Getting a car loan with a less than perfect credit rating may seem impossible, but it’s not. Canadians with poor credit get approved for car loans all the time, thanks to reputable credit car loan providers that work with you regardless of your credit situation.
If you are searching for a car, van, SUV, or pickup truck and probably need to take a car loan for it with bad or no credit, you’re not alone. Online bad credit loans are a convenient way to help you get behind the wheels and a great way to work towards a healthier financial future by improving your credit score. Here are some tips to help you expand your knowledge as you prepare to go through the process.
Find Out How Bad Your Credit Is
First and foremost, you’ll want to go into the process knowing what your credit score is and what your options are. You can check your credit scores using any of Canada’s major credit bureaus such as Equifax or Transunion or a free tool like Borrowell and confirm that the details on your credit report are accurate. Typically, lenders will check your credit score during the loan application process. With lower credit scores (which is assumed to be a score below 650) or no credit history, applying for credit can be a frustrating process.
Most lenders assume they will be taking on greater risk hence will charge a higher interest rate or even turn down your request. If your credit score is bad now, don’t worry, as you can still get pre-approved for car finance and improve your credit rating while at it. You just need to know where to look. And that is going through a non-traditional lender who specializes in helping customers with bad credit get back on the road.
Consider Your Income
You can make up for bad credit with a high income. A lender is less likely to view you as a risk since you’re more likely to be able to pay all your obligations every month. The minimum income to qualify for an auto loan with low credit is $1,800 monthly before taxes or deductions are taken out. However, it should be noted that this requirement can vary from lender to lender.
Know What You Can Afford
Besides knowing your credit score and what features you want in a car, you’ll also want to know what you can afford. As the modern marvels of machinery that they are, cars aren’t cheap. It’s essential to be realistic about your financial situation and create a budget that you will stick to over the years. While some dealerships aren’t equipped to help bad credit customers, we can help you get pre-qualified for free, so you go ahead with the process knowing exactly how much you can afford.
Determine Your Down Payment
A down payment demonstrates your commitment to a car purchase and allows you to contribute more towards the car so that you are borrowing less. Based on the 20/4/10 rule, the conservative rule of thumb is to put down 20% on an auto loan. In case you aren’t able to make a down payment, there usually are no money down options to explore.
Consider a Used Vehicle
While you might really like to own a brand new Jeep Gladiator, this should be a time to consider going for used instead of new. Used cars have less depreciation after their sale. You’ll also improve your chances of obtaining a quality car of choice at a lower purchase price.
Decide on a Cosigner
Consider having a cosigner join you on the loan. A cosigner is an individual who signs the loan document with you and agrees to share ownership and payment responsibility in the event you can’t. Your cosigner needs to be someone with whom you have a mutually trusting relationship, like a relative or friend. Just make sure you pay your bills on time every month, as defaulting on your loan will affect them directly.
How a Car Loan Impacts Your Credit
Getting a car loan will positively or negatively impact your credit, depending on how you handle your repayment. Focusing your efforts on making regular payments is one of the best ways of improving your credit score. Make it a positive one, and you potentially will have many greater opportunities to borrow in the future.
Financing through the dealership is often a convenient way to get a car and a car loan in the same place. If you need a car loan but have bad credit, don’t panic. At Autosonline, we work with customers with bad credit and help them get approved for a used vehicle that fits their budget and lifestyle. The application process is free and quick.
To get started, fill out our online car credit application, and once your information is reviewed, you’ll receive an offer from us. We look forward to setting you up with a car loan with a reasonable payment schedule and interest rate.