St. Patrick's Day is coming, but that doesn't mean you should rely on luck when it comes to repairing your credit. Bad credit car loans are an excellent way to improve your credit rating and purchase a car. Let's find out more. 

Why Don't I Qualify For a Traditional Car Loan?

When you apply for a car loan at a traditional bank, there are several reasons why your application might be rejected.

You Have a Poor Credit Rating

Traditional financial institutions lend money to individuals who are likely to repay their loans. They use your credit history to determine your risk. An established credit history suggests that you have experience with borrowing money. A high credit score suggests that you have responsibly paid back your loans. When you have a low credit score, you are viewed as a risk, and the banks are unlikely to accept your loan application. 

You Have Declared Bankruptcy

While bankruptcy can help you to manage a large amount of debt, it does affect your ability to apply for future loans. TransUnion and Equifax only remove a bankruptcy from your credit report six to seven years after the date of discharge, so you may have difficulty securing a loan during this time. 

You Have a History of Missed or Late Payments

Missed or late payments are also listed on your credit report and will negatively impact your credit score.

Your Income Is Irregular

So far, we’ve discussed how traditional banks like to see stability in credit reports. The same is true for income. If you can show that you have a stable job that provides a stable source of income, this is viewed positively by the banks. If, on the other hand, you engage in seasonal work or are a freelancer whose income fluctuates each month, this will affect your ability to get a loan. 

While all these factors limit your ability to get a traditional loan, this does not mean that you can’t get a loan at all. If you are struggling with bad credit, you may still qualify for a bad credit car loan. 

A Car Loan With Bad Credit? Is There a Catch?

No, there is no catch. A bad credit score is just a temporary glitch. That doesn't stop you from being able to buy a car. After all, a car is an essential part of life for many of us. We need a car to drive to work, drop our kids to school and make the weekly grocery run. 

While you won't qualify for a loan from a traditional lender, there are lenders that do provide bad credit car loans. They will loan you the money but under different terms.

• Car loan interest rates for bad credit loans tend to be higher than loans offered by traditional institutions

• You may not receive the most favourable loan terms 

What Do I Need To Qualify For a Bad Credit Car Loan?

While the eligibility criteria for a bad credit car loan will depend on the individual lender, there are some guidelines you can use to determine your eligibility.

Credit Score

While credit scores range from 300 at the low end to 900 at the high end, there are many lenders who will still offer loans to individuals who have a score of 300. 

Income Level

While the minimum income level starts at approximately $1500/month for a car loan, you need to bear in mind that you may not qualify for a loan if you choose the most expensive car. Some lenders will also need to know that you’ve been employed in your current situation for a minimum of three months.

How Does Your Credit Score Impact Your Interest Rate?

If you have a low credit score of between 300 and 559, you will pay more interest on your loan than a person who has a score of between 760-900. To put things in perspective, let's work with this hypothetical situation. 

Person A takes out a loan of $40,000 over a term of 5 years. Due to their low credit rating, they qualify for a loan at 15% interest with 5% sales tax. Their total monthly cost is $950, and the total amount of interest paid is $17,000.

Person B takes out a $40,000 loan over five years. However, they have a credit rating of 850 and qualify for an interest rate of 6%. They pay about $770/month, with the total amount of interest being about $6400. 

Even with a low credit score, it is a good idea to shop around for a lender who can provide a more favourable interest rate as this does make a difference to the overall cost. 

How To Get the Best Car Loan Rates For Bad Credit Loans

The first thing you will want to do is to find out what you can afford. Use our car loan calculator to find out your vehicle price. 

Figure Out Your Budget

Assess your income and expenses to determine how much you can pay each month. Keep in mind that personal expenses can arise unexpectedly. Keep a little wiggle room to account for this. If, based on your figures, the monthly car loan calculator suggests a vehicle price of $15,000, that doesn't mean you should choose a vehicle at that price. 

Set Aside a Downpayment 

A downpayment is a great way to lower your monthly costs and reduce the amount of interest you have to pay over the term of the loan. In addition, a large downpayment will be viewed favorably by lenders and possibly lower the interest rate you will have to pay. 

Prepare Your Paperwork

Your lender may request to see various statements to ensure that you are able to pay back your car loan. They may request the following:

• Financial Statements - several months' worth of checking and savings account statements.

• Employment History - they will need proof of secure employment. You can either submit pay stubs or provide written proof of employment.

Once you know all the costs and have all your paperwork in order, you are ready to get pre-approved!

How To Repair Your Equifax Credit Score

While a bad credit car loan is more expensive than a traditional loan, you benefit from the opportunity to improve your credit score. This improved rating helps to ensure that you will have better options in the future when negotiating other loans, such as a mortgage. 

Make Your Payments in Full and On Time

Choose an inexpensive car where your monthly payments will fit comfortably within your budget. This is important if you are keen to improve your credit rating, as missed or late payments will reflect badly on your credit report. 

Why Shop At Insta Auto Solutions?

If you like getting help from professionals who are focused on meeting your needs, you've come to the right place.

At Insta Auto Solutions, we are committed to two things:

1. We want to help you find the right vehicle for your lifestyle needs. Whether you are a single person needing a car to drive into town for work, or a parent ferrying multiple kids to and from school, we have a large selection of high-quality vehicles to suit your needs. 

2. We want to help you get a bad credit auto loan so you can improve your credit rating and improve your Equifax score.

Fast Approval Process

You can be approved for a loan in two easy steps.

1. Submit your online application. It only takes a few minutes to complete the application, and we only ask for the information we require.

2. Wait—but you don't have to wait long! Your application is approved quickly with same-day approvals.

Shop at One of Our Many Dealerships For Great Benefits

Insta Auto Solutions has several dealerships across Alberta. You are welcome to test drive your next car at any location; just schedule an appointment. We also provide convenient delivery of your newly purchased vehicle to any location across Western Canada.

Rebuild Your Credit With Insta Auto Solutions

Whether you are just trying to find out the value of your vehicle on a trade-in, or wanting to calculate what a car loan might cost a month? Or looking for help with rebuilding your credit, we are here to help! 

Find your next vehicle, secure a loan, and build up your credit with Insta Auto Solutions. Contact us today! We are happy to help you! 

Insta Auto Solutions Offers a variety of conveniently located dealerships including but not limited to Edmonton, St Albert, Acheson with new stores opening in Kelowna, Saskatoon, and Manitoba