Car loans for non-residents in Canada
How to increase your chances of approval when you're only living in Canada temporarily.
Getting around Canada without a car can be difficult, especially if you’re not living in a major city or populated suburban area. The good news is that some lenders are willing to offer car loans for temporary residents. However, you may be subject to more stringent eligibility requirements than other borrowers.
How do car loans for temporary residents work?
Car loans for nonresidents are essentially the same as any other car loan, except that fewer lenders offer them and you may need to meet additional eligibility requirements.
In general, you borrow money needed to purchase a car from a bank, credit union or online lender and enter into a contract to make monthly repayments over a set number of years. The loan is backed by the car you’re purchasing, which means the lender can repossess your car should you fail to make your payments. You might be able to take out a car loan, or alternatively, you could apply for a personal loan to buy your vehicle instead.
As a nonresident, however, you may be subject to additional eligibility criteria and stricter terms. Keep these factors in mind when looking for a car loan:
- Loan term. Most car loan providers offer terms from 1-5 years. However, you likely won’t be offered a loan term that extends more than 3 months before your visa expires. Most lenders only consider your current visa and won’t rely on pending visa applications or extensions — no matter how likely you are to be approved.
- Visa type. Some lenders will only extend credit to nonresidents holding certain types of visas. Borrowers with student visas or permanent resident status will likely have a greater chance of success than someone on a provisional or seasonal work visa. If your visa has been sponsored by an employer, this will greatly improve your chances of success. While requirements may vary between lenders, some lenders may limit financing to those who have one of the following documents:
- Permanent Resident Card IMM5688 or IMM5292
- Work permit IMM1102 or IMM1442
- Study permit IMM1208 or IMM1442
Be sure to check with your lender to find out exactly what status and documents you must have in order to apply for a loan.
- Credit history. As a nonresident, you likely have little or no credit history in Canada. Since lenders won’t consider your overseas credit history, they may place more emphasis on your down payment, income and employment status to help determine your ability to repay a loan.
- Visa breaches. Many visas have strict limitations on the number of jobs you can hold or hours you can work in a week. While it’s important to maximize your income before applying for a car loan, lenders likely won’t extend you credit if you’ve breached the terms of your visa.
How do I know if I’m eligible for a car loan?
As with all car loans, eligibility criteria vary by lender and may include minimum income and credit requirements. However, not all lenders are willing to work with nonresidents. And those that do may require you to hold a certain visa to qualify. Additionally, lenders may have different requirements regarding how long you’ve been in Canada, how long you intend to stay and your employment status.
Look for banks or other lenders with specific auto financing programs for people with little or no credit history in Canada. These options are great for immigrants or temporary residents who have trouble finding loan options elsewhere.
How can I increase my chances of approval?
Car loans for nonresidents are considered a high-risk endeavor for lenders. Aside from meeting the eligibility requirements, here are some tips to improve your chances of approval:
- Make a cash down payment. The greater the down payment you can offer, the greater your chances of success. Ordinarily, down payments are 15-20% of the vehicle’s value, so you should try to aim for an even larger down payment than that.
- Build up your savings. If you can prove that your down payment is the result of your savings efforts while working in Canada, this will show lenders that you’re serious about applying and can effectively manage your finances.
- Increase your income. Earning a monthly income of at least $1,500-$2,000 will make you a more favorable borrower, as this is usually the minimum income amount that lenders are looking for.
- Prove your employment is stable. Lenders need to be satisfied that your employment is stable and that your income is regular. A lower, steady income can be more favorable than intermittent or seasonal income — even if the latter is higher. You may need to provide both your tax documents and your employment history for the past several years.
- Apply with a cosigner. If you have a friend or family member that’s a Canadian citizen and willing to cosign your loan, you’ll have an easier time finding a lender. Just make sure you only borrow what you can afford to pay back — your cosigner’s on the hook for repayments should you default on the loan.
- Open a Canadian bank account. Most lenders want to see that you have a Canadian bank account that you use to deposit your paycheques on a regular basis. Be prepared to provide bank statements for at least the last 3-6 months. Click here to find out more about opening a bank account in Canada.
How do I submit my application?
Many lenders allow applications for car loans to be completed online, making it a simple and easy process. On the other hand, since there are more stringent requirements for nonresidents, an online application isn’t always the best idea. If you’re working to build your credit in Canada and want to apply online, call and ask the lender if they’re willing to lend to nonresidents before submitting an application. Your credit score drops a bit each time a lender checks your credit, so you’re better off not applying to lenders you don’t have a chance with.
Lenders do have a certain amount of leeway when it comes to deciding whether to extend credit to nonresidents. For this reason, an in-person appointment can give you the opportunity to state your case and show that you’re a good candidate something that’s not possible with an online application. Do the groundwork first to work out which lender could be the best choice based on your circumstances. Then, make an appointment to speak with a car loan officer at your chosen bank or credit union.
You should always double check with your lender to see what documents you should bring with you to fill out your loan application, but the following information is typically required:
- Personal identification. A valid, non-expired passport or driver’s license from your home country should be sufficient. Your I.D. should have your name, date of birth and photo.
- Proof of employment. Details on who you work for over the last several years and how long you’ve worked for them may be required. Include business contact information for your employer and immediate manager or supervisor.
- Proof of income. Bring pay stubs from the past 3-6 months, bank statement showing your income and/or tax documents, such as Canadian Notices of Assessments, from the past 2-3 years. If you’re a contract worker, you may also need to get a letter from your current employer confirming how long you’ve been employed, the stability of your employment for the foreseeable future and how much you’re earning.
- Other financial details. You should be ready to report your debts including student loans, credit card debt and anything else that you owe. Also be prepared to report savings, investments and any other assets you have in your name.
- Proof of residence. A bank statement, utility bill, credit card bill, phone bill or similar document with your name and address on it is often sufficient.
- Vehicle information. This includes the make, model and year of the car you want to get as well as your dealership’s address and contact information. If you have not yet picked a car, you may be able to submit a preliminary loan application to get pre-approved for a certain loan amount. Usually, you have 60 days after getting pre-approved to find a car within your price range and make a purchase.
- Proof of Insurance. If you have a vehicle selected, you may need to show proof of insurance to your lender. Lenders often require a more comprehensive level of coverage that what is required by law in order to ensure that you will remain in a position to repay your loan even if there has been an accident and you suddenly have unexpected expenses to pay for.
Getting a car loan as a nonresident can be difficult, but it definitely is possible. Take the time to call banks, credit unions and online lenders before applying to make sure they have options to provide you with financing. And increase your chances of approval by saving up for a sizeable down payment or by applying with a cosigner.
To learn more about how car loans work and compare lenders, check out our guide.