Do you know your credit score? Credit scores can help you get several types of financial aid. A good credit score improves your chances of getting an auto loan.
However, not all credit scores are equal. Canadian credit scores have a range of 300-900. The average credit score in Canada falls around 650.
Scores above this figure count as good or very good credit. A score between 575-650 counts as fair.
What about bad credit? Bad credit constitutes a credit score between 300 and 574.
Bad credit doesn’t necessarily stop you from financing a car. Instead, a bad credit auto loan can help you get a new vehicle even with a poor credit score.
Finding an auto loan with bad credit can be a challenge. Check out these five tips to find the auto loans you need!
5 Tips for Finding a Loan in Canada
1. Find Out Your Credit Score (And Improve It)
The first step in getting bad credit auto loans is discovering your credit score. Surprisingly, many Canadians don’t know their credit scores. Many people only check it once or twice a year.
You may not know how to learn your credit score. If so, don’t worry! Several resources exist to help you discover it.
First, check online credit score checkers. Many of these resources exist for free.
Another step is to request your credit reports from the two primary credit bureaus. These two bureaus are TransUnion Canada and Equifax Canada.
These bureaus will send you full credit statements that include your score. When you receive these statements, examine them for any inaccuracies. For example, you may notice that your statement includes backed payments you know you paid.
You can challenge any inaccuracies that you see on your credit report. Once you verify these errors, it will improve your credit score.
There are several other ways to improve your credit score. Some of the most common approaches include:
- Take out credit building loans
- Pay bills on time
- Pay down revolving account balances
Doing this for a few months can improve your credit score and enhance your chances of getting an auto loan. In the meantime, consider following the second step.
2. Save for a Bigger Down Payment
Another step to follow in getting an auto loan is to save for a bigger down payment. This process may seem difficult, especially if you’re trying to increase your payments to improve your credit score. Why should you save money when you’re trying to pay more?
The answer revolves around the lender’s mindset. Financial lenders want to ensure the money they lend to others will eventually return to them. This goal is also why they charge interest on their loans.
The interest payments borrowers make ensure they get back a higher amount of money in case the borrower has to default on the loan. It offers a layer of security.
The same holds for larger down payments. When you demonstrate that you can afford high down payments, lenders often become comfortable lending you money. Higher down payments also help by allowing you to take out a smaller loan.
3. Set a Budget You Can Afford
The next step is to set a budget for your vehicle to ensure you can repay your auto loan. When you make this budget, consider more than just your monthly payments. Remember the other payments you’ll need to make as well, such as:
- auto insurance
- fuel costs
- maintenance fees
Setting a budget helps you determine how much you’ll need for your auto loan. It also helps you set realistic expectations for what kind of car you can afford. Even the best bad credit auto loans won’t help you get a Maserati.
4. Find a Co-Signer for Your Bad Credit Auto Loan
Finding a co-signer can go a long way to helping you get an auto loan. Lenders often prove warier about offering you the money when you’re the only responsible party. However, a co-signer with higher credit than you lends more legitimacy to your request.
Why is that, you ask? First, it inspires confidence in your ability to pay back the loan. Even the most loving family members won’t co-sign for a loan that they expect to bankrupt them.
So, when your co-signer vouches for you, it makes lenders trust you more. It also provides them with a secondary payment source in case you can’t repay the loan. In other words, it offers them additional security when they lend the money.
5. Find a Bad Credit Auto Loan Website
Some online lenders specialize in giving auto loans to those with bad credit. However, please be careful when considering these websites. Some offer “loans” that are essentially scams.
Bad credit auto loan lenders may use different methods to approve you for an auto loan. Some perform no credit checks, allowing you to become approved even with the worst credit.
Many of these lenders charge higher interest rates for borrowers. This way, they can ensure they get the most money out of borrowers as soon as possible in case the loan defaults.
Also, remember to shop around for different payment rates. Companies that let you compare their prices with other lenders are often more reliable.
Find Your Auto Loan With Us
Finding a bad credit auto loan can take a lot of work. By the end of this process, you may wonder whether you can find a suitable loan.
If so, don’t worry! We offer affordable loans for borrowers with all types of credit scores.
Our establishment provides several advantages for borrowers. We strive to provide lower interest rates and payments. In doing so, we can save you money.
So, apply for a loan with us today! Soon, you can finance the new vehicle you need.