Car Loan with Debt? Here's How to Get Approved (2026)

Finding yourself in a situation where you need a car loan but are already managing existing debt can be challenging. You're not alone in wondering if it's possible to secure financing for a vehicle under these circumstances. The good news is that, yes, you can get a car loan with existing debt, and understanding the process can help you navigate it effectively.

Understanding Car Loans with Existing Debt

When you're managing existing debt, the prospect of adding a car loan to your financial responsibilities can feel overwhelming. However, lenders are often more concerned about your ability to repay than the fact that you have other debts. In Australia, car loans are typically secured loans, meaning the vehicle itself serves as collateral. This can make lenders more willing to approve your application, even if you have existing debt, provided you can demonstrate a stable income and a manageable debt-to-income ratio.

Factors to Consider: Interest Rates, Requirements, and Options

The Australian car loan market in 2026 offers a range of options, and understanding your eligibility and potential costs is crucial. Interest rates for car loans typically range from 6.49% to 12%, depending on factors like your credit score, the lender's policies, and the terms of the loan. Here's a breakdown of what you need to consider:

When considering a car loan, weigh these factors carefully. A higher interest rate or longer loan term can significantly impact the total cost of your loan.

How to Get a Car Loan with Existing Debt

Securing a car loan while managing existing debt involves several steps:

1. Assess Your Financial Situation: Calculate your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. Most lenders prefer a ratio below 40%.
2. Check Your Credit Score: Your credit score can influence the interest rate offered. Aim to improve it by paying off outstanding debts and avoiding new credit inquiries.
3. Research Lenders: Compare offerings from various lenders. Esteb and Co, with access to 83+ lenders, can help you find options that suit your needs.
4. Prepare Documentation: Gather proof of income, existing debts, and identification documents.
5. Apply for Pre-Approval: This step gives you an idea of your borrowing capacity and strengthens your negotiating position with car dealers.
6. Choose Your Vehicle: Opt for a vehicle within your budget to avoid stretching your finances further.
7. Submit Your Application: Once you've selected a lender and vehicle, complete the application process with all necessary documentation.

Expert Tips and Considerations

Securing a car loan with existing debt requires careful planning and consideration. Here are some tips to help you along the way:

• Improve Your Credit: Pay off smaller debts and keep credit card balances low to boost your credit score.
• Consider a Co-Signer: If your credit score is low, a co-signer with a strong credit history can improve your chances of approval.
• Negotiate Loan Terms: Don't be afraid to negotiate interest rates and terms with lenders to find the best deal.
• Use a Broker: A mortgage broker like Esteb and Co can provide access to a wide range of lenders, increasing your chances of finding favourable terms.
• Budget for Additional Costs: Remember to account for insurance, registration, and maintenance costs in your budget.

Frequently Asked Questions

Here are some common questions about getting a car loan with existing debt:

• Can I get a car loan if I have a low credit score? Yes, but you may face higher interest rates. Improving your credit score can help secure better terms.
• What is a debt-to-income ratio? It's a measure of your monthly debt payments compared to your income, used by lenders to assess your ability to manage new debt.
• How can Esteb and Co help me? With access to over 83 lenders, Esteb and Co can help find a loan that matches your financial situation and goals.
• Should I pay off my existing debt before applying for a car loan? It's not always necessary, but reducing your debt can improve your chances of securing a loan with favourable terms.
• Can I refinance my car loan later? Yes, refinancing can help you take advantage of better rates in the future, potentially lowering your monthly payments.
• Do I need a deposit for a car loan? While not always required, a deposit can reduce the loan amount and make approval easier.
• What if I'm self-employed? Self-employed individuals can still qualify for a car loan but may need to provide additional documentation to prove income.