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How to Get a Car Loan with Bad Credit

As Canadians rank up unprecedented debt and bad credit, many are concerned as to whether or not they’ll be able to obtain an auto loan. In July 2018, interest rates have been raised by a factor of 1%. This increase, perpetrated by the Bank of Canada, is cited as the result of an economic expansion. In recent times, data suggesting said economic expansion has been present, but never this concrete. As reported by Global News, the Bank of Canada’s increased interest rates may cause a “cooling effect on growth, helping to keep inflation in check.” Although this is indeed a positive effect of the increase, those who maintain mortgages at a variable rate will almost certainly pay more. Those with a fixed-rate mortgage will, of course, be unaffected by this increase. According to the Business News Network (BNN), the number of debt Canadians owe has climbed to near-record highs. For every dollar a Canadian makes, they owe approximately $1.68.

Obtaining An Auto Loan With Bad Credit? Car Finance Canada Defies the Impossible

The fact that Canadians are so entrenched in debt is a scary fact for many. After all, Canadian credit scores are and have been taking tremendous hits due to this debt. The idea of purchasing a car may seem like an impossible feat, but we’re here to tell you otherwise. It is possible to buy a car with bad debt. For those who don’t have bad debt, but have no credit rating at all, you don’t have to worry. You can still buy a car. Auto loans are and always will be Car Finance Canada’s forte.

For those suffering from built up debt, and believe they can no longer purchase a vehicle due to said debt, this article may just become your best friend. Stay tuned, for we’ve put together a guide displaying everything you need to know about purchasing a car via an auto loan with bad or missing credit.

The Most Common Credit Struggles

  1. Bad Credit

    Take a look at your credit score. If you fall anywhere in the ranks of 300 to 660, you have bad credit. You’ll rank in one of the following three zones: 300 to 500, also known as deep subprime, 501 to 600, also known as subprime, and 601 to 660, also known as non-prime.

    Keep in mind, just because you’re in one of the three bad zones, doesn’t mean you can’t get a car loan, and eventually buy yourself a vehicle. According to statistics the Financial Consumer Agency of Canada, approximately a quarter of all auto loan customers were those with bad credit. For more information on your specific credit rating, feel free to contact us, and set up a consultation. Credit ratings can be confusing. Let us help you decipher yours today. Your auto loan is a mere few steps away!

  2. Lack of Credit

    Having absolutely no credit at all may seem like a confusing issue. Since you have no credit, you’d think that would make it easy, seeing as you have no bad credit either. However, you also have no good credit. Many auto loan companies would see that as a reason to not trust you, and would, therefore, be reflected back upon your rates. If this happens to be you, don’t worry.

    Here at Car Finance Canada, we understand that a lack of credit happens. Perhaps you are new to Canada, or you just didn’t have any credit cards under your name growing up. We understand and are more than happy to set you up with one of our highly-trained credit specialists. Our employees will walk you through all the details in regards to credit, as well as how you can get on your way to having a good credit rate. Call us today, let’s set up that meeting!

    Keep in mind that if you’re new to the country, beginning your application for an auto loan requires a few pieces of information. You must bring with you your landing papers or your permanent residency papers (either work), your driver’s license (a must for all of those applying, not just newcomers), your Social Insurance Number (SIN), and proof that you’re making above $1,800 monthly. To prove this you may bring your paychecks, pay stubs, employment contract, etc..

  3. Bankruptcy

    According to the Canadian Government, bankruptcy is defined as a “legal process that can provide relief to honest but unfortunate individuals who are unable to pay their debts.” For those swimming in debt, they may have absolutely no option but to declare bankruptcy. Although this may help those in this situation, it certainly doesn’t help your credit rating. The bankruptcy notice may remain on your credit rating for up to seven years. Typically auto loan companies don’t like to see this. If you’ve declared bankruptcy, worry not, for here at Car Finance Canada, we understand that life happens. Life is not perfect, it is not fair, and it’s just not right for you to be judged simply on unfortunate occurrences.

    For more information, give us a call. Our highly trained staff will lay out your options, and help you secure the auto loan that fulfills your needs the best. Keep in mind that a Consumer Proposal is not the same as Bankruptcy. This particular declaration is one that is made in agreement with your creditors. You will have to pay back a certain amount of your debt, as well as fulfill a variety of other pertinent tasks before lessening the burden of debt you may be suffering from.

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What Does Affect Your Credit Score?

Most major lenders, such as banks, see a bad credit score as a reflection of someone’s responsibility levels when it comes to lending. A bad credit score means to them that you’re not responsible enough to take on a loan. To the banks, it doesn’t matter whether or not your bad credit is your fault or merely due to a series of unfortunate events. Regardless of whether you lost your job, or went through a bad divorce, the big banks don’t care. We at Car Finance Canada however, do care. We understand that unfortunate things happen, and we’re here to help in any way we can.


  1. Payment History

    Often your payments say a lot about you as a person. Careless and/or reckless purchases are often what force people into debt, and therefore the bad credit zone. Purchases like fancy vehicles, boats, and even large houses are all prominent examples of reckless purchases. Fancy vehicles tend to lose their value over time and cost a lot more than they’re worth to fix when they eventually break.

  2. Length of Credit History

    If you have only been working on your credit for two years, and have bad credit already, you’re deemed irresponsible in the eyes of major lenders. Having a longer credit history is what saves many people from not being able to obtain a loan. If they can prove that it’s simply due to unfortunate events, or is the product of the current economy, they may have more luck securing an auto loan.

  3. Amount Owed

    This is simply in reference to the amount of money you owe lenders. If you have large amounts owed to others, how are you going to pay the monthly rates that lenders require?

  4. New Credit/Credit Mix

    For detailed information on new credit and credit mix, and how that has affected your credit rating, feel free to talk to one of our highly trained representatives. All consultations are free of charge and have absolutely no strings attached.

Ways of Bettering Your Chance of Obtaining an Auto Loan

  1. Check Your Credit Score

    According to the Financial Post, it’s been revealed that over 50% of Canadians do not know what their credit score is, and have actually never checked. Keeping up to date with your credit score is incredibly important, as it allows you to make educated financial decisions, and bargain for your preferred rates.

  2. Pay Any Overdue or Outstanding Bills

    Showing that you’ve done your best to pay off any outstanding bills is one of the best ways to show us that you’re doing your best, despite the unfortunate situation you’re in (bad debt). If you can’t pay them all of, don’t worry. Do your best, even if it means you’ll have to make some sacrifices. We understand that times like these are tough, but if you show us that you’re trying, we’re far more likely to see you as a trusted customer.

  3. Choose the Appropriate

    Vehicle Choosing the appropriate vehicle is very important during this process. Many people with bad credit tend to choose vehicles with high mileage, and therefore expect the rates to be lower considering the car is cheaper. This is not the case, unfortunately. An old vehicle is far more likely to break down and cost you even more money. Seeing as though you’re already in some pretty severe debt, we have no way of knowing if you can even afford to make those repairs. The last thing we want is for you to default on your car loan. Your credit rating will truly take another dive, and it’ll be even more difficult for our employees to help.

  4. The 20/4/10 Rule

    By following the 20/4/10 rule, it is much easier to follow your budget, and pay the rates you want to. First off, you need to plan around putting down a 20% down payment on the vehicle. Next, ensure you don’t finance your vehicle for more than four years. Lastly, you need to be sure that your payments per month are not above 10% of your gross income monthly.

Why Shouldn’t I Just Drive an Old Rust Bucket Instead of Worrying About This?

Many people with bad credit simply believe that by driving old vehicles that aren’t worth much at all, you don’t need to worry about securing bad credit auto loans. After all, when you don’t make big purchases, why worry about credit? Well, there are several reasons actually.

By obtaining a bad credit auto loan, you are actually working to better your credit score. By successful lending from Car Finance Canada, your Credit Score is likely to increase, perhaps even taking you out of the bad credit zone. That way, your future is as bright as ever. After all, a vehicle only lasts so long. Once you’ve run out of mileage on one vehicle, you’ll most likely need to secure an auto loan for another. Don’t want to go through the hassle of securing a bad credit auto loan again? Do it right the first time!

Another reason as to why you should get yourself a newer vehicle is simply for safety purposes. Old vehicles like to break. If you don’t the money to pay for these repairs or skills to do them yourself, you are endangering yourself and everyone you have in that vehicle. What happens when you blow out a tire? You can’t drive on the spare forever. Perhaps you have sticky brake calipers? Maybe a worn-out brake disk or brake lines? All are problems that occur to old cars. Don’t let them endanger your life. Apply for an auto loan today. Work on your credit, and stop driving around old and broken rust buckets.

Final Thoughts

Here at Car Finance Canada, we are committed to doing what’s right. People shouldn’t be a judge for the credit rating, for too many unfortunate and unavoidable factors are constantly coming into play. Our highly trained, and highly experienced staff know exactly how bad credit comes to be, and exactly how to help those with it obtain what they need. Why choose us over others? Well, to keep it simple, other companies tend to turn away those with bad credit. We do not. We work around your situation and do our best to keep within your preferred budget. Our specialists will even go over your credit information with you. Here at Car Finance Canada, your priorities are our priorities, and that will never change. We look out for you, the same way we’d want someone to look out for us. For a free consultation, with absolutely no strings attached, give us a call today.

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