on their side. Finding someone who will trust you enough to put down their signature may not be easy, however there’s no harm in seeking out friends and family for help.

Down payment A down payment not only reduces high interest rates, it reduces the overall value of your debt. If you are able to pay up-front at least 20% of the total purchase price of the vehicle as down payment, you are essentially reducing your total debt.

If none of the above works for you, it is still possible to find car finance in Perth who will not perform a credit check, instead look at your employment history and verify your income to determine your ability to meet the repayment terms of the loan. However, you may have to pay a higher interest rate. The options are limited for those who have poor credit scores, however not impossible. So for now, make it your goal in getting a guaranteed approved car loan and then spend your energy on improving your credit score. This way, you will not have to deal with the same dilemma again.


For more information on Car finance in Perth, Finance 48 has all the information and the personnel you'll need when it comes to financing a vehicle.