Car Loan Options for Canadian Car Buyers

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In Canada, car loan repayments usually come to around $300-$600. This of course depends on what car you are buying and over how long you have chosen to meet these repayments.

However, every loan type is different. Canadian car buyers are always in the market for the best loans available to them. Thankfully, there is a wide range of car loan options available in Canada that will suit your needs.

Before considering applying for a car loan, there are some important factors that you should take into account. These include the types of loans available if you’re a new buyer, and what interest rates are available.

To learn more about the different car loan options available for Canadian car buyers, check out the overview below.

What Types of Car Loans Are Available In Canada?

In Canada, there are three main types of car loans used by new and old vehicle owners. These include regular car loans, secured personal loans, and unsecured personal loans.

Each has its own set of advantages and disadvantages. Which one you decide to go for will depend on what you are looking for in a car loan.

Regular Car Loan

A regular car loan is offered in most car dealerships. They are also offered by certain banks and other lending bodies. Car loans, as the name suggests, simply offer loans specific to cars.

Advantages of a Car Loan

The major advantage of a personal auto loan is that when your repayments are finished you own the car completely. You can sell the car after you’ve repaid your loan if you no longer need it.

With personal car loans, you can also usually avoid any large final payout. This will depend on the loan you go for and the dealer involved, so always check with them first.

Disadvantages of a Car Loan

Your credit rating often has an impact on whether you can get a personal car loan. Poor credit scores are likely to be a deciding factor in whether your application for a car loan is approved.

Car finance loans can also reduce your negotiating power, as they are often pre-determined by the lender. This means that you may not be able to negotiate how much you pay or for how long.

Secured Personal Loans

A secured personal loan is a type of loan that requires collateral. This is usually against a home you own or perhaps another asset, such as a second car. This collateral is used to guarantee you will meet the repayment demands.

Advantages of a Secured Personal Loan

One important advantage of a secured personal loan is that you can usually borrow larger amounts of money. This is because you have put up something valuable as collateral, so lenders feel you are more likely to repay your car loan.

Another advantage of this type of loan is that you can spread the repayment costs over a longer length of time. This can make what you pay back more manageable and ensure you won’t struggle with repayments.

Because you have provided an additional asset as a form of security, you will have less interest to pay. This can also cut the costs of your repayments and make them more manageable.

Disadvantages of a Secured Personal Loan

One very important disadvantage of secured personal loans is that if you cannot meet your repayments, you could lose whatever you put up as collateral. This is often a significant asset like your home.

It is very important to ensure that you will be able to meet the monthly repayment costs if you take out a secured personal loan.

You also risk damaging your credit if you cannot keep up with monthly repayments. This could make getting new or additional financing in the future very difficult.

Secured personal loans may also incur early repayment charges. This means that if you are in a position to repay your loan before the set time, you could be charged more money.

Your lender will let you know if you will be charged an early repayment fee when you borrow money from them. But it is important to be aware that your costs could rise if you decide to pay back your loan early.

Unsecured Personal Loans

An unsecured personal loan won’t require you to present any kind of collateral when you apply. These kinds of loans also don’t require you to have a guarantor to cover you if you can’t meet the repayments.

Advantages of an Unsecured Personal Loan

If you don’t own your own home or have nothing to use as collateral, an unsecured personal loan could be right for you. Because you don’t have other assets to help secure your loan, there is no risk of you losing anything valuable if you are unable to meet repayments.

Unsecured personal loans can also be advantageous if you need your money quickly. Once you have provided proof of income and the required personal details, the money can usually be in your account very fast.

Disadvantages of an Unsecured Personal Loan

If you can’t meet the repayments of an unsecured loan, your credit rating could take the brunt of the impact.

Considering there is nothing to guarantee you pay your loan back (such as putting it up against your house), the interest rates on unsecured loans are usually higher.

Many unsecured loans also have a shorter payback period. This means what you pay each month could be higher because you have agreed to repay the loan in a short amount of time. While this is fine for many people, it is an important factor to consider when applying for an unsecured personal loan.

When Is the Best Time to Get a Car Loan?

This depends largely on your circumstances. However, if you are currently in the process of meeting big monthly repayments that you are already struggling with, a new car loan may not be the right option for you.

Of course, there are ways to do this. Discussing your financial obligations with the bank or dealership you are taking the loan from will help you decide if you want to take on this extra dept.

What Is the Right Kind of Car Loan for a New Buyer?

Any of the loans listed above are fine for a new buyer. However, if you are a young applicant who doesn’t have any other assets to use as collateral, an unsecured personal loan may work best for you.

But that is not to say you can’t apply for the other kinds of available loans. Most loans are dependent on your circumstances. This means that if you’re making enough money to ensure you can meet repayments, you can choose the kind of loan that you feel is right for you.

What Is the Right Kind of Car Loan for an Experienced Buyer?

Canadian car buyers who have experience in buying cars will already have a loan type in mind. Some will prefer a secured personal loan for the larger amounts of money on offer.

However, some experienced car owners will prefer to go directly to a dealership. If you’ve repaid an auto loan before, you can use this to prove you will be able to make the repayments.

How Can I Guarantee My Car Loan Application Will Be Accepted?

Sadly, being accepted for any type of loan is never guaranteed. However, there are things you should do to make the likelihood of your loan application being accepted higher.

If you’re in a position to repay any current debt, you should do this before making your car loan application. This will increase your credit score and prove to lenders that you can meet monthly repayments.

Can I Negotiate on My Car Loan?

Yes! Negotiating on car loans is quite normal. You can negotiate on how much you wish to repay, how much interest you are charged, or how long you spend meeting repayments.

Your negotiating power may be reduced if you buy directly from a dealership. This is because dealerships often have their loan criteria already in place that can’t be changed.

However, if you’re making an application through a bank or a private lender for a car loan, you should always negotiate to get the best deal. What you choose to negotiate depends on your priorities.

If you want a lower interest rate, you may end up making a lot of repayments over a short period. But if you want to make lower repayments over a longer period, your interest rate could be higher.

Is a Down Payment Needed?

Whether a down payment is required on your car depends on where you are buying it from. Dealerships will often prefer a down payment to ensure your commitment to paying back your loan.

However, if you’re buying from a private seller, such as a person who is getting rid of an old car, a down payment usually isn’t required. This will depend on the seller. However, used cars are significantly cheaper than new ones, so making a down payment won’t always be necessary.

What If I Have Poor Credit?

If you have poor credit, there are still car loan options available to you. You should be aware that most lenders will run a credit check to assess your financial background and history.

However, other lenders will be happy to provide repayment options even if you have poor credit. This will depend on the car loan you choose and where you decide to borrow the money from.

Are Loans Different for New vs. Used Cars?

The main difference between securing a loan for a new vs. a used car is that new cars are generally more expensive. This means you will need to borrow more to finance a new car.

However, this is not a hard and fast rule. Some second-hand car dealerships will offer their own loan types that can be equally expensive depending on what car you want to buy.

What Sort of Interest Rates Am I Facing?

This depends on the lender and the length of time over which you meet repayments. ‘

Your credit score can also affect the amount of interest you are asked to repay.

Can I Choose My Repayment Length?

You will usually have a say in how long you spend repaying your loan. However, some lenders and car dealerships will already have set loan types in place.

In these circumstances, you will have to commit to paying back your car loan over the agreed amount of time set by the dealership.

What Happens If I Can’t Meet the Repayments?

If you are struggling to meet your loan repayments, you should get in touch with the lending body. Most will try to help you meet repayments by reducing the amount you pay each month and spreading it over a longer period of time.

You should be aware that in this circumstance you may face paying back a higher interest rate.

If you still can’t meet your loan repayments even after discussing your options with your lender, your car will likely be repossessed. This may hurt your credit rating, so it is important to avoid this scenario if it’s possible to do so.

Canadian Car Buyers Have Great Options for Car Loans

Getting a car loan can be stressful. It is difficult to know if you will always be able to meet the repayments and what will happen if you don’t. Knowing and understanding how Canadian car loans work can help make applying for a loan a little easier.

Thankfully, Canadian car buyers have several car loan options available to them. With the right loan, you will be able to easily meet the repayments over an agreed time length that suits you.

If you’d like to know more about the range of loan options available to Canadian car buyers, see this webpage. If you have any further questions, you can contact the expert customer service team. They can guide you through the car loan application process and help you figure out a repayment plan that will suit you.

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