Getting approved for a car loan with your bad credit might seem daunting and impossible. Well, good thing, folks - It’s Not!
Even getting considered for an automobile loan in Canada on bad credit sounds too good to be true. But, of course, a good credit score range will help you leap and bounds with that ‘loan.’
However, having bad credit for a loan isn’t so bad.
You still have many options, even with your poor score. With the right help, you can get the desired loan at an affordable rate! Keep reading to know how:
Car Loans - Basics
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The financial decision you make today can impact the credit goals of your future.
For instance, if you want to apply for a mortgage, business investment, or vehicle loan, your credit score and history can significantly impact the result. Here’s a breakdown:
Bonus: Are you wondering what ideal down payment amount you should secure? Click to read a comprehensive guide by Experian on the topic.
Car Finance - What Is It?
You need money to buy a vehicle, but you need a vehicle to get to work so that you can earn money to buy the vehicle.
Ah, that’s so messed up!
Like, of course, you can always commute via public transportation, but the cost can really disturb your savings and financial planning if you have to do it twice daily.
Then comes other personal errands you have to make (using a bus or taxi), which require money again!
So, to save some bills in the long run, you opt to buy a car.
Woohoo, an idea pops up in your mind: Let’s get your car (alleged) financed! Cool, but what is it? And, how does it work? (or, how can it work for you?)
As Wikipedia explains, per se, car finance includes a variety of financial solutions that enable a person to purchase a vehicle, such as car loans, installments, and leases.
Okay, that seems easy to understand. Then what’s the problem with it? Find your answer below:
How does car finance work?
A financial association offers you the money you need to buy an automobile as ‘car finance.’ You pay the lender interest and perhaps fees over a set number of months to borrow the money in exchange.
You could get the car finance from different resources like:
Yes, the point is there are a bunch of options to consider. Now, the good thing is the majority of the providers keep up with the bad credit loan.
Nope, they’re not going to offer you miracle rates, but surely they can help you out in landing the decent ones!
Bonus: Click to see the short clip by VideoJug further explaining the car finance.
Can You Get A Car Loan On Bad Credit?
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To answer in one word: Yes!
It sounds bizarre, complicated, and simply untrue. Because we've been told you have to have a good credit score to get affordable loans.
Now, we are not implying that’s false information, but that’s also not true that a person with bad credit can never apply for or get a loan or car finance.
So, here are some ways to get car finance with poor credit:
1. Do Your Research & Compare Wisely!If you’re thinking of getting yourself a car, do yourself a favour and seriously start looking around.
Now, there are two things you need to look for:
A. A CarIf you can afford the down payment and at least the majority of the price. This is something to go with. You have then the choice to:
There’s not much into it regarding the bad credit score. For instance, your credit score is 547, but if you have the money to pay for the product, it’s all good.
However, if you have bad credit and no money, here’s what to do:
B. Car Finance:The world doesn’t end with bad credit. In fact, there are many lenders and loan providers that can help you with a car loan, even on a poor score.
The key is to search well and compare your choices to select the best one out there. Because you never know, there might be scammers waiting for you.
2. Consider Short Term Loans!
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Getting approved for car loans is often more challenging for Canadians with poor to no credit history.
Lenders use credit scores to determine how likely you are to repay your loan - the lower your score, the greater risk they assume they are incurring.
But, for a successful closing, you might have to budget your income intelligently. So, yes, you really need to put effort into paying the high monthly payments.
3. Skip The Add-Ons!
When you’re planning to get car finance, you have to cover everything related to it. Like any extra thing, you want to do on the vehicle (new or old).
Now, you may think when you’re trying your luck by applying for a car loan on a poor score, you might as well go all the way.
Nay Nay, not a good decision! Here’s why:
Think about whether getting that new tire set is necessary or even whether your vehicle needs the ‘new painted look.
All the little details and requirements matter when applying for a loan with a bad score!
Tips To Follow Before Applying For A Car Loan
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Buying a car isn’t cheap, and that’s why the majority of Canadians are inclined toward the automobile loan option.
However, qualifying and getting approval for a car loan with a bad credit score isn’t that easy. Here are some tips that can help you with your application:
1. Plan according to your score: Now, you might think your Equifax credit score is already bad, so what could be worse? Well, see if it’s poor or how bad it is and then do your loan planning accordingly!
2. Do a secured or unsecured visa credit check: You have to maintain an error-free credit report so your poor score won’t look even worse!
3. Keep an application gap: Every time you apply for a car loan, the lender or loan provider will pull a credit check to see your history and score. And it will result in inquiries which can further reduce your credit score!
Dealer financing may appear to be a more appealing option at times.
For example, deals like 0% financing and significant cash back rebates may appear to be the greatest alternative since they can reduce the total amount of your interest and premiums.
But, ensure that you understand the terms and know what you’re getting yourself into!
Bottom Line
Car loans mean two things: A car and the finance for it.
Easy peasy lemon squeeze, right? Hah, only if you wish getting a car loan was that easy - Especially if your credit score is just not considerable!
So, what have you got to do? Give this guide a read and know your options and some additional helpful tips! ;)