How to Shop Around for the Best Car Loan Rates with Bad Credit

If you have a bad credit score, you may feel like your options for obtaining a car loan are limited. However, it is possible to get a car loan with a poor credit history, and you don’t have to settle for the first offer you receive. The key is to be aware of your options and to shop around carefully so you don’t inadvertently damage your credit rating. In this post, we discuss bad credit car loans and how to ensure you get the best car loan rate.

The Basics of Credit

In Canada, credit is commonly used to purchase goods and services on a regular basis. This includes credit cards to buy groceries, clothes, and electronics and mortgages to pay for homes. By using credit, we have immediate access to the items we want and need but can pay them off over a longer period of time. 

What Is Your Credit Report?

Every time you apply for a credit card or take out a loan or mortgage, this is reported to the two main credit bureaus in Canada—TransUnion and Equifax. Bill payments, including phone bills and some utility bills, may also be recorded in your report. All of your credit card and loan payments and any missed or late payments are reflected in your credit history, and you end up with something called a credit score. 

What Is a Good Credit Score?

According to Equifax, a good credit score is between 660 to 724. A score between 725 to 759 is considered to be very good while a score of 760 and above is excellent. The credit score range is anywhere between 300 to 900, with scores less than 600 generally seen as poor.

The more sources of credit you have, and the more you make your bill payments in full and on time, the more likely you are to have good credit, making it easier to get new loans. 

Do You Have Bad Credit?

There are many reasons that you may have bad credit. Newcomers to Canada or students will have little experience with credit and have low or no credit as a result. If you have a history of missed or late credit payments or have experienced bankruptcy, this affects your credit rating, too. When you apply for a loan in Canada, lenders take note of your credit history and your credit score, and this can affect your ability to secure credit. 

Are You Having Problems Getting a Loan from the Bank?

Traditional lenders such as banks and credit unions give loans to applicants based on the following criteria:

• A good credit score

• Varied sources of credit

• Stable employment

• Proof of your ability to pay back your loan

If you are in good standing with the credit bureaus and have stable employment, the chances of securing a traditional bank loan are high. However, if you’re struggling to get a loan with bad credit, you can try a non-traditional lender instead. 

What Is a Bad Credit Car Loan?

Non-traditional lenders offer a special type of loan called a bad credit car loan. These loans are designed for individuals with bad credit. The main difference between bad credit car loans and the loans you’ll get from the bank is the loan terms, particularly the bad credit car loan interest rate. 

What Type of Loan Terms Can You Get?

Different lenders offer varying loan terms, and their decisions to provide credit are often tied to your credit report, the stability of your job, your income, and your assessed ability to pay back the loan. If you have a short credit history and a low score with limited sources of credit, the lender may be unsure how well you can manage credit. They view this type of lender as risky and will charge higher interest rate fees as a result. 

Talk to an Experienced Finance Advisor About Credit

While it can be frustrating to negotiate a car loan with bad credit, help is at hand. Find a used car dealership that specializes in bad credit car loans. It’s important to find a finance team who knows what they’re doing, as too many credit inquiries from several dealerships can negatively impact your score and push your interest rates higher. 

How the Insta Auto Solutions Finance Team Is Different

Work with Experienced Industry Professionals

As experienced professionals, we’ve been selling used cars and arranging financing for some time now, and we pride ourselves on only selling quality used cars and helping to improve our customer's credit. 

Work with Multiple Lenders 

We work with several lenders and negotiate hard to get you the best loan terms with lower interest rates. We also offer refinancing so you can apply for a new auto financing loan to take advantage of better interest rates. 

What to Expect from Our Team

When you sit down with our finance advisors, they will ask questions to get a good overview of your current financial situation and your credit standing. It’s best to be honest about your situation so we can find the best loan for you. Our finance managers understand each lender's requirements, so they will only match your situation to lenders when they’re sure you’re likely to qualify for a loan. 

Working Hard to Improve Your Credit Score

Our finance managers have taken the time to nurture strong relationships with the lending institutions so they can get good advice when discussing your loan. Our advisors will also discuss your credit report with you so you can better understand your score and the steps you can take to improve your credit.  

Have You Thought About Refinancing Your Loan?

If you currently have a bad credit car loan and are paying high interest rates, you might want to consider refinancing your loan to benefit from lower interest rates. Refinancing is a good option in the following situations:

• If you’ve been making payments on your loan for at least a year.

• You've been paying all your bills, loans, and credit card payments in full and on time.

• Your credit score has increased significantly since you took out the original loan.

• If interest rates have gone down and are much lower than your current rate.

If these factors apply, you may be in a good position to refinance your auto loan and benefit from lower monthly payments. 

How Can Refinancing a Loan Lower Your Monthly Costs?

Refinancing your car loan can help to reduce your monthly loan payments in the following ways:

• If you are already at least a year into your loan or halfway through your original loan term, you can spread the remaining balance of your loan over a longer period of time, reducing the monthly cost.

• If you can get a lower interest rate, your cost of borrowing goes down, so your monthly payments will be less. 

Get Started on Your Loan Application Today! 

The process to get pre-approved for a car loan is easy. You can make your application online and be approved for your loan on the same day. It’s best to keep the following in mind before starting the application process.

Proof of Employment

When applying for a loan, you need to demonstrate to the lender that you have stable employment to ensure that you can repay the loan. You can submit an employment letter, bank statements, or several months of pay stubs to the lender as proof of your employment.

Proof of Income 

The lender may request bank statements or pay stubs to verify income so they know you can pay back the loan.

Driver's License and Proof of Address 

In order to get a loan from your lender, you will need to provide proof that you are a registered driver, so keep your Canadian Driver’s License handy. Additionally, your lender will need to know where you live, so copies of utility bills, such as phone or gas bills, that display your name and address are ideal.

Visit Insta Auto Solutions for the Best Loan Rates

We love helping people finance their new cars with great loan rates, and we can usually find a solution to most problems. Whether you have no credit or bad credit, call or visit our dealership today, and let’s discuss financing your new car.