Low Credit Car Loan – Many car dealers advertise financing for buyers with bad credit or no credit.
It is possible for those whose credit is not ideal to get a car loan, but due diligence is required to ensure that the terms of the loan are affordable.
These steps can help consumers with low credit scores find car loans that won’t break the bank.
1. Know The Score
The first step for potential car buyers who suspect they have bad credit is to find out exactly how low their scores are. Consumers can access their credit reports and ratings from Equifax Canada and TransUnion Canada, the country’s two credit bureaus. In general, a score of 650 or higher is considered good credit risk in Canada, while below this number, buyers are classified in the subprime category. This often means higher interest rates.
2. Register a Deposit for Low Credit to Car Loan
In many cases, buyers can get a lower interest rate even in bad credit by depositing money on the car. A 10% deposit is often enough to access more advantageous conditions. This means that buyers interested in financing a 10000 loan vehicle should expect to deposit at least $ 1,000, especially if they have a credit score below 650.
3. Consider a Co-signer for Low Credit to Car Loan
Those who have a trusted family member or friend who has good credit and who are willing to co-sign on a car loan may be able to afford better financing. However, that person must undergo a credit check and agree to act as guarantor if the loan is not repaid.
Subprime buyers can often pay 9-10% interest on a car loan, compared to only 3-4% for those with better credit scores. Buyers should know these figures when requesting financing. Auto loans with interest above 10% are not worth the cost, so it makes sense that buyers get several different offers before committing to financing.
5. Do The Math
In addition to learning about the expected interest rates before shopping, buyers should be aware of what they can afford and stick to that price range. This means calculating the target purchase price based on the total amount you expect to pay, not the monthly payment you can afford. Making monthly payment purchases often means accepting longer loan terms, which is generally not a good financial strategy when it comes to buying cars.
6. Provide Documentation
The best way to get a favorable car loan despite a bad credit rating is to establish good faith by other means. When purchasing a loan, consumers must bring copies of recent pay stubs, utility bills and other documents proving their ability to generate income and repay the debts.
Although bad credit car loans are common, a low score does not mean being satisfied with the first offer. Preparation and research can potentially help consumers benefit from lower interest rates and shorter durations, saving them thousands of dollars over the life of the financing contract.