The mistake many people with bad credit make is to think that they cannot qualify for a car loan or get a loan that doesn’t break their budgets. This is not true. However, there are several things you need to consider when trying to get car loans for bad credit in Canada.
People with good credit get 4% to 5% interest rate, those with bad credit get between 10% to 13%. Even with a bad credit score, you can get deals that are better than the market average stated above. While it may not go as low as that of those with good credit, it can be much lower than the market average for those with bad credit.
With car loans, there is less money involved across a shorter period. It is also easier to repossess a car than a home. The same credit score which put you in a subprime mortgage loan may bring you a prime auto loan. Applying for a subprime loan while you have good credit could result in you getting less favorable terms.
It is also always a good idea to start shopping at institutions where you have a relationship. Even in situations where you are unsure whether you will get car loans for bad credit in Canada, start with your credit union or your bank. Based on your relationship with the institution, they may know you better and end up giving you good terms.
Remember to also start with institutions that specialize in car loans rather than those that specialize in clients with low credit scores. This could include regional and local banks or reputable online lenders.
Professionals highly advise that you look out for a very low annual percentage over a very short repayment period. Avoid promises of low monthly payments that drag over a long period. If your only option of financing is by taking long-term loans, then maybe that car is too expensive for you.