In Australia, it’s possible to secure car finance even if you have poor credit, provided you have a strong and stable income. Lenders assess more than just your credit score, and a reliable income can work in your favour. If you're in this situation, here's how to improve your chances of securing a car loan with poor credit but strong earnings.
1. Understand Your Credit Status
Having a poor credit score can be a barrier to car finance approval in Australia, but it's not the only factor that lenders consider. A strong income demonstrates your ability to make regular repayments, which can outweigh your credit history. Before applying for a loan, check your credit report to understand your standing and identify areas for improvement.
2. Specialist Lenders for Poor Credit Borrowers
While traditional banks may be hesitant to approve car loans for those with poor credit, many specialist lenders in Australia are more flexible. These lenders focus on your current financial situation, such as your income and employment stability, rather than solely relying on your credit history. Non-bank lenders and finance brokers can help you find the best deals available.
3. Provide Proof of Income
One of the most important factors lenders will consider is your ability to repay the loan. A strong income—whether from your salary, business earnings, or other reliable sources—can significantly improve your chances of approval. Be prepared to provide recent payslips, tax returns, or bank statements to demonstrate your financial stability. Lenders are more likely to approve your loan if they see you can comfortably afford the repayments.
4. Save for a Deposit
A deposit reduces the amount you need to borrow, lowering the lender’s risk and increasing your chances of loan approval. While a deposit isn’t always mandatory, saving at least 10%–20% of the car’s value can show lenders that you are financially responsible. Additionally, a deposit can help you secure better loan terms, such as a lower interest rate.
5. Consider a Secured Car Loan
Secured car loans, where the car itself acts as collateral, are often easier to obtain for borrowers with poor credit. By reducing the lender’s risk, secured loans can come with lower interest rates and better terms than unsecured loans. Since you have a strong income, you may be in a position to take advantage of this option.
6. Opt for an Affordable Vehicle
Lenders are more likely to approve a car loan for a vehicle that is within a reasonable price range. A modest car will not only keep your loan amount lower but also ensure that the monthly repayments are manageable. Keeping the loan amount smaller increases the likelihood of approval and reduces the financial burden on you.
7. Work with a Finance Broker
A finance broker can be an invaluable resource when securing a car loan with poor credit. Brokers have access to a wide range of lenders and can match you with the ones most likely to approve your loan. They also help negotiate better terms and guide you through the application process.
8. Rebuild Your Credit
If your credit score is affecting your loan approval, consider working on rebuilding it over time. While this might not help with the current loan application, improving your credit score can open up better financing options in the future.
Final Thoughts
Securing car finance with poor credit but a strong income is entirely possible in Australia. By working with the right lenders, demonstrating your ability to repay the loan, saving for a deposit, and opting for a secured loan, you can increase your chances of approval. Always ensure that your loan terms are manageable within your budget to avoid further financial strain. With time and responsible borrowing, you can rebuild your credit and access even better financing options in the future.
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
