In Australia, missing a payment on a loan or credit card can have a significant impact on your credit score, but it doesn’t mean that you’re completely out of options when it comes to securing car finance. If you’ve missed a payment and are concerned about your ability to obtain car finance, it’s important to understand your options. With careful planning and the right approach, it’s still possible to secure financing for a new or used car, even after a missed payment.
1. Understand the Impact of a Missed Payment
When you miss a payment, your credit score may drop, depending on how late the payment is. For example, if the payment is more than 30 days overdue, it may be reported to the credit bureaus and affect your score. Lenders use your credit score to assess your risk as a borrower, and a lower score can make it harder to secure a loan. However, the severity of the impact will depend on the type of credit and how long ago the missed payment occurred. It’s important to assess your credit score and understand where you stand before applying for car finance.
2. Consider a Larger Deposit
If you’ve missed a payment and have a less-than-ideal credit history, one way to increase your chances of securing car finance is by offering a larger deposit. A larger deposit reduces the loan amount and shows lenders that you’re financially responsible, even after a missed payment. By reducing the risk to the lender, a larger deposit can help you secure better loan terms and lower interest rates.
3. Opt for a Secured Car Loan
If your credit score has been affected by a missed payment, a secured car loan might be a more feasible option. With a secured loan, the car you purchase acts as collateral for the loan, reducing the lender’s risk. Since there’s less risk for the lender, they may be more likely to approve the loan despite a missed payment. Keep in mind that if you default on the loan, the lender has the right to repossess the car, so it’s crucial to ensure that you can make the repayments.
4. Explore Lenders Specializing in Bad Credit Loans
In Australia, there are lenders who specialize in offering car loans to individuals with bad or poor credit, including those who have missed payments. These lenders are typically more flexible with their criteria and may be willing to work with you even if you’ve had a financial hiccup in the past. While these loans might come with higher interest rates than those offered to borrowers with good credit, they can be a lifeline for securing a car loan after a missed payment.
5. Consider a Co-Signer
If you’re struggling to secure car finance on your own after a missed payment, another option is to enlist a co-signer. A co-signer is someone with a stronger credit history who agrees to take responsibility for the loan if you fail to make payments. This can help reduce the lender’s risk and increase the likelihood of your loan being approved. Keep in mind that your co-signer’s credit score and financial situation will also be assessed, so it's essential to choose someone who is financially stable and willing to take on the responsibility.
6. Shop Around for the Best Deal
After a missed payment, it’s crucial to shop around and compare different lenders and loan terms. Not all lenders will have the same criteria, and some may be more flexible than others when it comes to approving car loans for individuals with a history of missed payments. Online comparison websites can help you quickly compare loan offers, interest rates, and repayment terms, allowing you to find the best deal that suits your financial situation.
7. Work on Improving Your Credit Score
If you’ve missed a payment and are looking for car finance, it’s a good idea to focus on improving your credit score before applying. While this may take some time, a higher credit score can help you secure better loan terms in the future. Start by paying off outstanding debts, reducing your credit card balances, and ensuring that all future payments are made on time. Even small improvements in your credit score can make a significant difference when applying for car finance.
8. Be Transparent with Lenders
When applying for car finance after a missed payment, it’s important to be transparent with lenders about your situation. Lenders may be more willing to work with you if you explain the reasons behind the missed payment and demonstrate that it was a one-off occurrence rather than a pattern. By showing that you’ve taken steps to resolve the issue and improve your financial situation, you can increase your chances of securing a loan.
9. Consider Alternative Financing Options
If traditional lenders are unwilling to approve your car loan due to a missed payment, you might want to explore alternative financing options. Some dealerships offer in-house financing, which can be more flexible than traditional bank loans. However, be aware that in-house financing may come with higher interest rates. Additionally, peer-to-peer lending platforms or car loan brokers may be able to help you find a lender willing to approve your loan despite your missed payment.
Conclusion
While a missed payment can make securing car finance more difficult, it’s important to know that there are still options available to you. By understanding your credit situation, considering secured loans or a co-signer, shopping around for the best deal, and working to improve your credit, you can increase your chances of getting approved for a car loan. With persistence and the right approach, you can find a solution that allows you to finance your car, even after a missed payment.
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.
