Bad credit car loan interest rates
Rates correct as of August 2026.
How do bad credit car loans work?
A bad credit car loan works in much the same way as a standard car loan. You borrow a set amount, use the vehicle as security, and repay it in regular instalments over an agreed term. The key difference is who it's designed for: lenders who specialise in this space are set up to assess borrowers with past credit issues or limited credit history, rather than declining them outright.
Because these borrowers represent more risk to a lender, bad credit car loans typically come with higher interest rates and fees, and may have a lower maximum borrowing amount than a standard car loan.
What counts as bad credit?
Credit scores are measured on a scale of 0 to 1,200 through Equifax, one of the country's main credit reporting bodies. A score of 459 or below falls into Equifax's “below average” band, which is generally what's considered bad credit. If you're sitting in this range, you're more likely to be declined by mainstream lenders and may need to look at a specialist bad credit lender instead.
How much will my bad credit car loan cost?
The average bad credit car loan taken out through Savvy in the 2025-26 financial year was $30,905 at 17.47% p.a. You can see how the cost of this loan stacks up against the average car loan for all credit types here:
| 2025-26 | Loan amount | Loan term | Interest rate | Monthly repayment | Interest payable |
|---|---|---|---|---|---|
| All car loans | $37,346 | 5 years | 12.72% p.a. | $844 | $13,318 |
| Bad credit car loans | $30,905 | 5 years | 17.47% p.a. | $776 | $15,649 |
| Interest rates based on average rate available for each profile type through Savvy in the 2025-26 financial year. These aren’t necessarily reflective of the rates you’ll receive on your car loan. Calculations are for illustrative purposes only and don’t include costs such as loan fees, motor vehicle duty or other government charges. | |||||
Several key factors will impact the cost of your car loan, including:
- Interest rate: this is the biggest factor when it comes to the cost of your car loan. As mentioned, they’re typically higher than a standard car loan, but every basis point counts when it comes to calculating how much you’ll pay overall.
- Fees: expect an establishment fee (typically $400 to $600) and possibly ongoing monthly fees of up to $15. Early repayment and late payment fees may also apply, but some of these charges may not be included in your loan agreement by certain lenders.
- Loan term: a longer term lowers your monthly repayments but increases the total interest you'll pay. For example, opting for a six-year term on a $24,000 loan at 15.00% p.a. adds only $44 a month compared to a seven-year term, but saves over $2,300 in total interest.
- Extra repayments: if your lender allows free additional repayments, making them can meaningfully cut your total interest. An extra $50 a month on a $24,000 loan repaid over five years saves around $1,270 and clears the debt six months sooner.
The table below shows how loan size and interest rate combine to affect your monthly repayments:
| Loan size | 15.00% p.a. | 17.00% p.a. | 19.00% p.a. | 21.00% p.a. |
|---|---|---|---|---|
| $15,000 | $357 | $373 | $389 | $406 |
| $20,000 | $476 | $497 | $519 | $541 |
| $30,000 | $714 | $746 | $778 | $812 |
| $45,000 | $1,071 | $1,118 | $1,167 | $1,217 |
| $65,000 | $1,546 | $1,615 | $1,686 | $1,758 |
| Calculations based on a five-year loan repaid monthly. Rates are used for illustrative purposes only and aren’t necessarily reflective of the rates you’ll receive on your car loan. | ||||
Bad credit car loan eligibility and documentation requirements
Eligibility
- You must be at least 18 years of age.
- You must be an Australian citizen or permanent resident (or, in some cases, an eligible visa holder).
- You must be earning a stable income that is enough to comfortably support your repayments. This can start from as little as $480 per week and include certain Centrelink benefits.
- You must be earning a consistent income from your employment and/or Centrelink benefits.
- You must meet your lender’s requirements related to paid or unpaid defaults and bankruptcy.
- Your car must meet your lender’s requirements related to type, age and condition.
Documentation
- Front and back of your driver’s licence (or another form of government-issued ID)
- Your last two consecutive payslips (or your last tax return if you’re self-employed)
- Information about your car, such as its age, is handy to have
- 90 days of bank statements and/or Centrelink income statements may be requested, but not always
How to apply for a bad credit car loan with Savvy
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Fill out our simple online application form
Tell us about your financial situation and the amount you’re looking to borrow.
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Send through your documents
We’ll need to see your ID and financial documents to verify your identity and income.
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Speak to your broker
Your Savvy broker will give you a call to discuss your situation and finance options.
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Pick your car
If you haven’t chosen your car yet, our in-house car broker can help you find one at a competitive price.
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Have your application submitted and get approved
When you’re ready to proceed, your broker will prepare and submit your application to your lender.
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Sign off and get your car
Once you’re formally approved, sign off on the final loan documents and we’ll handle settlement. From there, the car is yours!
Why apply for a car loan with Savvy?
Tips to improve your bad credit application
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Demonstrate stable income
Lenders want to see that you’re earning enough to support your car loan repayments, whether that's from your employment or eligible Centrelink payments. If you’re casually employed, you’ll need to show a record of stable, consistent hours and income to maximise your approval chances.
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Put down a deposit
While putting a deposit down for a car loan is less common, doing so will reduce the size of your loan. This lowers the risk your lender takes on and the interest you’ll pay. Depending on your financial profile, there may be situations where you’re required to pay between 10% and 20% upfront as a condition of approval, though deposits aren’t always mandatory.
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Improve your credit score
Even small improvements to your credit score can make a difference to the size and rate of the car loan you’re eligible for. Paying bills on time, reducing outstanding debts and checking your credit report for errors can all help boost your score and chances of approval.
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Use a co-borrower or guarantor
Having a co-borrower like your partner or a guarantor on your car loan (someone with a stronger financial profile who agrees to back up your loan) can strengthen your application. Both options reduce the burden on you, with lenders often feeling more confident with an extra person either paying the loan or adding a layer of security.
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Pay off debts and close any unnecessary lines of credit
The less debt on your plate when you apply for your loan, the better. This means clearing outstanding debts, including those that you’re behind on, and reducing your credit card limits. If you have credit cards or other lines of credit that you don’t use, they’re actively impacting your borrowing power.
Critical pitfalls that destroy your chances
"Critical pitfalls that will destroy your car loan application are wage advance and payday loans, excessive gambling, poor bank account conduct and recent unaddressed defaults. Rushing into applications with these issues active virtually guarantees rejection and further credit score damage. A skilled broker can assess your profile honestly and identify which issues need addressing before applying and risking rejection."
Car dealerships and bad credit
An alternative option to comparing car loan deals online is to purchase your vehicle at a dealership and take out finance through them. However, while this might seem convenient, there are a few things to keep in mind when financing a car through a dealership when you have bad credit:
- Watch out for steep balloon payments: a balloon or residual payment is a lump sum payment to be made at the end of your car loan. A car loan through a dealership may appear cheap month-to-month but have an unaffordable balloon payment attached at the end that you need to fork out tens of thousands of dollars to cover.
- Keep an eye on added extras: car dealership representatives will often suggest optional extras like add-on insurance. Consider these carefully and evaluate whether you want the cover or if it’s worthwhile.
- Consider where you’d be if the car breaks down: if you’re buying a used car that isn’t covered by a manufacturer warranty, you’ll still be covered by a short dealer warranty. However, if it breaks down outside both, think about whether you’ll be able to manage a high interest loan on a long term without a working car.
Another important factor to keep in mind is depreciation. Your car’s value will decrease over time, meaning the balloon you’re signed up to pay at the end of your loan could be substantially higher than the vehicle’s sale price.
For example, you could get a $35,000 loan for a new car taken out over five years with a 45% balloon payment ($15,750) from a dealership. However, if the car is only worth 40% of the original price after five years ($14,000), you’d have to pay $1,750 out of pocket if you wanted to sell the car and cover the balloon.
How can a broker help me get approved for a car loan if I have bad credit?
Brokers can be very beneficial when it comes to dealing with bad credit applications for several reasons:
- A good broker will have a wide and diverse panel of lenders, which gives them more options to choose from to accommodate your profile and needs.
- Because brokers have existing relationships with their partnered lenders, they’ll often understand qualification requirements and help argue your case.
- By taking a deep dive into your credit file, they can identify where the issues lie and provide guidance on the best course of action. This can include advising you on any debts or defaults that need to be addressed before the application can proceed.
- While applying for a car loan with a lender will automatically trigger a hard credit check, going through a broker like Savvy will only come with a soft-touch credit check initially (which doesn’t impact your score) before moving into the formal process with your chosen lender.
Can I refinance my car loan with bad credit?
Yes, you may be able to refinance your car loan deal if you have bad credit. There are several situations where you might look to refinance, such as if your credit score and finances have improved, you need to increase your loan term to lower your repayments or you want to remove a co-borrower or guarantor.
However, if you’re switching to a new loan and your credit hasn’t improved, you risk being hit with a higher interest rate and potentially steep exit fees for your current loan and setup fees for your new one. This is especially the case if you’re removing a guarantor and your situation hasn’t improved or has worsened.
The decision may be taken out of your hands, though, if you can’t show lenders that you’ve been able to do each of the following:
- You’ve consistently made repayments on time and in full
- You’ve decreased or eliminated other bad debts
- You’ve continued to have stability in your life, such as employment, income and residential history
Bad credit car loan refinancing example: locking in a lower rate
Matthew needs to buy a new car but has bad credit. He finds a lender who can offer him the $40,000 loan he needs over seven years, but he has to repay it with a 15.00% p.a. interest rate. His repayments are $772 per month.
Matthew repays his loan for two years without any issues, during which his past defaults are removed from his credit file. His current loan balance is $32,445 and he’s repaid $10,970 in interest in the first two years of his loan.
He starts looking around for other loan options and finds one that he can refinance to with a 9.00% p.a. rate. However, they are only willing to approve a five-year loan of $28,000, as his car has decreased in value by 30% over those two years. This means he’ll have to pay the remaining $4,445 out of pocket if he refinances his loan.
Matthew works out the cost of sticking with his current loan compared to refinancing to a new one:
| Loan | Loan amount | Interest rate | Monthly payment | Total interest | Total after seven years |
|---|---|---|---|---|---|
| Bad credit car loan | $32,445 | 15.00% p.a. | $772 | $24,837 | $64,837 |
| New car loan | $28,000 | 9.00% p.a. | $581 | $17,844 | $57,844 |
| Interest rates and calculations are for illustrative purposes only and may not be reflective of the car loan deals you are offered. Total after seven years for new car loan includes a deposit of $4,445 to cover the car’s negative equity. Costs do not include early break fees, which may apply to the old loan, and setup fees, which may apply to the new loan. | |||||
Even though Matthew will have to fork out almost $4,500 out of his savings, he sees that he’ll still save around $2,500 if he refinances his car loan to access the reduced rate.
