Automobiles are an essential part of life for Canadians. Many of us depend on it to get to and from work or for getting our daily errands done. It is imperative for us to keep our credit scores in check in order to get car loans from banks or credit unions. Canadians with bad credit (or no credit) often have a more difficult time getting approved for car loans. But it does not have to be that way!
When it comes to bad credit car loans, new opportunities are on the horizon. There are dealerships and lenders that specialize in helping customers with challenged credit get approved! Keep reading below, as we go into more detail about how you can set yourself up to have a better chance of getting approved for the financing you need.
What exactly is a bad credit score?
Credit scores in Canada range from 300 points to 900 points. According to Equifax, one of Canada’s major credit bureaus, a good credit score of 660 will likely qualify you for a loan. However, any score of less than 660 might make it challenging to get approved for new credit. Considering the average credit score in Canada is on the brink of subprime (a score below 660), applying for credit can be a frustrating process for a lot of people.
When the banks say “no”, there are alternative ways to get car finance. There are providers that specialize in helping customers with bad credit, and they can help you get approved for a vehicle that fits your budget and lifestyle. With a bad credit auto loan, a customer not only gets into the driver’s seat of a new car but also gets an opportunity to rebuild their credit history.
Yes! Bad credit happens, and while getting approved might require a few extra steps, it is possible to get a car loan in Canada if you have bad credit. With bad credit car loans, you’ll still finance your car over a term, and make payments on the loan principal plus interest.
Can You Qualify for a Car Loan with a Bad Credit Score?
Though it may be tempting to go to your nearest car dealership and sign for the first deal they will give you, we recommend being patient and contacting at least a few different lenders through our dozens of dealer partners in your area so that you can secure the best possible terms and the lowest interest rates possible.
Getting Approved for a Bad Credit Car Loan in Canada
Getting approved for a bad credit car loan in Canada is about more than just your credit score. Your lender may consider some of the following factors to determine whether you can be eligible for car finance.
- Down Payment – Saving a large down payment will indicate that you are financially prepared to take on a car loan. Larger down payments generally look more favorable to lenders. Another benefit of a down payment is that it reduces your monthly payment and also reduces the amount of interest you pay over the term of the loan.
- Income Documents – An important part of any approval is being able to prove you can afford the monthly payments. Most lenders will require you to be employed full-time and be able to show pay stubs or bank statements to verify. All of our dealer partners are well-versed in these requirements and will help every step of the way!
- Affordability –The amount of the loan also impacts how easy or difficult it will be to get approved. When having challenged credit, it might be more beneficial to choose a vehicle that is more affordable. It might not have all the special features you are looking for, but the payments will be lower and it will be easier to secure approval.
- Regular Payments on credit – If you can’t afford to pay off your credit card in full, remember to make at least the minimum payment, doing this will improve your credit score and protect you from increased interest rates on your existing debt.
Bad credit doesn’t need to mean that you’ll never qualify for a car loan in Canada. By following the guidelines set out above and working with our dealer partners you will get the best possible approval and a payment you can afford.
Once you’ve secured your loan, you can begin rebuilding your credit score and can work towards getting a better interest rate in the next 18 to 24 months!