Average reading time: 3 minutes
Unless you have saved up enough money to purchase a new or used vehicle with cash, you will need to obtain a car loan to purchase the vehicle. Problem is, if you have no credit you may have found it difficult to secure such a loan. But everyone needs to start out somewhere, so just because you don’t have credit doesn’t mean you’ll be blacklisted from obtaining a loan in Canada. There are just a few ins and outs to understand, plus a few pointers to expect.
Look For A Co-Signer
If you have a parent, guardian, or someone you live with who is willing to co-sign with you and they have a credit history (a good one, desirably), this can help you with obtaining a car loan. It may also help you reduce your interest rates as well.
It is important to talk with them and see if they have a good credit score though. Asking someone with a poor score may actually hurt your chances of landing the loan. Often times it is better to have no credit history than extremely poor credit. Just make sure you stay up on your payments. If you fall behind it will go not only on your credit report, but on theirs as well.
Grab All Your Financial Documents
Having a credit score makes it easier to apply for a loan, but just because you don’t have a credit history doesn’t mean you can’t. You just need to jump through a few additional hoops to get auto financing.
First, you’ll need to grab all your financial documents. You need to prove you can afford the loan. The best way to do this is with all your financial records. Make sure to grab your current pay stub (print this out if it is all electronically), plus your last several years of taxes.
You will want to show you can pay your bills on time. Of course, without a credit history you won’t have this information on file, but you will be able to show it in other ways.
For starters, bring in your cell phone and other utility payments that demonstrate you pay your bills on time. You may also want to ask your landlord for payment history as well. Make sure to bring all of this with you during the first time you go into your bank or other financial institution looking for a loan.
Simply having everything with you will demonstrate to the lender that you’re organized and doing everything in your power to impress the lender and help land the loan.
Save A Down Payment
You want to show the auto loan lender that you’re serious about not only buying the vehicle but in paying off the loan. One of the best ways to do this is to have a sizable down payment saved up.
Traditionally you should aim for at least 10%, but in these instances the more you can pay up front the better. This means the financial institution takes less of a risk on you as you’re paying more for the car initially.
You Can Get A Car Loan Without Credit
Just because you don’t have a credit history doesn’t mean you can’t secure a car loan here in Canada. You just need to prepare yourself for the process. It can take a bit longer to go through everything, and you won’t secure the best interest rates as those who do have excellent credit reports, but with your car loan you will have the opportunity to not only own your own vehicle, but build your credit at the same time.