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Bad Credit Car Loans: How it works

May 28, 2020 6 minute read
Bad Credit Car Loans: How it works

Looking for bad credit car loans?

If you have a bad credit score, getting approved for a car loan can be slightly difficult, however, it’s not impossible. You still have a few options available to help you get the car you want, even with a bad credit score. 

At Jacaranda, we don’t necessarily believe a mistake you made up to 7 years ago should represent how you are with money today. Instead, we prefer to look at how you’re going to pay back your loan. That’s why, despite having a bad credit score, we could still offer you a car loan.  Read on to find out if you’re eligible for bad credit car loans Australia and how you should go about applying for one. 

What should I know about bad credit car loans Australia? 

A car loan is a lump sum of money you borrow from a lender to purchase or to help you purchase a new used or used car. You’ll find that most car loans are secured. This means if you’ll need to attach an asset to your loan as collateral. The asset needs to be something of value, so in the event you cannot afford to repay your loan, your lender can repossess your asset to cover the cost of the loan.  Most lenders will require that you use the car you are purchasing as collateral. 

Learn more about secured car loans here!

Bad credit car loans vs. regular car loans

Here’s what to know about bad credit car loans Australia as opposed to regular car loans:

  • You do have a chance of getting a bad credit car loan, however, keep in mind that because your score could make you risker to lender to, the interest rate is usually higher than regular loans
  • Depending on how much you plan on borrowing, your loan could turn into a secured car loan. This means that you will need to provide an asset as collateral, just as extra security. This asset can be the car you’re buying, your home, or expensive belongings. 

Note:

We care about you and want you to know that you can speak to someone. If you find that you’re in a stressful financial situation and are unable to handle debt, talking to a financial advisor or free financial counsellor could be helpful. 

Remember, there is always someone there to help and talk to when you find yourself financially or emotionally distressed.  

  • National Debt Help Hotline: 1800 007 007
  • The Department of Human Services: Crisis and special help
  • Lifeline: 13 11 14

What you should know about car loans

Buying a car is a significant purchase that requires a lot of thought. Before you even start shopping around for cars, you need to assess whether it’s affordable for you. The last thing you want to do is have a flash new car, but being in financial hardship because of it.  

Like shopping around for a new car, you also need to shop around and compare different car loans to find the right one for you.  You should look for things like interest rates, fees, the repayment period etc. interest rates and term. 

With affordable interest rates, transparent fees and flexible repayment terms, Jacaranda could have the perfect car loan for you. If you’ve got bad credit, don’t sweat it! Our assessment team will do their best to find you a suitable loan product despite your less than perfect credit score. 

What is an interest rate?

The interest rate is a percentage of your loan amount that you’ll be required to pay back on top of your loan. Think of this percentage as a small cost for borrowing the money. There are two types of interest rates – fixed and variable. A fixed interest rate is simply a rate that won’t change over the entirety of your loan term. This is most likely the interest rate you’ll be given when applying for bad credit car loans or a personal loan. A fixed rate allows you to calculate the total cost of your loan before you fully commit. 

A variable interest rate, on the other hand, is a rate that varies depending on market rates. A variable rate can be beneficial if your rate were to decrease during your loan term. Of course, these rates can cost you more if the rate were to increase. 

Learn how to find the lowest car loan rates!

What is a loan term?

A loan term is the duration of which you’ll repay your loan. You can choose your loan term accordingly with your budget and plan. With Jacaranda, our bad credit car loan terms vary between 2 and 5 years depending on the amount you borrow. If you choose a shorter loan term, you might find that it reduces the amount of interest paid overall. While that option might save you a couple of bucks in interest,  keep in mind that your repayments will be higher. 

You can repay your loan in either weekly, fortnightly or monthly instalments. However, we’ll generally align your repayments with your payday. It’s important that you choose repayments that are manageable for you and your budget. 

How can I improve my bad credit?

Although you can access bad credit car loans, it won’t hurt to improve your credit score for future endeavours. Having a higher credit score might also mean you have access to lower interest rates, which could save you hundreds if not thousands of dollars. 

Your credit score is a numerical representation of the information in your credit report. It’s meant to indicate your creditworthiness to lenders and credit providers. 

Credit ScoreRating 
833 to 1200Excellent
726 to 832Very Good
622 to 725Good
510 to 621Average
0 to 509 Below Average

 

Tips for improving your credit

Although there’s no way of improving your credit score overnight, there are many things you can do to increase it in the long term. Here’s how you can maintain or improve your credit score over time:

  • Constantly check your credit report: Checking your credit report at least once a year ensures there are no errors. The reason why it’s recommended you check your credit report frequently is to notice any errors such as late payments that could’ve been incorrectly added to your credit file. 
  • Avoid overdue debts: Make sure to pay all your bills on time. A helpful tip would be setting up payment reminders through your personal device or with your financial provider. 
  • Reduce your debt: Decreasing any existing debt could maintain or increase your credit score and could help your chances of taking out a loan. 

Think you’re ready to apply? 

Now that we’ve given you the rundown on bad credit car loans, do you think you’re ready to apply? An application could take you as little as 5 minutes to complete, and then we’ll do our best to give you an outcome in 60-minutes.* The best part, once you’ve signed your contract, you could have the cash in your account and ready to use in 60-seconds**!

If you have more questions regarding our bad credit car loans, head over to our FAQ page (link to car loans FAQ page) or alternatively, get in touch with our customer service team. 

*If you apply during our regular business hours and we don’t require additional information from you

**Only for NPP-enabled bank accounts

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Last updated: 19/08/2020, 10:00am

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