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How to Get Approved for a Car Loan With Bad Credit in Canada

Oct 12, 2023 | Car Loans


Getting approved for a car loan with bad credit can seem really challenging. But with the right strategy, it is possible to qualify for auto financing even with less-than-perfect credit or past challenges. Follow these pro tips to boost your chances of getting approved for a bad credit car loan in Canada.

Check Your Credit Report for Errors

Before you start applying for any car loan with bad credit in Canada, it’s wise to pull your credit reports from Equifax and TransUnion and comb through them for any errors or discrepancies that may be unfairly dragging your score down. Getting any mistakes removed or disputed immediately can help improve your report. Checking your credit reports also lets you know your precise credit score, so you can set realistic expectations when applying for a car loan with bad credit in Canada.

Make a Sizable Down Payment Upfront for a Car Loan with Bad Credit

Lenders view borrowers who make a down payment of 20% or more of the vehicle purchase price as less risky when considering car loan with bad credit applications in Canada. While most lenders will accept smaller down payments, putting down a more substantial amount upfront reassures them that you are truly committed to repaying the auto loan. If needed, take time save up a larger down payment amount before applying.

Consider Used Car Models Instead of New

Sticking to used car models that are only 1-3 years old with relatively lower mileage can potentially help increase your chances of qualifying for approval for a car loan with bad credit in Canada. Used cars have loan amounts that are not as large as new luxury vehicles, and they also tend to depreciate at a slower rate which keeps them holding value longer. Expand your options by looking at reliable used models of common brands.

Shop Around with Specialty Subprime Lenders

Instead of just applying at your main bank or primary financial institution, make sure to also compare loan offers from specialty lenders that offer specific bad credit car loan programs in Canada. Many finance companies like CarMoney, CarsFast and others cater specifically to borrowers who are rebuilding their credit, and provide customized auto financing loan options even for those with challenged credit.

Add a Cosigner with Excellent Credit

Asking a cosigner with very good or excellent credit to apply alongside you on the car loan application can help strengthen and balance out your own weaker credit profile. Their solid credit history and score helps counteract your negative factors. Just make absolutely sure to diligently make all your payments on time moving forward, otherwise their credit could get damaged as well.

Provide Extra Documentation Upfront to Build Your Case

Lenders typically feel much more reassured about approving a car loan with bad credit applications in Canada when the borrower provides additional documentation upfront. This includes proof of income, residency, valid auto insurance, and statements showing other collateral assets. Going the extra mile demonstrates you are serious and ready to take responsibility for the car loan.

Explain Any Past Credit Challenges in Writing

If you have any specific negative marks on your credit file from the past, or previous experiences with financial struggles like bankruptcy or consumer proposal, take the time to draft a letter to the lender explaining the context, how long ago it was, and how you have taken steps to rebuild your credit since then. Demonstrating self-awareness and responsibility for past mistakes improves your odds of redemption and help you securing a car loan with bad credit.

Offer to Make a Higher Monthly Payment

Consider asking the lender if they would be willing to approve your application for a car loan with bad credit in Canada if you make higher monthly payments over a shorter loan term. While this results in higher payment amounts each month, it spreads the total loan principal over fewer months which saves substantially on your overall interest paid. Plus it shows the lender your commitment to aggressively repaying the auto loan.

Use a Cosigner Only as a Safety Net if Possible

If you have a cosigner with good credit willing to help, one option is simply having them sign onto the car loan with bad credit in Canada documents and not be listed on the vehicle registration or title itself. This avoids legal liability or risk for them as an owner, while still allowing their credit profile to help you get approved.

Be Realistic With the Vehicle You Need

To boost chances of getting approved, it’s wise to set your sights on reliable used models with moderate mileage that fit within your loan budget, rather than applying for loans on expensive luxury cars or sports cars. Lenders view high-end vehicle loans as very high risk for those with bad credit in Canada. Try to stick to cars priced under $15,000 for the best odds.


At the end of the day, with some extra diligence and preparation, those with bad credit can still get approved for the reliable vehicle loan they need in Canada. Implement these helpful strategies to significantly boost your odds of overcoming past credit challenges and getting approved for a car loan with bad credit in Canada with the keys to your next car in your hands. And for personalized assistance exploring bad credit auto loan options, the lending experts at Get Approved Canada can help identify partners that are willing to work with your unique situation.

Click here to learn more about improving your chances of bad credit auto loan approval success in Canada!

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