Getting approved for car finance in Australia can be challenging if you have a history of late payments. Late payments on previous loans, credit cards, or bills can negatively impact your credit score, making lenders hesitant to approve your loan application. However, it's still possible to secure car finance, even with a history of late payments, by following the right strategies. Here are some steps you can take to improve your chances of getting approved for car finance despite your financial history.
1. Understand Your Credit Report
Before applying for car finance, it’s important to understand how your late payments have impacted your credit history. Late payments typically remain on your credit report for up to five years, which can lower your credit score. By checking your credit report through agencies such as Equifax, illion, or Experian, you can get a clear picture of your credit status. If there are any discrepancies or errors on your report, make sure to address them before applying for car finance.
2. Seek Specialist Lenders
Traditional banks may be less inclined to approve car loans for individuals with a history of late payments. However, specialist lenders in Australia focus on offering car loans to people with bad credit or payment histories. These lenders understand that everyone’s financial situation is different, and they are more likely to consider factors beyond your credit score. They will typically evaluate your current income, employment stability, and overall ability to repay the loan, rather than focusing solely on past late payments.
3. Consider a Secured Loan
Secured loans are a great option for borrowers with a history of late payments. With a secured loan, you offer an asset, such as the car you are purchasing, as collateral for the loan. If you fail to make the repayments, the lender has the right to repossess the car. Since secured loans pose less risk to lenders, they are often easier to obtain, even with a history of late payments. Additionally, secured loans often come with lower interest rates compared to unsecured loans.
4. Provide Proof of Stable Income
Lenders are more likely to approve car finance if they can see that you have a stable and reliable source of income. Even with a history of late payments, demonstrating that you can make consistent payments going forward is crucial. Be prepared to provide proof of income, such as recent pay slips, tax returns, or bank statements, to show that you can afford the loan. A steady job and regular income indicate to lenders that you are more likely to make timely payments in the future.
5. Offer a Larger Deposit
If you can afford to offer a larger deposit, this can increase your chances of getting approved for car finance. A larger deposit reduces the total amount you need to borrow, which lowers the lender’s risk. It also shows the lender that you are financially responsible and committed to the car purchase. Ideally, you should aim for at least a 20% deposit, but even a smaller deposit can help improve your chances of securing the loan.
6. Consider a Guarantor
Having a guarantor on your loan application can also help you secure car finance with a history of late payments. A guarantor is someone who agrees to take responsibility for the loan if you are unable to make the repayments. If your guarantor has a strong credit history, it can reassure the lender and increase the likelihood of loan approval. Additionally, having a guarantor may also help you secure a better interest rate on your car loan.
7. Shop Around for Lenders
Different lenders have different criteria for approving car loans, so it’s essential to shop around and compare your options. Some lenders may be more lenient with applicants who have a history of late payments, while others may have stricter requirements. By comparing different lenders, you can find the one that is most likely to approve your application. Car loan brokers can also help you connect with lenders who specialise in bad credit loans and offer more flexible approval criteria.
8. Improve Your Financial Situation
If you are in a position to do so, it’s a good idea to work on improving your financial situation before applying for car finance. Pay down existing debts, reduce your overall expenses, and ensure that you are making timely payments on any current loans or bills. The more evidence you can provide that you have improved your financial habits, the more likely lenders will be to approve your car loan. A history of late payments can be a red flag for lenders, but showing that you’ve taken steps to improve your finances can help overcome this obstacle.
Conclusion
While having a history of late payments can make securing car finance in Australia more challenging, it’s not impossible. By seeking specialist lenders, considering a secured loan, providing proof of stable income, and offering a larger deposit, you can increase your chances of approval. Additionally, having a guarantor and shopping around for the best deal can further improve your chances. By demonstrating that you are financially responsible and have taken steps to improve your credit and financial situation, you can successfully secure the car finance you need, even with a history of late payments.
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.
