Canadians who need bad credit car loans are in lick. There are lenders out there who will give you a second chance. While it is great news there are lenders who provide car loans to borrowers with bad credit. You should take a moment and understand why you have bad credit.
Your credit score is not fixed. It changes monthly depending on the information that your creditors report. If you miss payments or are carrying a large amount of debt, your credit score will drop.
When you pay your bills on time, your credit score will rise and allow you to borrow money at lower interest rates.
Interest rates are at historic lows
The Pandemic forced central banks all over the world to keep their interest rates artificially low. While the rates were kept low, the central banks were forced to print money to keep the economy alive. This money printing has caused runaway inflation, which is forcing central banks to raise interest rates. When these rates increase, your costs of borrowing are going to follow suit. You need to start shopping around right now for car loans.
Do you have a reliable source of income?
Having a bad credit score is not the end of the world, provided you have a reliable source of income. Lenders are eager to issue loans but need to make sure you can handle the repayments.
As a rule of thumb, lenders will not approve a loan if you haven’t been in the same job for at least 6 months and preferably a year. Self-employed borrowers need to be in business for 1-2 years, the longer you have been in business or working, the greater your chances of having the loan approved.
Lenders will request copies of your latest payslip for employed borrowers. Self-employed borrowers must show their bank statements for the last 6 months. Without this information, lenders will not be able to approve your loan.
The interest rate on these bad credit car loans in Canada are going to be high. These lenders are taking on increased risk and the costs for the lender to raise capital is much higher than traditional banks.
Since you are paying a higher interest rate, you may not qualify for a brand new car loan, but instead, secure a loan for a used car. The term “used car” may have negative connotations but if you go through a reputable dealer, you will have no problems.
Since we are on the topic of dealerships, you will need to identify local dealerships that provide bad credit car loans in Canada. Not every dealership has access to the same lenders, so be prepared to shop around.
When you have found the dealership that has access to these lenders, you should find out what steps you have to take to rebuild your credit. So in a year or two, you can refinance your car loan to something more competitive.
Make sure the car you buy comes with a warranty, repair costs are on the rise so you need the peace of mind that a warranty provides.
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 bad credit car loans in Canada!
For any questions or concerns, please don’t hesitate to contact us here!