How to get a car loan on minimum wage

Posted by on Aug 12, 2022 - Archived under Bad Credit Car Loan Tips

Suppose you are working for minimum wage and need a car. In that case, these suggestions are going to help you get behind the wheel of a car sooner rather than later, but you need to stick around with us until the end.

Working out a budget

The first step in your journey to getting a car loan is establishing a budget; even if you don’t want to create one, prospective lenders are going to look at your budget when deciding on how much of a car loan you can receive.

These ratios could change at any time, but the industry average is that your debt-to-income ratio cannot exceed forty percent of your gross, pre-tax income.

If you are earning $2,000 per month, then your maximum debt cannot be more than $800; this takes into consideration all of your existing obligations plus the projected new car loan.

Rising costs require prudent money management

There is an adage that it is not what you make but what you keep that matters.

With rising costs due to inflation, even upper-income Canadians are feeling the pinch; from housing to food, everything is getting more expensive.

If you are not carrying much debt, you can get an amazing car loan, even on minimum wage, but it all comes down to your credit score and where you rank compared to the rest of Canada.

Credit score variables to bear in mind

There are two credit reporting agencies in Canada, TransUnion, and Equifax. Each of these firms has its own credit scoring model, you could have a 720 with TransUnion and a 650 with Equifax, and those differences could cost you dearly.

What you should do is sign up for free access to your credit report with both of these firms.

Once you have access to the reports, you can look at your credit reports and make note if there are any errors or mistakes inside your credit report that could weigh down your score, making it harder to get a competitive car loan.

Rising interest rates are working against you

As the Bank of Canada increases interest rates to fight inflation, Canadians who are earning the least are going to feel the greatest impact of these changes.

When the benchmark interest rate increases, it makes everything more expensive and has a domino effect on the entire economy; anything that is financed will become more costly.

The only way you can beat this situation is to get a car loan approved before the next round of interest rate hikes come into effect. Don’t waste your time trying to find a “good deal” online; you won’t.

Suppose you really want to buy a car. In that case, you need to work with local professionals who will take their time understanding you and your situation.

The dealership will be able to shop around and get you approved at the most competitive terms, even if your credit is on the low side.

So you should head over to your local dealership right now and get things rolling.

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!

Let’s get in touch! 

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