From driving to and from work to hauling the kids around to soccer practice, having a car is essential for most of us to operate in our daily lives. If you have bad credit, or have declared bankruptcy in Canada, getting a car loan may seem like an impossibly challenging task. It is true that not all lenders are willing to take on higher-risk auto loans, and receiving a rejection based on your financial history can be a devastating experience, particularly given how necessary cars have become to most of us.
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Before you resign yourself to public transportation or to waiting a decade to secure a car loan, read our tips on how you can get approved for auto financing, no matter how bad your credit score or how recent your bankruptcy. By taking the right measures, such as the ones we list below, you may find the process much smoother and less stressful than you could have ever imagined.
Make A Detailed (And Reasonable!) Plan for Your Car Loan Application
First off, don’t panic if you need a car loan but you’ve declared bankruptcy or have a low credit rating. Bankruptcy in Canada is becoming increasingly common, with a projected 1 in 6 Canadians declaring bankruptcy at least once over the next 30 years, and another 15% of Canadians are considered to have “bad” credit with a score of 520–680.
Of course, many of these people urgently need a car to be able to work and take care of their families. Consequently, the strong demand for car loans from this segment of the population means you probably have more financing options than you might expect. However, it’s important to first have a detailed and realistic action plan in place.
So, before you proceed any further, draw up a budget and make sure that it accurately reflects how much money you’re currently bringing in. Remember to be reasonable in your expectations; your car loan terms will be less desirable than applicants with a better credit rating, as you’ll be considered a greater risk to the lender.
It’s also a good idea to have a sense of the make or model of the car you’d like to buy, but a certain level of flexibility and ability to adjust your expectations may be required. Whatever car you end up choosing, having a sensible budget and a well-considered plan for getting a car loan will help you immeasurably as you pursue the next steps in this journey.
Get Preapproved For A Car Loan
If you need a car loan but you have bad credit or you’ve declared bankruptcy, one of the best things you can do is receive approval for a car loan.
You have many different options to choose from when looking into getting a car loan in Canada. So many in fact, that the wealth of choices could be daunting. A good place to start is Canadian firms that specialize in providing car loans to people with precarious financial circumstances, including bad credit or a history of bankruptcy.
Receiving preapproval for your car loan should allow you to save time so you won’t have to undergo the dull and time-consuming process of comparison shopping between lenders. Furthermore, you’ll receive detailed information on the lender’s proposed terms, including the duration of the loan, the interest rate you’ll be charged, and your monthly payment amount, which you can then incorporate into your budget.
How are all these terms determined? Usually a lender will consider your employment history and current job status, your income and expenses, and your payment history, among other factors, to put together the best car loan proposal for you.
In some cases, approval for auto financing can take as little as a few minutes and can be done online. Simply provide your contact information, employment details, and residence information to get all the numbers you need to know on your car loan.
Then, with this information in hand, you can judge whether to go ahead with the proposed financing option or whether you need to go back to the drawing board and make some changes to your initial budget and action plan.
Look Into Refinancing Your Car Loan
Maybe your bad credit or bankruptcy has resulted in less favorable car loan terms than you would have liked. Luckily, in Canada, you have other options in the form of refinancing your car loan. However, remember that you’ll need to be diligent about making your payments in full, and on time, in order to be considered for refinancing.
You can also improve your chances of getting the best refinancing terms if you’re able to find a cosigner with impeccable credit. Their high score can balance out your bad credit and score you a lower interest rate from your lender.
Likewise, if you can manage to make a higher down payment, your monthly payments will be lower, as will your interest rate.
Time to get driving!
Bankruptcy can seem like the end of the world. Being able to own your car can feel, for many, like the first step back toward a normal life. Even if your financial history seems like an insurmountable obstacle to getting a car loan, don’t lose heart. If you’re able to set realistic expectations and make a detailed budget, you should be able to get approved for a car loan that suits your needs. Finally, don’t forget that refinancing your loan at better terms is always an option once your credit score improves.