Around 33% of Canadians worry about their credit score.
A credit score is a snapshot of your creditworthiness. The majority of lenders require average to high credit scores for loan approval. But not all lenders are the same.
Having poor or average credit should never stop you from getting the vehicle you want and need. Lenders can provide you with car financing. But you have to know where to find them!
To help make things easier, we’ve put together this short but complete guide about bad credit car finance options. We’ll go over everything you need to know about credit scores, finding lenders, and getting your desired approval. When you can find a quality loan, you’ll be able to pay low-interest rates over a preferred time period.
What’s the secret to getting a car loan with bad credit? Read on to find out.
Navigating Credit Score Ratings
When it comes to exploring bad credit car finance options, it helps to understand how your credit score. Companies use different formulas for credit scoring.
You’ll have more than one score out there. Scores range from very poor up to excellent.
Credit Score Calculations
How do credit score calculations work? Specific data points go into creating scoring models.
Here are the different data points that can impact your credit score:
- Account history
- Payment history
- Credit utilization
- Debt
- Credit mix
- Recent inquiries
Pavement history concerns how often you pay your bills on time. Your account history pertains to how long you’ve had specific loans and credit cards open.
Debt takes into account how much you owe across every single account. Your credit utilization notates how much credit you use compared to the amount you have available.
Credit mix has to do with the types of credit you use, such as installment loans and credit cards. As far as recent inquiries go, these have to do with the credit reports from potential creditors. If you have a lot of new loans, that could also impact your recent inquiry score.
Collections activity, foreclosures, and bankruptcies also figure into your credit score. Sometimes major events like bankruptcy can affect your credit score for 10 years or longer.
How to Quickly Improve Bad Credit
The good news is that with enough time, your credit score can improve. There are even things you can do today to start making immediate changes. The first step is to thoroughly review your credit report.
Get a sense of where you stand, so you can make a plan for where you want to be. You’ll also need to catch up on overdue bills and practice paying every bill on time.
Since your payment history plays the biggest part in your credit scoring, getting it under control can be a major help. If you’re unable to pay any bills, reach out to a lender immediately. There might be special payment options available to you.
Anything you can do to avoid missing a payment will be helpful. You could also look into becoming an authorized user.
Trust can be one of the most significant factors when it comes to acquiring lending. By becoming an authorized user, you’ll be able to benefit from somebody else’s good credit history.
Another credit-improving option is to get a secured credit card. Certain credit card companies report secured credit card activity, which can help boost your score.
Finally, pay attention to your credit utilization. How much of your available credit is in use?
You should always have some credit available. Across all accounts, if you can keep credit usage to 30% or lower, you’ll be in a great position. All of these things can help boost your credit score.
Certain changes will take longer to provide results, While other financial tools can start providing results in a matter of weeks. If you’re looking to buy a car now, your best bet will be to find a lender who’s willing to work with a bad credit score.
Should You Buy a Used or New Car?
You might be wondering why it’s worth your time to get a car loan instead of paying cash for a used vehicle. It all has to do with long-term planning.
When you buy a used car, its lifespan is already cut short. You’ll be investing in a vehicle that isn’t guaranteed to get you everywhere you need to go.
Alternatively, when you buy a new vehicle, you’ll save on car maintenance. If there is any type of mechanical breakdowns, they’ll likely be covered under warranty.
Certified Pre-Owned
Another option is to purchase a used vehicle directly from the dealership. When you purchase from a dealership, there are certain guarantees that you can rely on. For instance, certified pre-owned cars have to meet specific quality standards.
Different dealerships will have special warranties, customer service plans, and more. Instead of buying from a private seller, give yourself the peace of mind that a dealership can deliver.
Finding the Right Lender
If you want to get approved for a car loan in a matter of minutes, you’ll need to find the right lending network. Look for lenders who specialize in providing loans to people with all types of credit. When the lender has access to dealers across Canada, they’ll be able to specialize in providing you with the best deal.
Unfortunately, a lot of Canadians find themselves turned away from traditional car lending markets. Having a limited credit history or bad credit history winds up stopping them from getting the transportation they need. This should never be the case!
As long as you’re willing to find a reputable lender, you can get great rates, low payments, and save money. You could qualify for a loan that has a reasonable interest rate, which means it’ll be easy for you to maintain payments.
As you maintain your payments, you’ll be building your credit immensely. We also suggest looking for lenders who give you the ability to compare options. The best platforms will let you compare multiple lenders throughout Canada so that you can find the best deal for you.
Applying for a Bad Credit Loan Online
Have you been calling institutions and trying to get loans but not having any luck? You probably need to try filling out an online application. User-friendly websites will have online applications that only take 2 to 5 minutes to complete.
By only asking for the information they actually need, lenders can provide you with a quick approval decision. The first step is going to be to apply, which, as we said, happens quickly.
First, you’ll apply online, and ensure that you’re entering all of the incorrect information. After approval, you’ll be able to look at the best rates.
Carefully compare the different rates among lenders to find the best deal. From there, you can begin to shop for your dream car.
The best bad credit finance lenders will have access to dealerships across the nation. From the comfort of your home, you’ll be able to check out hundreds of dealership inventories.
Basically, what you’re looking for is a lender that puts you in the driver’s seat. You should get to decide where you get your loan from, where you get your vehicle, and what you’re willing to pay. It’s also important that you work with a lender who isn’t going to try to upsell you.
You don’t need to be contacted about insurance deals or bundling packages. Instead, your sole focus is getting an outstanding loan and reliable transportation. That’s why the best lenders won’t contact you unless it’s necessary.
You never feel an obligation to move forward with the loan. Instead, it’s all about waiting until you’re ready. If at any point a lending institution makes you feel rushed or pressured, take your business elsewhere!
What to Expect With a Bad Credit Loan Application
What type of questions can you expect on your bad credit loan application? First, you’ll need to choose your preferred type of vehicle. For instance, are you looking to buy a car, van, truck, or SUV?
After picking a vehicle, you’ll move on to deciding your monthly budget. By selecting your preferred budget, you’ll be able to avoid loans that are out of your price range.
It’s always a good idea to select the payment that you’ll be able to easily reach rather than one that you’ll have to stretch to make. The last thing you want to do is sign up for a car loan and fail to keep the payments timely.
After choosing your monthly budget, you’ll need to disclose whether or not you have an existing vehicle. If you have an existing vehicle, do you want to trade it?
Will you be keeping your existing car and becoming a 2 car household? Or is this your first car, and you don’t have any vehicles under your name?
Typical Application Questions
Moving on, you’ll enter personal information such as your date of birth. Take your time and make sure you enter the information correctly so there aren’t any delays with your approval.
You’ll also need to disclose your employment status. Employment status options include employed, retired, self-employed, unemployed, and being on disability.
You’ll also need to let lenders know your monthly gross income.
Always Be Honest With Loan Information
Be completely honest when disclosing your income. You don’t want to claim that you make more than you actually do in hopes of approval.
Any misinformation could delay the approval process or cause a revocation of the loan altogether. Instead, play it safe and always enter the correct information.
Whether you own, rent, or have some unique type of living situation; the lenders are going to want to know. Going one step further, the application will also require that you enter your monthly rent or mortgage payments.
There are a few more details you’ll enter before wrapping up the application. As we mentioned earlier, the entire process can be completed in less than 10 minutes.
Avoid Complicated Applications
Overly complicated loans could be a sign that the company is trying to approve you for financing opportunities you’re not interested in. If a bad credit loan is asking for so much information that it takes 30 minutes or longer, you’re not working with the right institution.
Instead, quality lenders understand the need for efficiency and timeliness when it comes to loan applications. After completing your application, the platform can begin pairing you with the best dealerships. In a matter of minutes, you’ll find out whether or not you’re approved for your loan.
What to Do After a Loan Denial
Let’s say you fill out the application and find out you aren’t approved. If the lenders aren’t able to find a match for you based on your profile information, there’s still hope. You can still look into getting a personal loan so that you have the cash you need now.
If you’re interested in the personal loan, you’ll need to answer a few additional questions. For instance, you’ll need to let the lenders know how much you want to borrow.
Pick a number that you’ll be able to easily maintain payments with. You don’t want to borrow $10,000 if that’s going to be difficult for you to repay. Instead, pick the amount that will help you get your vehicle faster.
Buying a Car Bad Credit Car Finance Options
As you can see, exploring bad credit car finance options opens opportunities for buying a car. Instead of assuming you won’t qualify for a loan, it’s worth your time to try applying.
Here at CarsFast, we offer car-buyers all sorts of financing options, regardless of your credit score. It’s our belief that everyone should have the transportation they want and need. Our vast lending network can instantly connect you to hundreds of dealerships with the best deals around.
What are you waiting for? Apply for your auto loan today. It takes less than 5 minutes!