Did you know that one-third of Canadians believe they have too much debt?
The times aren’t good: inflation is rising, and the cost of living is only getting higher. This has forced many people to resort to loans when they purchase a new car. But when you have bad credit, your chances of getting a loan are next to impossible.
Fortunately, there is a market for those who need a bad credit car loan. The best online auto loan can still get you a decent interest rate. Bad credit loan approval is within the realm of possibility if you know where to look!
Follow along as we discuss bad credit and the best subprime auto lenders.
How Your Credit Score Works
To understand why it’s so hard to get a loan with bad credit, let’s discuss what a credit score is.
The credit score, put in the simplest terms, is a guarantee. It’s a way for others to determine if you are reliable when it comes to taking on financial responsibility, such as loans and mortgages. Credit institutions look at your financial history before they determine what this score is.
Your credit score can be anywhere between 300 and 850. The higher your score, the better.
Good Credit
To get a good credit score, you need to do the following:
- Assume some form of credit (a credit card, loan, or mortgage)
- Make payments on time
- Pay off your debts according to the agreed schedule
- Have multiple types of credit
A good credit score shows high financial reliability. It signals to others that you never miss your payments and that you have the money to make them. As a result, you’ll get more opportunities–better credit cards, loans with lower interest rates, etc.
Bad Credit
Bad credit, on the other hand, results from the following:
- Not assuming any form of credit (resulting in no score)
- Late payments
- Failing to pay debts off on time
- Cancelling credit cards, even zero-balance ones
- Defaulting on loans or mortgages
Bad credit means you’ll struggle to find the best loans and credit cards. It tells financial institutions to stay away from you. You may have more trouble getting loans or credit cards with good interest and repayment strategies.
Can You Get a Loan When You Have Bad Credit
The above information may make it seem like hope is scarce. But we’re here to show you that a bad credit car loan is possible. The best subprime auto lenders can give you a loan with decent interest rates.
Even in the instance of non-payment or bankruptcy, you will be able to find loan options.
Bad credit loan approval is possible thanks to organizations like Carsfast. They’re one of the best subprime auto lenders, and they understand the difficulty of having a bad credit score. They know the stress of making a car budget, and as such will work with you.
Options for the Best Online Auto Loan
Believe it or not, there are quite a few options for you if you have bad credit. While these options are not as great as good credit options, they’re fair and reasonable. They’ll help you get the car you need and rebuild your credit in the process.
Let’s discuss options for the best online auto loan.
1. Obtaining a Pre-Approved Loan
A pre-approved is a loan that anyone can obtain. Since they are “pre-approved,” your credit score and income don’t factor in. These are a great option if you are at your wit’s end.
Getting a loan from Carsfast is simple and easy. You fill out their online questionnaire and can get approval in minutes. They work with a lot of lenders, and as such can get you loan pre-qualification.
If you have really bad credit, this is your best bet. You can get trade-ins as a means of lowering your rate, too.
The benefit of pre-approved loans is that you have many options to work with. You can choose from one of many lenders, rather than having to make do with a single one. Companies like Carsfast make this easy and fast, so you can scope your options well before buying.
2. Getting a Loan With a Down Payment
A down payment is a lump sum of money you pay upfront. It’s a form of insurance that gives you better options than what you might have had without it.
The benefits of a loan with a down payment are the following:
- Your loan is much smaller, meaning less interest over time
- Your approval is much more likely
- It’s like a first payment, reducing the size of the loan
- You can exchange a higher down payment for better rates
Even if you don’t yet have a loan with a down payment, start saving now. It always helps to have that money on hand. You can then use it when the opportunity arises to get a loan with a down payment.
3. Proving Your Financial Stability
If you’re having trouble getting a bad credit car loan, your credit score might seem like a huge obstacle. Auto loan rates in Canada may seem too steep. So, why not leave the credit score behind?
Your credit score is only one of many options to prove your financial stability. The next best thing is proving it with pay stubs. A pay stub is a document from your employer that proves how much money you make per month.
Generally speaking, lenders in Canada will only lend to someone who makes at least $1,800 CAD per month. It doesn’t matter if this is biweekly payments, weekly payments, or monthly payments.
You can also provide a bank statement showing evidence that you have the money available. Even with a bad credit score, it makes it clear that you can afford at least the minimum payment.
4. Find a Cosigner
A cosigner is someone who takes on risk and responsibility in tandem with you. A cosigner can be anyone, but in most cases, people recruit a loved one or friend. The lender is more likely to do bad credit loan approval since a second person is on the line for repayment.
The benefits of a cosigner are the following:
- You can often get better loan options
- If your cosigner has good credit, you also get more loan options
- Your cosigner can contribute to loan payment if you need help
- Your cosigner can be anyone you trust
That said, there are a few caveats when it comes to a cosigner:
- They are on the hook for the loan, same as you
- If collectors cannot collect from you, they will go after the cosigner
- Their credit score stands to be tarnished if you do not pay the loan
- A cosigner cannot back out of the loan after signing the paperwork
It goes without saying that you should not take advantage of them. They are taking on a lot of risk to help you in a bad situation. Do your best to pay off the loan, and be clear if you might need help.
This is a great option if you have a spouse who has good credit. They can help contribute to the loan’s payment as well. A parent or a guardian are also options for cosigners.
5. Choose a Used Vehicle over a New One
New vehicles are a lot of financial responsibility. Even if you get a good price, this will be costly compared to other options. That’s why you should consider a used vehicle with the help of the best subprime auto lenders.
The benefits of a used vehicle include the following:
- Much smaller loan, meaning less interest
- Pay off the loan in a shorter period of time
- Still get the best online auto loan options
- Trade in an existing vehicle for a better deal
However, there are some things you should keep in mind here, too:
- You have fewer options with a used car
- If you buy directly from an individual, you may not be able to get this loan
- If the used car breaks you’ll still be on the hook for the loan
Used cars are a great budget option if you don’t have many other choices.
Use the Best Online Auto Loan to Rebuild Your Credit
Most important of all here is to use this loan to change your fortune. If you have bad credit, it can be hard to reverse your situation. Debt can be crushing and can sink you deeper over time.
A bad credit online auto loan is a chance to rebuild your credit score. Take this advantage and build a brighter future!
Get Your Car Loans With Carsfast
Bad credit loan approval is a tall order if your credit score is low. Fortunately, you can still get the best online auto loan from a lender that specializes in assisting people with poor scores. Make sure to consider your options well before you sign any documents.
Carsfast is Canada’s leader when it comes to obtaining an online auto loan. They have the lowest auto loan rates in Canada and plenty of options to choose from. Check out their questionnaire and see what you can qualify for.