Written by If you’ve been rejected from obtaining car finance due to a poor credit history, there may be more to the story. Did you know unpaid defaults could lurk on your credit history without you even knowing it? Some large corporate businesses can tarnish an otherwise good record if you've ever defaulted. These defaults can range from small unpaid phone or utility bills to missing car loan payments.
It's important to be aware of these when applying for a car loan and know what your options may be, which is where Savvy can help you out. Learn more about car loans with unpaid defaults with us today!
How to get a car loan with unpaid defaults
There are lenders operating in Australia who can approve car loan applications even if the borrower has unpaid defaults on their credit file. These specialist lenders work with customers who’ve struggled with their credit in the past, such as those with bad credit or profiles that otherwise don’t meet traditional lending criteria.
Whether you’re approved for a car loan with one of these lenders will ultimately come down to their lending criteria and factors such as the nature of your default, its size and how recently it occurred.
Unpaid defaults are more common than you think
Not paying a phone, gas, electricity or internet bill may put an unpaid default mark on your credit history. As mentioned, it’s still quite possible to take out a car loan with an unpaid default, as some lenders understand how big service and utility providers are over-eager with handing people defaults.Â
On occasion, some financiers will ask for the defaults to be settled before considering lending to you. Others may not even take these defaults into account, depending on the frequency and severity of the defaults. If you have a lot of defaults over a given period, it may give lenders cold feet as they see you as a higher risk.
Other types of defaults
Unpaid phone or utility bills fall at the smaller end of the default spectrum. There are many more serious defaults that could make getting a car loan more difficult for you. These include:
- Outstanding defaults to other financiers
- Outstanding defaults to banks or other financial institutions
- Outstanding court judgments or writs
If you’ve defaulted on a loan such as a car loan, home loan, personal loan or business loan, many lenders will have reservations about lending to you. You’ll have to obtain and produce evidence to dispute what's already on your credit history. On average, car financiers will want these defaults settled before giving the green light for a car loan. If the defaults are small or even negligible, a few lenders may waive their usual restrictions in light of this information.
Court writs and judgements
In some cases, car financiers may still approve your application if you have pending or incomplete court judgments or proceedings relating to debts or other financial matters. Court judgments and writs that have been handed down and actioned that are insubstantial in nature may be overlooked by some car financiers, and you may still be able to gain some sort of car loan.
In most cases, you will need some supporting evidence and transcripts so your lender can assess your position. If you’re appealing your case in the courts and on favourable grounds, some lenders may not take your legal history into consideration.
If you’re unsure about your ability to access car finance with unpaid default or court judgments against you, talk to one of the financial professionals at Savvy.Â
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Frequently asked questions about car loans with unpaid defaults
It’s always advisable to pay off defaults before applying for car finance, as this will boost your chances of approval. If you’re in a position to do so, clearing these defaults will benefit your financial profile and potentially make it easier to access finance.
Because car loans for borrowers with bad credit are considered a greater risk for lenders, your interest rate and fees are likely to be higher than for applicants with good credit scores. Your lender will ensure any car loan you’re approved for is affordable for you in line with responsible lending obligations.
The amount you can borrow will depend on a range of factors, including the following:
- Your income and job stability
- Your expenses
- Your liabilities (other debts)
- The value of your car
- Your lender’s eligibility criteria and maximum borrowing range
No – you won’t be able to take out a car loan if you’re bankrupt at the time you apply. However, once you’re discharged from bankruptcy, you may be able to start applying for car finance.
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