For individuals in Australia with poor credit, getting approved for car finance can feel like a lengthy and stressful process. The good news is that securing car finance with poor credit is possible, and depending on your lender and financial situation, the approval process can be relatively quick. However, there are several factors that affect how long it will take to secure car finance. Here's what you can expect when applying for car finance with poor credit.
1. Types of Car Loans for Poor Credit
The time it takes to get approved for car finance largely depends on the type of loan you're applying for. There are two main types of car loans available to individuals with poor credit:
- Secured Car Loans: A secured loan requires the car to act as collateral. This type of loan is generally quicker to approve, as the lender has added security in case of default. Since the vehicle reduces the lender's risk, approval times are often shorter.
- Unsecured Car Loans: These loans do not require collateral and are typically more difficult to secure, especially for those with poor credit. Due to the increased risk for lenders, approval times may be longer, as lenders conduct a more thorough review of your financial situation.
2. Factors That Affect Approval Time
While some lenders may promise "instant approval," the time it takes to get car finance with poor credit can vary depending on several factors:
- Lender's Process: Different lenders have different approval processes. Some online lenders or brokers may offer fast approvals, with decisions made within a few hours. On the other hand, traditional banks or credit unions may take several days to review your application and make a decision.
- Your Credit History: While your credit score is not the sole determining factor, it does play a role in the approval timeline. If your credit history is particularly poor or complicated, such as having multiple defaults or bankruptcies, lenders may take longer to assess the risk. They may need more time to verify your income, outstanding debts, and past financial behavior.
- Documents and Information Provided: Providing all the necessary documentation upfront can speed up the approval process. Lenders typically require proof of income, identification, and information about the car you're purchasing. If you have these documents ready, the process will likely be quicker. On the other hand, delays in providing documents may lead to a longer approval time.
- Loan Amount and Vehicle Type: The amount you're borrowing and the type of vehicle you're purchasing can also impact the approval timeline. A larger loan or high-risk vehicle may require more thorough evaluation from the lender, leading to a longer wait time.
3. How Long Can Approval Take?
In general, the approval process for car finance with poor credit can take anywhere from a few hours to a few days. Here’s what to expect:
- Fast Approvals: Some online lenders or car finance brokers offer fast or "instant" approval for car loans. These approvals can often be completed within a few hours, sometimes as quickly as 30 minutes, especially for lower loan amounts or if you’ve applied with a direct lender that has a streamlined process.
- Standard Approvals: If you’re applying with a traditional bank or a lender with a more extensive review process, approval may take 1-3 business days. They may require a deeper review of your financials, income, and the car you're purchasing. If you have bad credit but can demonstrate stable income, it might expedite the process.
- Longer Approvals: In more complex cases, such as having a history of bankruptcy or other significant financial challenges, the approval process may take longer, possibly 5-7 business days. This is because lenders need more time to assess your financial stability and mitigate the risk.
4. How to Speed Up the Process
To speed up the car finance approval process with poor credit, consider the following tips:
- Pre-approval: Getting pre-approved for a loan can expedite the process. Pre-approval helps you understand how much you can borrow and what terms to expect, which can speed up the decision-making process when you find a car.
- Compare Lenders: Research and compare lenders who specialize in car loans for bad credit. Some online platforms offer quick approvals, and some lenders may offer quicker processing times than others.
- Prepare Documents: Have all the required documents ready before applying. This typically includes proof of identity, proof of income, proof of address, and details about the car you're purchasing. Having everything on hand will reduce delays.
- Consider a Larger Deposit: A larger deposit can reduce the lender’s risk, which may speed up the approval process. If you can afford to contribute a larger amount, lenders may be more likely to approve your application quickly.
5. What to Do if You’re Rejected
If your application is rejected, it's important to understand why. Some lenders may provide feedback on your application, which can help you improve your chances in the future. If you're rejected by one lender, consider approaching others, as different lenders have varying approval criteria. Additionally, working to improve your credit score or securing a guarantor could improve your chances in the future.
Conclusion
The time it takes to get car finance with poor credit in Australia can vary, but on average, approvals can be completed within a few hours to a few days. Factors like the type of loan, lender's processes, the complexity of your financial history, and the documentation provided all play a role in how long the approval process will take. By researching your options, preparing the necessary paperwork, and choosing the right lender, you can secure car finance with poor credit more quickly and efficiently.
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.
