With the chronic shortage of new and used cars available in the Canadian market, if you need a car you will need to act fast even if you have bad credit.
Our goal is to provide the information needed to buy a great are at a reasonable interest rate and have enlisted our Waterloo auto loans team to help.
The first thing you need to do is get your finances in order by reviewing your credit report and isolating the root cause of your “bad credit”.
Accessing your credit report
There are two major credit reporting agencies in Canada, Equifax, and Transunion, you will need to visit each one and get a free copy of your credit report. They will try to sell their credit monitoring services but you do not need those services.
While reviewing your credit reports, look for any account/s that are either past due or have gone into collections. If you have any accounts that are past due or in collections, those need to be paid as soon as possible.
Having accounts that are delinquent is the primary reason your credit score is low.
To qualify for the most competitive auto loan interest rates, you will need a credit score of 680 but don’t worry, there are lenders who will give you a loan (You just need to know where to find them, we will show you).
Income verification process
Even though you have bad credit, there are lenders who will give you a loan provided you have a verifiable source of income.
Since the onset of the pandemic, lenders are now very cautious so you will need to provide documentation. If you work a classic 9-5 job, your latest salary slip should meet the lender’s requirements but if you are like most Canadians with more than one job, you will need to provide bank accounts and income tax assessments.
The lenders want peace of mind knowing you are able to repay the loan if approved.
There are debt-to-income ratios that all lenders use when making a decision on whether to approve a loan. If you are carrying a large amount of debt, you may not have enough income to pay the car loan so make sure you declare all of your income.
Accessing the lenders that provide bad credit car loans
Spoiler alert but you are not going to find lenders that offer bad credit car loans online or by doing a Google search. These lenders are only accessible through a network of authorized dealers, the good news is these dealers are in your neighborhood.
There are local car dealerships that work with consumers who have bad credit. The dealership has a working relationship with the lender and can discuss the intricacies of your situation in detail.
Not only is the dealership able to help you get approved for a car loan right away if you follow their advice, you will be able to refinance your car loan to a much lower rate. It will take a few years, but your credit score will improve to beyond the 680 requirement.
The car shortage is going to last a few years so you should reach out to your local dealership ASAP, you will be happy you did.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!