If you’re hoping to purchase a sedan, family van, truck, or any kind of vehicle, you’ll need to explore the car financing options available to you. It’s crucial to find a loan that best fits your financial situation and your needs to ensure you successfully repay the loan on time. Part of the loan application process is submitting your financial information, like your credit score, which plays a huge role in getting approved.
A good credit score can get you a low-interest rate and an approved loan. The good news is that you can still get a loan with a low credit score in Canada, although you’ll usually get a higher interest rate. Here’s what you need to know about bad credit car loans and the credit score you need to get approved:
The Minimum Credit Score Required for a Car Loan
Car loan lenders typically prefer applicants with a credit score of 630 and above. The more confident they are in your ability to pay the loan on time, the lower the interest rate they’ll offer you, allowing you to save more money in the long run.
Still, this isn’t set in stone, as the approval ultimately depends on the lender’s preferences and the applicant’s standing. Some lenders are stricter and approve applications with much higher credit scores, and others are more lenient and willing to accept low credit scores. Even car dealerships can help you find the car financing you need to secure a loan for your future vehicle.
If your credit score is below 630, don’t worry—you can still get approved for a car loan. However, you’ll have to keep an open mind and continue comparing rates, as it may take a while to find a lender that will work with your credit score.
Getting a Better Loan
The average credit score required for getting approved for a car loan is in the 600s, resulting in mediocre loan terms and conditions. Credit scores between 680 and 720 mean lower interest rates and more favourable terms. Credit scores higher than 720 are even better, resulting in tiny interest rates and advantageous terms.
Your credit score will determine the kind of car loan offer you should expect to receive. The higher your score, the better your offers will be. It’s important to note that everyone wants a loan with low monthly payments, low-interest rates, and a large loan amount. With a high credit score, these are all possible, and you’ll get approved right away. Still, you should consider the deal being offered and study it carefully to determine if it fits your present financial position and future goals.
Improving Your Credit Score
However, if you have a low credit score, you may want to consider boosting it before applying for a loan. You can also do more research to increase your chances of approval by finding lenders who work with people with similar credit scores.
To start, check your credit score. Get in touch with a credit bureau to resolve any mistakes you spot in your credit report. Reorganize your finances to pay off as much outstanding debt as possible and begin making punctual, complete, and consistent payments. Then, shop around for car loan offers so you can compare and negotiate for better rates. In the process, start saving up a down payment of 20 percent of the vehicle’s purchase price, which will demonstrate to lenders your readiness to commit to the loan.
Purchasing a vehicle is incredibly exciting and can vastly improve your quality of life. When you have a healthy credit score, you won’t have any problem getting approved for a car loan. However, if you have a less than stellar credit score, there’s no need to fret; you can still get approved for a car loan or explore ways to improve it.
Get Approved Canada is a team of Canadian loan specialists that can help you secure bad credit car loans. We work with all credit types to get you the best payment options and the lowest interest rates, whether for car loans, mortgage loans, or personal loans. Apply now!