Bad Credit Car Loans and Auto Finance

Bad Credit Car Loans and Auto Finance

car loans for unemployed

You may think that because you have a bad credit history that you stand no chance of obtaining finance for a new car but this is often not the case. There are a number of lenders out there that offer bad credit car loans. Second chance car loans are actually becoming more and more popular but there are a few things that you really should get in order before you submit your application.

Some of the things that will be assessed when you apply for Car finance with a bad credit history are your previous history of non payment and slow payments of previous debts, along with the size of the default you have made. A small loan default will be looked upon much more favourably than a bankruptcy.

bad credit car loans

Car Loans For People With Bad Credit Are Real!

The interest rates for car loans for people with bad credit are assessed on a case by case basis and are in direct relation to the amount of financial risk you are deemed to subject the lender to. One the low end standard interest rates can be achieved even with a bad credit history, but on the high end interest rates of up 30% can sometimes be offered to auto loan applicants.

The reason for these very high interest rates is simply that even when lenders offer people a second chance and extend them a credit lifeline, there are still a percentage of people that will default again. If you are deemed to be in this category of people that are likely to default on your car loan, you will be offered a very high interested or declined completely.

Because lenders assess you using both your previous credit history along with the information you supply them with, it’s very important that you get all your information prepared and in order before you seek finance for a new vehicle. If you take some time upfront to understand what liabilities you have that any lender will deem risky you can set to rectifying them as soon as possible, therefore increasing your chance of approval for a car loan.

Let’s take a look at what you can do before applying for a bad credit car loan.

What You Can Do In Advance

When you submit your application you should be 100% honest and transparent because anything you try to hide will be found when detailed cross checks are carried out on your credit history. If you are caught hiding anything you will stand a very small chance having your car finance application proceed any further with that particular lender.

If you have a recent history of bankruptcy you will stand a very small chance of obtaining finance for a new car. The best way around this situation is if your bankruptcy is discharged you will generally be subject to 6 month waiting period before most lenders will deem you eligible for auto finance again.

Keeping Clean Records

You need to show records of any other loans you have being paid on time and without default in the recent past, the longer the time period the better. If you have any credit cards, start paying a little more than the monthly minimum as this will show the potential lenders that you are serious about paying off your debts.

Start saving a little money each month and keep a record of your bank statements. If you can combine saving with those small extra credit card payments each month and show your debt slowly going down and your cash savings slowly going up, your application will be looked upon much more favourably.

Ideally you should keep a record of your bank statements showing the above mentioned trends for at least 6 months but 3 months will be a good starting point. Remember that having a bad credit history is not so much of a limiting factor if you can show that you are now on track with your finances and will not repeat any past mistakes you may have made.

Car Loans For Unemployed People

car loans for unemployed

Car Loans For Jobless People

While some lenders may offer car loans for unemployed people the majority of major banks and financial institutions will not. Most lenders will look for a stable employment history of at least 3 months but ideally 12 months. It doesn’t really matter if you are employed on a full time, part time or casual basis, as long as you show a steady employment history which will allow you to support any new debt you acquire you will be considered.

As well as showing a steady history of employment, lenders will also look at your housing stability. If you show signs of moving house often this will be seen as a sign of instability and will have a negative impact on your loan application. A small tip here is to do what you can to prevent your address from changing often by getting some mail such as a bank or credit card statement sent to the address of a trusted friend or family member for a long period of time.

With all that being said, there are some loan providers that do specialize in helping unemployed people obtain finance for cars. We have provided a detailed guide about some of these providers that help unemployed people on Centrelink obtain car loans. However these loans are typically for small amounts of money to buy used second hand cars. These loans are actually not specifically car loans for people unemployed and on Centrelink and can be used to buy other items also, however this may the best loan option for you. These loans also offer very low or no interest to applicants that fulfill the criteria to qualify.

Bad Credit Auto Loans Guaranteed Approval

bad credit car loans guaranteed approval

Are There Bad Credit Car Loans With Guaranteed Approval?

There is really no such thing as guaranteed approval for car loans if you have bad credit. There are however a few steps you can take to give yourself a much better chance of getting approved and it largely has to do with how the loan provider will perceive your application and the risk you present to them.

You should get a copy of your personal credit history so you can see what blemishes you have and then take steps towards fixing them. You should also be sure to disclose absolutely everything to the loan provider in your application. This is crucial because all of your details will be thoroughly cross checked and it will be very hard for you to hide anything. If you fail to disclose something and you are caught out all trust will be forfeit and you will be instantly denied.

The best way to think about approaching your application is admit that you have made mistakes in the past but that you have since changed and are now financially stable and are willing and able to repay your debts. Use your personal credit history to see the negative points that will hurt your application and take steps to address them.

Another step you can take in an attempt to gain guaranteed approval for a bad credit car loan is to seek the advice of a reputable auto loan broker. They will know the lenders criteria very well and will be able to guide you through exactly what you need to do before submitting your loan application. They will ask all the right questions and will be able to provide the best answers on the applications for each individual lender.

ABC News Car Finance Video Report

This report goes over some of the major reforms that are currently affecting the car industry in Australia which will have an alarming impact on the future of car prices for Australians.

Final Thoughts and a Helpful Tactic

If you do apply for a car loan and your bad credit history lands you in a situation where you are stuck with a really high interest rate, one option you can take is to look at buying a cheaper second hand car and only take out a small loan. This will enable you to pay back the loan quickly and will help you gain a trust with the lender. It also means that the high interest rate will not be so damaging to your wallet.

Adopting this strategy and successfully completing the cycle will ensure that you will be offered another loan of a larger amount and a much lower interest rate. If your credit history really is very bad, this one of the best ways you can repair it because nothing will demonstrate your ability to pay off a car loan like actually paying off a car loan!

About the author

Jonathan Heart

Hello, I'm Jonathan Heart. I'm an accountant by day and a financial enthusiasts / investor by night who invests primarily in Australian real estate and blue chip shares. I live in Sydney and I thoroughly enjoy spending my spare time reading and writing about all things related to finance in Australia.

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