Bad Credit Car Loan Interest Rates
Written by Phillip Gruppelaar
One of the most misunderstood factors of bad credit car loans is the interest rate that the borrower will have to pay.
As a snap shot, it’s pretty easy to say the worse the credit rating you have, the higher the interest rate will be. This however is not always the case.
Defaults, Judgements and bankruptcy notices can remain on your credit file for up to seven years. 99% of institutions have computerised programs to assess applications. This means that a person with bad credit will, in the greater majority of cases, will automatically receive decline notices for a considerable period.
Computer programs hate bad credit.
When looking for a bad credit car loan it is advisable to deal with an intermediary (Finance Broker or Motor Dealer). These people only get paid if they are successful in getting you approved.
A Finance Broker is better than a Motor Dealer as he has more financiers at his disposal.
Most financiers have a ranking system. Years of lending data has been collected that clearly shows some customer demographics are less likely to pay than others. Please note that they are not saying all people of these demographics are this way, but simply the highest percentage.
In assessing a bad credit car loan application the intermediary, firstly needs to work out if you can afford the loan. No matter how good the intermediary is, if you can’t afford the loan using government expenses guidelines, you cannot get approved.
If you can afford the loan, the intermediary now establishes what financiers are likely to look favourably at this application.
Using the table below, the lower the combined score you have the lower the interest rate will be (e.g. a combined score of 2, even if you have bad credit you can still expect to get close to the best rate in town).
Anyone who scores more than 7, any approval is a good approval. The interest rate and fees will be higher, you should be mindful of this and consider a lower value loan as a stepping stone in your credit rating recovery.
- 1. Home Owner or Investment Property Owner
- 2. Home Owner or Investment Property Owner (Mortgaged)
- 3. Renting via Real Estate Agent
- 4. Renting from a Private Source
- 5. Living with Parents
- 6. Renting from a Government Authority
- 7. Living with Other Relatives
- 8. Boarding
- 1. Full Time Permanent Employment (12 months +)
- 2. Full Time Permanent Employment (Less than 12 months not on probation)
- 3. Full Time Part Time Employment
- 4. Long Term Casual Employment (more than 12 months)
- 5. Casual Employment
- 6. Centre-Link Income
Please note this is a general guide. All Financiers assess an application on its own merit. Other factors, such as a good credit reference, or an extended period of regular savings will assist in approvals and reduce the interest rate.