Best Bad Credit Auto Loans in Canada of 2016
There are a number of different reasons that you could end up with bad credit. In fact, it happens to nearly everyone at one time in their life or another. The reasons are endless whether you suffered from bad advice, loss of a job or anything else, there’s no reason to think badly of yourself just because your credit isn’t what you think it should be. It doesn’t necessarily show that you don’t care about paying back debt or that you aren’t a good risk. Unfortunately, the people you’re trying to borrow money from are going to think exactly those things because they use your credit score as the only reference of whether or not they should give you money and they decide that the answer is no.
Now, if you’re really trying to fix your credit and get off to a better start, you definitely should think twice before financing anything large. Another hit on your credit report, which happens when you apply for any kind of financing, is only going to bring your score down. Another account due is also only going to hurt your account, at least in the first place. That means you want to look at all of your options before you decide to go ahead with the financing and try to get a loan. But for a lot of people, those bigger purchases just can’t wait as they find themselves in desperate need of a car and are left with no other option.
If your family can survive with one vehicle (if you have another vehicle) or if you can survive for at least a short time on public transportation and others to help you out, that would be great and it gives you time to get your credit back in a positive light before you try applying for a loan. That makes you more likely to be approved for a traditional auto loan. But if you can’t make it work then you need to look at the bad credit car loans that are out there. If you need a car to get back and forth to work, for example, you may not have the option to use a bus or other form of transportation and that means you have no other choice. You either get a car and make a paycheck every week or you lose your job.
If you find yourself in this type of situation know that you are definitely not alone. There are plenty of other people that are going through similar situations and that means there are options for you. There are companies out there that will help you get the loan that you need and they will also help you get the car you want or need at the same time. So there’s no need to worry. You and your family can be back on your feet in no time at all, with the car you need.
What Your Credit Score Means For Your Car Loan
If you have bad credit, you’re going to end up paying more for your car loan. It’s an unfortunate fact because often having bad credit means you really don’t have a lot of money, but at the same time it’s going to be true no matter where you go. You’ll end up with a larger monthly payment than someone with good credit because you’re considered a bigger risk and therefore your interest payments are going to be higher. That’s because the lending company assumes you may default on the loan before it’s completely paid off. If they charge you more interest at the beginning, that means they have fewer loss at the end.
Of course, you know what you can afford and you know that you aren’t going to default on that loan, but they don’t and they’re not going to just take your word for it. They’re going to try to figure out a way that your monthly payment is going to offset whatever they may otherwise lose out on. That means the lower your credit score actually is, the higher your interest rate is going to be. Because the lower your credit score the more likely you are (according to their estimations) default entirely on some portion of the loan.
Now, if your credit score is less than 500 you definitely don’t want to try and get a car loan. You’re extremely unlikely to get anything that way unless you have a very large down payment or you have someone else to cosign. Even then you may not have a chance. On the other hand, if your score is at least a 500 you have a chance of getting approved by a bad credit loan facility and then you’ll be able to get started on your new car loan and exactly what you want for that new car.
Unfortunately, the APR you end up with when you have only a 500 score is going to be extremely high compared to anything you’ll get higher up. In fact, if you can raise your credit score by about 150 points you can lower your interest rate almost by half. At 500 all the way to around 590 you could have interest around 15%. If you have a good credit score, somewhere in the mid-600’s, you could end up with a score that’s closer to 7% and if you can get your score into the mid-700’s you could end up with a score as low as 3% or even less. That’s because those people are considered a better risk, more likely to pay off their loan than someone with a bad credit score. What this means is someone with a lower credit score is going to have a higher monthly payment and pay a whole lot more on the loan overall than someone with a good or great credit score.
Shopping For Your Car Loan
If you have bad credit especially you really need to put some work into the process of shopping for your new car. After all, it’s a difficult enough process when you have all the credit and money in the world to work with. When you don’t … well then it becomes an ordeal from the very start. But there are plenty of ways you can make the process a lot easier for you, so you can get that car you want quickly and easily without having to worry as much about how you’re going to get the approval you need.
Before You Set Foot Inside
Before you even set foot inside a car dealership there are several things you should do and know about the process and about yourself. After all, that dealership is probably going to give you a little bit of trouble about your bad credit or the low amount of money you may have for a down payment and if you don’t do your research, they could pressure you into something that you don’t really want or pressure you into paying more than you should even with that bad credit.
What Do You Need?
The very first thing you should be thinking about when you’re going to get a new car is what you need. Of course you know that you’re going to have higher interest and larger payments on anything you choose because you have bad credit, but remember the basics about getting a car. Even if you have good credit it’s going to be important to think about the exact type of vehicle that you want. A larger vehicle is going to cost you more right off the bat for the initial cost and more later for gas, maintenance and insurance. But if you need a larger vehicle you don’t want to let this deter you too much.
If you’re able to make your way with a smaller vehicle it’s going to help you out quite a bit. You’ll be able to save money on just about every aspect of having a smaller car, but only as long as it’s going to work for your needs. The more space you really need for a vehicle the more you want to make sure you get because suffering with a too-small vehicle is going to hurt worse than that payment you have to make. So make sure you’re paying attention to what you really need right from the start.
Make Your Budget
Before you even go to the dealership, you want to make sure you know how much money you’re really willing and able to spend. It may not be as difficult as you might think to stick to a good budget even with bad credit. You’ll need to carefully think about not only what you can afford, but also what you really need in order to create a budget. For example, if you really need a large vehicle you may want to look at your budget a little differently than if you can get by with a small vehicle.
Consider how much it’s going to cost for you to get the loan type you need with your budget and think about different lengths of time that you could get the loan for. The longer you spread out the payments the less you’re going to pay each month but the more you’re going to pay overall. If you need a more expensive vehicle you may have to opt for a longer term on your loan payments in order to afford it, but try to keep your budget overall as close as you can to what you really can afford.
The key is to make sure before you step into a dealership you know what you really want to spend, so you don’t get talked into something else that you think maybe you could manage, but it turns out you can’t, or have problems with it. You don’t want the dealership to do the math for you because they’re only going to tell you the max you can afford without factoring in anything else you might need to spend money on throughout the month. They want you to buy the bigger and better car and get them a bigger commission. You want to get something that will work for your needs and still save you money in the long run.
Understand Your Credit
Every year, you can get a free, full copy of your credit report from each of the three bureaus. There are also several services that you can sign up for which will give you a good idea of your credit score, letting you see a representation of what type of accounts you have and also what is counting for or against you. You don’t want a dealership to pull up your report and that be the first time you’ve seen your credit score of how it’s going to reflect on you.
Instead, get a free copy of your credit report when you can. If you have already gotten the free one directly from the dealerships check with a credit card company you already have or look for one of the free services online that will help you get a look at your score and better understand what you have to offer. That way you know what to expect when you walk into the dealership for the first time and you’re not blindsided by something that could have a big impact on your ability to get that credit.
The Buying Process
So now you have everything planned out and prepared and you’re all ready to get to the dealership and start making a deal on the vehicle that you really want or need. It doesn’t need to be a difficult process, but you definitely do need to keep a few things in mind. Here we’ll talk about some of the most important things you want to remember when you walk in and start working out your deal.
Stick to Your Budget
The most important thing is to make sure that you stick to your budget. You may want to tell the salesperson that your budget is actually less than what your maximum is because they are most likely going to try and see if you have some wiggle room by showing you bigger and more expensive vehicles that ‘you’re going to love.’ Make sure that the vehicle you decide on is still going to fall within your budget, even when you start adding on the taxes and insurance that you have to pay for at the same time. If you start adding on little things that are ‘just a little more’ you could end up way over your budget without even realizing.
Step Up and Haggle
The car dealership is going to expect you to haggle with them and they’re definitely going to give you a first price that’s way over what they’re going to accept. You should make sure you know what the vehicle you’re looking at is really worth and then make sure you’re haggling to find the best price you can. You can haggle as much as you want to get the price down to what you want to pay. The lower you get it from the start, the better off you’re going to be because your interest rate is going to bring it back up again later on.
Watch the Extras
Your salesperson is definitely going to try getting you to purchase extras that you don’t necessarily need. These are going to be little things that may not seem like much from the start or may seem interesting or nice to have but they aren’t things that you actually need. If you really think you can use them you might want to consider adding them in, but remember these are not part of your agreed to purchase price and they’ll increase the cost you end up paying when it gets time to sign that contract. You don’t want to get sucked into a lot of extras that you don’t need because that cost is going to add up quickly.
Read Your Contract
Never sign a contract without knowing exactly what it says. That means when you get the paperwork for your new car make sure that you read absolutely everything that’s on that piece of paper. It will take time and the salesperson will be staring at you the entire time, but just keep reading. Don’t let them make you feel uncomfortable. You want to make sure that everything on the paper is spelled out exactly the way that you agreed to with all the numbers accurately written with no typo’s or changes from what you agreed. If there is anything different make sure you ask questions until you’re satisfied or make sure that the contract is changed and reprinted. Once you sign it you have agreed to everything written on the paper, so don’t let anyone convince you that they’ll ‘change it later.’
When You’re Heading Home
Once you’re finished with the loan process and the car buying process it’s time for you to head home with your new car. You want to make sure that you’re prepared for everything that’s going to come after however, and that means that your work is not entirely done. You need to do just a few more things to make sure that the new vehicle you just brought home is going to stay yours, and that it’s going to be just like you agreed with your salesperson when you signed the papers and took it with you.
Keep the Contract
When you walk out of that dealership you should have a copy of all of the paperwork that you signed. Everything for the loan and the purchase should be in your hand with all of the same signatures and dates that the one they kept has. You want something that looks exactly the same when it’s all done. Then you want to make sure you keep that copy somewhere safe, just in case they try to tell you later that something different was in the contract. Do not let them just mail the copy later or tell you that something was wrong and needed to be changed. You want exactly what you signed.
Make the Payments
Now if you have bad credit you already know what happens when you start missing payments. You know how easy it is to fall into a bad rut and start falling behind on your debts, but it’s extremely important that you don’t allow this to happen again. The more you’re late on payments the further behind you can get and the worse your credit is going to get. Not to mention the company could come and repossess your vehicle for missed or late payments and then you’re going to have even bigger problems.
Instead, try to set up automatic payments so you’re never going to be late. If you come to a period in your life where you can’t afford the minimum payment talk to the dealership before your payment is due. If you haven’t been late yet or haven’t missed a payment yet they’re more likely to work with you to lower the payment at least temporarily. They want to get their money back and that means they’re going to be willing to work with you to make sure that they do.
The sooner you set everything up and get it figured out to fit what you can afford the better off you’re going to be. After all, you’re going to be working with the dealership and if they know you’re doing your best and you’ve communicated with them then they’re more likely to let you keep your vehicle. In some states they don’t have a requirement for much, but if you let them know they may try to help you. After all, they get a lot more money by letting you keep the car and make payments then they do by repossessing it.
What You Need In Your Loan
You definitely want to look for someone that’s going to provide you with an auto loan even if you have bad credit. That means someone who has worked with those who have your type of credit in the past and understands the process. You definitely don’t want to be the first person they’ve ever worked with. And you want to look at someone who gives you plenty of options. When it comes to where you get credit from you want to make sure you’re looking at different options as well, you may not be able to get a standard loan direct from the dealership, for example.
The first thing you want from your loan company is variety. You want to be able to choose from different types of vehicles and from different dealerships as well. The more options you’re going to get from the loan, the better that loan is for you.
If you’ve been through a bankruptcy then you know that it’s even more difficult for you to get a good loan than it is for anyone with just plain bad credit. So what do you do about it? Well you need to make sure that the loan company you’re working with is okay with people who have been through bankruptcy as well as having bad credit.
You don’t just want to get a loan, you want to get help and advice on how you’re going to proceed and that means you want someone who’s going to walk you through more information and not just give you the loan and let you sink or swim entirely on your own.
You want someone who is going to be there for you every step of the way and is going to be willing and able to help you out when you have questions, no matter what those questions might be. So you should be able to easily get ahold of someone to make sure that you get those questions answered.
Clear and Concise Requirements
You want to know what the requirements are for the loan you’re getting. If you can’t get specific vehicles you want to know about it. If you’re going to need something specific from a dealer you should know that as well. Just make sure you’re paying attention to the fine print as well.
Know Who You’re Dealing With
Finally, it’s essential that the company you’re working with is someone you can at least find out information about. You don’t want to choose a company that has no reputation and no verifiable experience. Instead, make sure that you can find out a little about the company before you sign a loan agreement.
What Your Contract Really Says
It’s important that you know everything that’s written on your contract before you sign it and that means knowing what some of the terms really mean when it comes to the financial lingo. It’s not as difficult as you might think, but you want to understand them right away.
This is anything above and beyond the vehicle itself that you may be getting. You want to make sure you’re reading through anything that’s listed in this section so you can be sure that you don’t pay for something that you don’t really want or need.
This is the amount of money that you’re being given for the loan. You want to make sure that the amount is exactly what you’ve agreed to. You don’t want to take out anything extra and you definitely don’t want to take out less than you need for the vehicle (alongside your down payment).
Annual Percentage Rate
This is how much interest you’re going to pay annually. It’s another number that you want to make sure you’ve agreed to before you sign on that dotted line. The higher your interest rate the more you’re going to be paying in the long run so try to keep the interest down if you can.
This is you, the person who is signing the contract and will be making the payments on the loan or to the dealership. Make sure your name is the only one listed here unless you have a cosigner that you’ve already agreed to.
You’ll want to pay attention to this because it says what’s going to happen to the loan if something happens to you and you’re no longer able to pay it (through death or disability). This is the insurance that’s going to help take care of the balance owed.
This is the amount of money that you’re giving the dealership in cash or a check that comes out of your own money. It’s not a part of the financed amount so you want to make sure that this section is marked properly. The amount you give as a down payment comes off the initial balance due and means you pay less in interest overall. Make sure this number accurately shows how much you gave for your payment.
Extended Service Contract
If you’ve agreed to any kind of maintenance coverage that is over and above the standard provided by the manufacturer you will see it here. If you haven’t agreed to anything make sure there’s nothing listed here. It is not the same as the standard manufacturer warranty so don’t allow anyone to convince you otherwise.
Here you’re going to see the amount that’s being charged to you just for the ability to use the credit that’s offered by the company. Not all companies charge a fee but you want to make sure you look for one before you sign.
Fixed Rate Financing
With this type of financing the interest rate you get right at the beginning of your loan is the same rate you’ll pay the entire time you have the loan. Variable interest rates will change. Make sure you know which one you have.
If you have a loan for your vehicle and the amount your insurance is going to pay is less than the amount you owe this type of insurance pays off the difference if something happens to the vehicle. This is something to consider if you have bad credit and your loan is going to cost more than the vehicle is worth overall.
You want to know how much you’re being charged each month. This number should reflect what you have already agreed to but will most likely not include the interest. Make sure you understand how much you’re really responsible for each payment.
This is going to be the amount of money that you will have paid at the end of your loan if you make exactly the minimum payments the entire time. It will include the agreed upon price as well as all of the interest that will be charged by then.
You want to know the total amount that you have agreed to pay for the vehicle. This is the amount without the interest which you would pay if you were to hand them the cash right at the time of the sale. You should have agreed to this price.
What To Watch Out For
If you have bad credit a lot of people think they have to just accept whatever they are offered, but that’s not actually the case at all. All you need to do is look around and you’ll find some good quality loans that will work even when you have bad credit to deal with. You don’t want to end up with a loan that’s only there to help milk your money and cause you more problems than it actually helps.
These are loans that seem good at the beginning but then tend to fall apart later on. What happens is the dealership lets you take the car and sign some of the paperwork pending the completion of your financing. But after a few days they tell you that there’s something wrong with your financing and you need to take a not-so-good deal in order to keep the vehicle. You feel pressured because now you have the vehicle in your possession and it’s considered a repossession if you let them take it. Make sure you never leave the dealership without finalizing the entire loan.
Some dealers will actually convince you to bring in a cosigner with the idea that you’re going to get a better rate on your loan by working with someone else who has better credit. They convince you and your cosigner to agree to the terms and then get you to sign but in these cases they may actually have the vehicle signed over entirely to your cosigner and you are actually not part of the loan at all. Make sure you’re always reading absolutely everything in your paperwork before you sign to make sure this never happens to you.
This is a car that is actually no good for anything. They might be flooded or completely wrecked and brought back from salvage. But the dealer won’t tell you these things. Instead, they’ll tell you that the ‘as is’ mark is no big deal and the car is just fine. Don’t trust the dealer with anything. Make sure you look at the vehicle history report either from the dealer or from a reputable third party and take a look at the title. This will all help you better understand what you’re looking at.
Online Financing Problems
Many dealers will tell you that they don’t work with online financing after you’ve gotten preapproved. They tell you they’ve had problems with it before and therefore they won’t accept what you have. Instead, they offer to get you financed through their own lending institutions. Don’t let them talk you into a deal that’s not at least as good as what you had in preapproval. If it’s not as good or if they won’t take your financing just walk away. You’ll find a good dealer that can get you what you want and will take your financing.
Starting Your Search
When it’s time to start your search make sure that you’re looking at all of your options. You have plenty out there and the more you pay attention to the fine print and all the instructions the better you’re going to do. Having bad credit does limit your options. We’re not going to lie to you about that. But you’re still going to have enough to choose from that you don’t have to sacrifice too much. So take the time to do your research before you agree to anything, especially if it doesn’t seem very good.
Your loan is going to be just what you allow it to be. Working with any type of lender can help you get there, but you’ll need to spend a little bit of time and effort at the same time. Lenders want to help you out, even when you don’t have the credit they’d really like, because helping you is also going to help them. Make sure you look at what you can get with your current credit and see what just a little bit of extra time could do for you when it comes down to it as well.
There is something out there and getting a car when you have bad credit does not need to be impossible. Don’t let anyone tell you that it is. Your credit will hurt, but it’s not going to keep you from getting loans that are similar to traditional ones. The only difference should be your interest rate, so make sure you’re looking at all the fine print of the loans you’re offered. Before you know it you could have a great loan for yourself and you could be driving your whole family around in your great new vehicle. It’s going to be easier than you ever would have thought and your credit is going to benefit.
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