Finding competitive new or used car financing can be challenging if you have bad credit. While a traditional lender may be unwilling to accept your application, nontraditional lenders have stepped up to fill the void and are issuing new and used car loans for bad credit borrowers. The improving economy has increased the ability of nontraditional lenders to accommodate customers with different credit profiles who need to purchase a new or used car. A nontraditional lender may have less stringent requirements for approving bad credit loans in Canada.
Qualifying for a Bad Credit Car Loan
While your credit score is an important factor when applying for financing, obtaining a car loan is based on several different criteria, including the amount of the down payment and the condition of the vehicle. The risk associated with the loan determines your qualifications. Consumers may be offered bad credit loans based on their unique circumstances. It may be possible to qualify for bad credit loans in Canada even if you have a history of consumer proposals, repossessions and maxed-out credit cards as well as late payments, collections and written-off debt. Canadian consumers must be employed in order to qualify for car loans with bad credit.
Types of Car Loans
The types of loans available include those with variable and fixed rates as well as flexible repayment and amortization schedules. A subprime or near-prime auto loan typically carries a higher interest rate than a standard solution. Certain circumstances may make it possible for moderate- to high-risk borrowers to qualify for used car financing near the current prime rate. You may also qualify for a lower rate with a secured option. The terms of loans for borrowers usually extend from 36 to 72 months. The monthly payment is based on the loan amount, the annual percentage rate (APR) and the length of the loan. A longer-term loan means that you will pay more interest. While the interest rate charged on a used car loans for bad credit borrowers is usually higher than that associated with a new car purchase, both types of loans are available to Canadian consumers with a less than perfect credit profile. The healthier your credit profile, the better the loan terms will be.
Securing Auto Financing
While shopping around for car loans with bad credit may take some time, this type of auto financing is available. Although loans for bad credit borrowers may carry a higher interest rate or require a larger down payment, it may still be possible for you to get the car financing that you need.