These two simple words can cover such a huge spectrum of situations. In Australia, if you have "bad credit" it could be as simple as one missed payment on a utility bill (such as phone, electricity, water etc) or as severe as having declared bankruptcy. If you are somewhere in-between and are searching for a bad credit car loan then here's some very useful information to help you understand if you will be successful or not with these specialised lenders.
Bankruptcy: If you have ever been unfortunate enough to have declared bankruptcy you need to be prepared for continual knock backs. There is virtually no lender that will consider lending to you if you have entered into bankruptcy in the past 12 months. Find out the exact date you declared bankruptcy (this can be done by obtaining a copy of your credit report through Veda Advantage) and make note of when it will be a full year. Only then should you considered applying for a bad credit loan and obviously you must have made many changes to the way you handle money/finance. You could contact a bad credit lender just prior to the anniversary purely to find out what their policies are surrounding a declared bankrupt. This way you can start getting organised for what you will need to provide as you must be prepared to be highly transparent and forthcoming with all information.
Security: "Security" is what you intend to provide to secure your bad credit loan. As a guideline most bad credit lenders will insist on security (being the car you are trying to buy) if you apply for more than $3000. If you already own a car and are just looking to get a bad credit loan you must understand that if you already have a loan secured by your car, you cannot use the car again for a second loan. This is important - you can only have ONE loan against any ONE car. If you are applying for less than $3000 the lender may not insist you provide the car as security but just be aware that by offering the car as security will generally mean your interest rate will be lower.
Employment: You cannot expect to get a loan if you do not have a job. If your only source of money is from the any of the following government hand outs then there is no point applying for a loan as no lender will accept these:
newstart or youth allowance aged pension disability support pension austudy
If you do have a job, also be mindful that you must be earning a minimum of $400 per week to be eligible for a bad credit car loan.
Bank Statements: You will need to have a bank account to be able to get a bad credit car loan. Generally you will be asked to provide 1 - 3 months worth of most recent bank statements to your prospective lender. Now go and pull out those statement and look at them as though you were a lender. If you were a lender you would want to see things such as:
the account is getting a regular pay deposited it is always in credit any loans you have mentioned on your application match the debits on your statements
If you were a lender you would not want to see such things as:
daily withdrawals from gambling organisations obvious direct debits from a lender that you have not stated on your application the account getting constantly overdrawn and being charged overdrawn fees
Be reasonable. Why would anyone lend you money if your statements show you can't look after your finances even before getting a new loan?
Do "look" around but don't "apply": Don't fall into the trap of filling in an application form on every bad credit lender website you can find, thinking that hopefully you will at least get one approval. This will definitely backfire on you. This is because each lender will do a credit check on you, so your credit report will show a handful of enquiries all close together which often rings warning bells to lenders. They see this as meaning you are applying, getting declined, applying again, getting declined again etc etc. By all means look at each website, get a feel for their lending policies, even phone them and see how you feel about the way they treat you over the phone! Then once you have decided on the one you like the best, then and only then should you click on that "apply" button.
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