Finance a Car With Bad Credit in Canada – STOP & READ
Don’t let bad credit stop you from driving the car that you want. Even with a poor credit history, you can qualify for auto loans that give you access to financing for thousands of vehicles in instantly.
Why Finance a Car
Financing a car is a great way to help you obtain a reliable new or used vehicle, and pay off the cost over a period of time. When you finance a car, the total cost is divided into more manageable monthly payments that consist of a sum paid to the dealership for the actual cost of the car and an interest fee paid to your lender. Learn how to build your budget and calculate your car payments.
There are several reasons to finance a car. Firstly, purchasing a safe, reliable car that fits your lifestyle and needs is of top priority. Financing a car can help you obtain a newer model car, a car with better features, a safer car for your family or a car that is in better working condition.
Secondly, many people don’t have upfront cash to cover the total cost of a car. Financing the cost of a car gives a buyer a larger range of options to choose from, based on the amount that the loan will cover. Financing your next new or pre-owned car gives you the freedom to choose from a variety of cars, vans, SUVs, and trucks in that meet your work and family needs.
Lastly, financing a car is a good way to rebuild bad credit; assuming that you make regular payments and remain in good standing with your lender. Making payments on a car loan builds equity and rebuilds credit by demonstrating trustworthiness to lenders. After months and years of regular car payments, you will see your credit rebuild and could even qualify for better loans when you finance your next car. Click here to see loans available to you!
How to Apply for a Bad Credit Car Loan
Did you know that one out of every three Canadians has bad credit? Bad credit isn’t an immediate stamp of disapproval from lenders. In fact, you can click here to review loan options for you!
Firstly, do your research on auto loans before you go in to make your purchase. You can find an auto loan in for the car that you have always wanted. A dealership is likely to offer you in-house financing options. By researching your loan options prior to entering a dealership, you can assess whether the loan options offered to you by a dealer are fair. You can also compare multiple financing options from multiple lenders, so that you can pick the loan that works best for you.
Don’t feel pressured into a bad credit car loan just because you feel there are limited options. You may be surprised at the number of financing options that are available.
Be vigilant of loans that will take many years to repay, you may build negative equity and end up paying more for a vehicle than you may realize. Longer term loans accrue more interest cost for buyer over time. Lenders often offer enticing packages that have hidden costs that leave you with more hassle and paying for your car. A common way that this happens is when buyers are most focused on their total monthly payment versus how much they will actually spend on a car. A lower monthly car payment seems attractive to many buyers, and one trick to lower a monthly payment is to extend the term of a lease which is a very risky practice. This means that you pay less monthly, but pay for a longer period of time. BEWARE longer lease terms can cost you more when combined with a higher interest rate.
Here is an example. A $15,000 loan at a 4% interest rate, with $0 down for 36 months (3 years) will cost you roughly $443 monthly. The same $15,000 loan at a 4% interest rate, with $0 down but at the average 90 month loan term (8 years the average loan term for Canadians), the monthly car payment will only be about $193. While the monthly cost appears to be significantly different, the amount that the buyer will pay for the car overall is significantly less with the shorter term loan. For the 36 month lease the buyer will only pay $15,948 across time, and for the 90 month lease the buyer will pay $17,370, which is a difference of more than $1,400. For a car loan at a higher interest rate, the difference would be even greater! Plus, loans with longer terms tend to take longer to build equity, which means that your credit will rebuild slower than with a shorter loan. See loans that you qualify for here.
Be cautious with high interest loans. A bad credit car loan may include a higher interest rate because lenders view buyers with bad credit as a higher risk. If you can, it is best to select a loan that offers both reasonable interest rates at a reasonable term length. Calculate your monthly car payments using this calculator tool. You can apply for bad credit auto loans in in three simple steps.
What You Need to Qualify for a Bad Credit Auto Loan
You ONLY need to meet THREE simple criteria to apply for a new or used car bad credit loan:
- You possess a valid driver’s license
- Are able to obtain car insurance
- Make at least $1,800 per month in income (Only $450 per week!)
If you meet these three criteria for acceptance, you can be approved for an auto loan in in just minutes!
How To Get Your Credit Report And Clean Up Your Credit Score
Having bad credit or no credit doesn’t make approval for an auto loan unattainable. Start by taking time to learn about your credit history. Armed with this knowledge you can pick the loan and car that fit your lifestyle and financial goals.
It’s important to review your options and never rush into a loan agreement without preparation. Research your credit score on a site such as Equifax or Transunion. You can use your auto loan to rebuild your poor credit, so that you will qualify for better financing options in the future.
Use these tips to access your credit score and rebuild your credit:
- Keep a signed contract of your loan, so that you have all details of your agreement.
- Never skip a payment. If you have bad credit already, then chances are you understand how one missed payment can affect you. If you can’t make your monthly payment, work with your lender to make a payment arrangement.
- Find ways to rebuild your credit like paying down credit card bills, closing old lines of credit, and removing old addresses and errors off of your credit report.
- Pay off high interest credit cards before you apply for an auto loan.
By taking a proactive approach in the bad credit auto loan application process, you can afford to purchase the vehicle that you want, rebuild your credit and meet your financial goals. Prepare yourself to proceed with the financing process by being vigilant of good practices that can help you secure the car that you want, and bad practices that can cost you more over time. Remember, your credit score doesn’t mean that you can’t afford to drive the car that you want and need. Ready to apply for your car loan? Click Here!
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