If you have moved to a new country for work or higher education, you might need a car that can help you commute easily. If you are looking for information on how you can borrow a car loan for newcomers, Canada has only a few basic rules that you need to follow and soon you will be on the road in your car. Getting a car loan is not as hard as it might seem. You need to have all the required documents, understand how the procedure of buying a car and the credit system work, and meet the eligibility criteria of the lenders to get your car loan approved. To understand how to finance your car in Canada, as a newcomer, you must read this guide from Carsfast. The following sections will not only guide you through the process of buying a car but also help you with all the little details of a loan like the interest rates, repayment tenure, credit score requirement, and so on.
All You Need To Know About Buying A Car In Canada As A Newcomer
Xavier Niel quotes, “In life, you need a house and a car. After that, you have a choice.” Even as a newcomer in a country, a car might be a necessity for you or you might just wish to own a car to make traveling hassle-free for yourself. No matter what your reason is, we are here to help you understand everything that you need to know about buying a car in Canada. The following four aspects will help you know the steps of buying a car and borrowing a car loan as a newcomer in Canada.
Finding The Right Car
Which car should you buy? To answer this question, you will have to consider a number of factors. Some of these factors include the cost of the car, the features, and performance of the car, fuel economy and running costs, reliability and warranty, and the depreciation value. You can also connect with friends and family who would have purchased cars recently to discuss more. Once you have shortlisted the best options, you can check out the prices at dealerships nearby and also start exploring the loan options and car loan rates being offered.
Car Loan For Newcomers Canada: Understanding Credit
This is an important step, especially for newcomers as you need to understand the credit system before you can go ahead and apply for a car loan. For applying for a loan, you need a credit score. This is a three-digit number assigned by credit bureaus that will help a lender in judging your creditworthiness. To build your credit score, you can get a secured credit card, maintain a low balance and make payments on time. If you are still not able to qualify for the loan, you can get a co-signer to assume responsibility for repaying the loan if you default.
Where Can You Find Car Loans?
What is the best place to get a loan that will offer you lower interest rates for car loans? You have three options. You can either get a loan from your bank or a credit union. This loan will require a strict credit check. Second, you can get your car financed directly through the dealership where you buy your car. This will be a more lenient method but the interest rate might be high. Third, you can check online for loan companies that deal with the loan applications of newcomers.
The following are some documents that are an important part of buying a car in Canada:
- A valid driving license
- Car insurance
- Car registration documents
Types Of Car Loans Canada
Now that you have some idea about borrowing a car loan in Canada, let us take you through the different types of car loans that you can get.
- Standard Loan. This is a very common loan that will be offered by banks and credit unions. The interest rate on this type of loan is generally fixed and the installments will be nearly the same throughout the term of the loan.
- Lease Return Loan. On returning a leased vehicle, you might be eligible for a lease return loan with a low-interest rate. This is a good option for you to save money on the car.
- Cash Back Loan. With this loan, you can pay for the car with a lump sum amount that you receive from your lender. The interest rate on this loan is negotiable if you have a good credit score.
Benefits Of A Car Loan
Why should you take a loan to buy a car and not pay the complete amount in cash? As a newcomer in Canada, you not only need to buy a car but also need to keep some savings in place for any situation that comes up. Most of all you need to start building your credit score and borrowing a loan is a good way of doing that. That’s right, you can build your credit score by borrowing a loan and making every monthly payment on time and in full. Other than this, borrowing a loan also makes it possible for you to break down one single payment into multiple smaller payments that are spread over a longer duration. If you finance your car through a dealership, you might also receive some other benefits.
Best Car Loan Interest Rates In Canada
How can you get the best interest rates for car loans in Canada as a newcomer? When applying for a loan, one of the major concerns of the borrowers is that they do not wish to pay a huge amount as interest to the lender. A lower interest rate will ensure that you do not pay a very large sum every month in installments. The following are two ways how you can get a lower interest rate on your car loan in Canada.
- Explore your options. Connect with your bank where you have an account or trusted credit union, to know the options possible. Get preapproved to get a rough idea of what you can afford and accordingly you can figure out which car you must buy.
- In Canada, interest rate is very much influenced by the credit history and credit score of the applicant. You must maintain a high credit score to be able to avail of a low-interest rate. Need help improving your credit score as a newcomer in Canada? The next section will help you.
Are you looking for the best interest rates in Canada? Look no further than Carsfast! Not only do we offer the best rates on new car auto loans, but we also provide a variety of options for securing the best interest rates for your financial needs.
Tips For Improving Your Credit Scores And Credit History
From the previous sections, it is very evident that your credit score and credit history play an important role in your loan application being approved and the interest rate that you will pay on the loan that you borrow. Having a solid credit report and a high score can help you get a loan for financing a car on better terms. The following are a few tips that will help you increase your credit scores to avail of loans.
- Keep a regular check on your credit scores. Make sure there are no errors and if there are any, get them resolved at the earliest.
- To avoid missing your payments, set up the autopay feature so that your monthly payments are automatically deducted on time.
- A low credit utilization ratio, preferably below 30% will help add up to your credit score.
- Do not close any credit card accounts.
- Do not apply for new credit accounts unless you are sure about qualifying or you really need the loan.
As a newcomer in Canada, you will not face many difficulties in buying a car and availing of a car loan for the same. When applying for a car loan for newcomers, Canada has a few rules and regulations that you must follow and the procedure will be quite simple for you. In this article, we have shared with you all the details that you will need before you apply for a car loan with a bank, credit union, or car dealership. We hope as a new immigrant in Canada this information will be beneficial for you in buying a car and getting your loan application approved.
Frequently Asked Questions (FAQs)
Can a newcomer buy a car in Canada?
Yes, a newcomer can buy a car in Canada. You must have a driving license, car insurance, and vehicle registration for buying a car.
Can I finance a car if I just started a new job?
Yes, you can finance your car if you have recently started a new job. While some lenders would require you to be employed for at least 3 months, other lenders will offer you a loan even if you have a lower employment record.
Can non-permanent residents get car loans?
Yes, non-permanent residents can get their car loans approved in Canada. The lending terms might be a little more strict for these residents.