9 Best Bad & Fair Credit Car Loans

Need a car loan but have bad or fair credit? You have options. Keep reading for details of some of the best bad or fair credit auto loans in Canada. We’ll also show how to get approved for a loan and what to watch out for before you sign on that dotted line.

Just remember that no single car loan is best for everyone, so compare your options before applying.

Best bad credit car loans in Canada

Bad credit car loan provider	APR	Loan term	Min. credit score	Eligibility requirements
Loans Canada	0% - 35.00%	12-84 months	300	Min. income of $1,800/month, 3+ months employed	Go to site
Clutch	From 7.99%	24 - 96 months	580	3+ months employed; maximum 1 bankruptcy; only available in Ontario, New Brunswick and Nova Scotia	Go to site
CarsFast	3.90% - 29.90%	12 - 96 months	300	Min. income of $2,000/month, 3+ months employed
Approval Genie	3.90% - 29.90%	12 - 84 months	300	Min. income of $2,000 /month, 3+ months employed, Ontario only
TD	7.49% - 29.99%	Up to 84 months	Undisclosed	Steady valid income
Scotiabank	From approx. 7.49%	12 - 84 months	Undisclosed	Scotiabank does not list any eligibility requirements. Apply directly with the bank or by visiting a local car dealership
Canada Drives	Varies	12 - 96 months	400	Min. income of $1,800 /month
iA Auto Finance	As low as 8.99%	Varies	Undisclosed	Steady valid income
Canada Auto Finance	4.90% - 29.95%	3 - 96 months	625	Min. income of $3,000/month, 3+ months employed

How we found the best bad and fair credit auto loans

Finder experts collected 23 points of data for more than 20 lenders operating in Canada. Finder used this data to create a proprietary weighting formula that scores each lender based on rates, terms, loan amounts, eligibility requirements, customer support, and reputation, among other features. The providers shown on the best list are those who scored highest based on this data-driven methodology. They are providers that are available and not available through Finder. While we aimed to review a wide range of lenders, the loans listed do not reflect the entire market. Read more about the Finder car loan ratings and review methodology.

Can I get a bad or fair credit car loan in Canada?

Yes, you can. Don’t be discouraged if you need to finance a car and have bad credit. While having a poor credit score will limit your financing options, there are plenty of lenders who offer bad credit car loans as long as you have a steady source of income. Just be aware that these loans usually come with higher interest rates of 12.9% – 29.99%.

Car dealerships and online lenders offer bad credit auto loans to people who are dealing with bankruptcy, bad credit or have no credit at all. With bankruptcy, the process of securing a car loan may take a bit more time because your lender may need additional information from your trustee.

What is a bad credit score for a car loan?

Car loan providers generally see any credit score below 660 as a bad credit score. In Canada, credit scores range from 300 to 900. By many auto financing standards, a bad credit car loan would often encompass scores within both “poor” credit (300-559) and “fair” credit (560-659) ranges.

Where can I get second-chance car loans in Canada?

While your first stop for a car loan may be your local bank or credit union, those institutions tend to offer car loans to borrowers with good to excellent credit. Still, if you have a longstanding relationship with your bank, it may be worth discussing your options with a representative there first.

But in general, you’ll have a much better chance of getting approved for bad credit car loans if you apply with auto lenders who specialize in that area, like at a dealership or with a private lender.

Car dealerships for bad credit

Dealerships are often willing to provide bad credit car loans to their customers. You can improve your chances of getting approved if you apply with a cosigner who has a better credit score than you do. Like with any bad credit loan, you’ll likely pay higher rates.

It’s a good idea to get auto financing quotes from online lenders before you visit a dealership. This will give you more bargaining power and help you feel confident that you’re getting a good deal.

Private car loan lenders for bad credit

Some private lenders, typically online lenders, specialize in offering car loans to bad credit borrowers. This means you have a much better chance of getting approved, but you’ll still have to pay relatively high interest rates.

The trouble with online lenders can be finding a legit and trustworthy one. Watch out for any online lenders offering guaranteed auto loans for bad credit, as they could be scams.

Can I get no credit car loans in Canada?

Yes, even if you have no credit history, you may still be able to get car financing from some lenders in Canada. While you likely won’t be able to qualify with banks, you do have options from alternative, online lenders like the ones in the table above who specialize in offering bad credit car loans.

Keep in mind that you’ll end up paying much higher interest rates—easily over 15%—since lenders consider you a riskier borrower for having no credit history.

Can I get bad credit car loans in Canada with guaranteed approval?

While there are some lenders in Canada who offer guaranteed approval car loans, be cautious with any such offers. Most legitimate lenders will not guarantee bad credit auto financing before thoroughly assessing your finances.

But if you’re worried that factors like your credit score or income might prevent you from qualifying, don’t worry, you have options.

There are many alternative lenders—like those in the table above—that have very lenient eligibility requirements and will accept bad credit or low-income borrowers. Of course, like any bad credit loan, it will come with high interest rates.

What is the interest rate on bad credit auto loans in Canada?

Interest rates on bad credit car loans typically range from 12.9% to 29.99%. The interest rate you qualify for will be based on factors like your income, down payment and credit score.

Other factors that may impact your car finance interest rate include:

• How much you need to borrow
• The type of car you’re buying
• How long you need to repay the loan

Watch out for long loan terms

How much your bad credit car loan costs will primarily depend on the interest rate you’re charged and how long it takes to pay off the loan. Loan terms range from 2 to 7 years.

The longer you take to pay off the loan, the more it will cost in interest. When signing up for a bad credit car loan, it’s a good idea to opt for the shortest loan term you can comfortably afford to keep the overall cost down.

Use the car loan monthly payment calculator below to see how much your loan will cost when you finance a car.

Take advantage of extra payments

Car loans in Canada are open, meaning you’re not charged penalties if you make extra payments or pay it off early. If you can, make the extra payments to save on interest.

How does your credit score impact your car loan interest rate?

Your credit score helps lenders determine how much risk they’re taking on by offering you an auto loan for bad credit. A lower credit score means more risk for the lender, which translates to a higher interest rate for you.

The following example shows the amount of interest you could end up paying based on your credit score for a brand new $36,000 car, assuming a loan term of 7 years, 13% provincial sales tax and a $3,600 down payment.

Credit rating	Credit score	Interest rate (hypothetical)	Monthly payment	Total interest paid
Poor	300-559	15%	$706.49	$22,733.39
Fair	560-659	10%	$607.80	$14,443.41
Good	660-724	6.50%	$543.67	$9,056.08
Very good	725-759	6%	$534.85	$8,315.27
Excellent	760-900	5.5%	$526.12	$7,581.74

Dive deeper: Compare car loan interest rates currently available in Canada

Types of cars can you finance with a bad credit car loan

You can pick from new and used cars with a bad credit auto loan. Many lenders work in partnership with car dealerships across Canada, giving you access to a large inventory of new and pre-owned vehicles, from cars and vans to SUVs and trucks.

That said, your lender will approve your loan based on how much you can reasonably afford. While you may want a brand-new BMW SUV, your income and credit score may limit you to a cheaper or pre-owned model.

Some popular car brands with vehicle models that may fall within your bad credit car loan budget include:

• Toyota
• Honda
• Ford
• Volkswagen
• Mazda
• Hyundai
• Subaru
• Kia
• Nissan

You can learn more about cheap cars to buy in our full guide to the best cars under $25,000 here.

Related: Our picks for the best cars to buy in Canada

Can I trade in my vehicle?

Yes, many dealerships will allow you to trade in your current car for a new one, even if you have a bad credit score. Your old vehicle’s value will be appraised and subtracted from the market price of your new car. Trading in your old car will lower the amount you need to borrow, which could improve your chances of approval for financing with bad credit.

How to apply for bad credit car loans

The process for getting a car loan with bad credit isn’t too different from getting one with good credit. Here’s a step-by-step look at what to expect:

1. Compare bad credit car loans in Canada

Compare the loan terms, loan amounts, interest rates, fees and eligibility requirements of lenders that offer bad credit car financing. Read reviews from real customers on independent websites, and compare your options in the table above.

2. Apply online

Once you’ve chosen a lender, fill out the application form online. Review your application thoroughly because errors can result in a rejection.

Most lenders require the following when you apply for a bad credit car loan:

• Your driver’s licence
• Your car insurance details
• Income and employment verification—this can often be done by connecting your bank account online

3. Get car loan pre-approval

In most instances, online loan search platforms will show you which lenders have pre-approved you, for how much and under what terms. You can then compare your car finance options for bad credit and choose the loan terms that work best for you.

4. Select your car

Your lender will connect you with a local dealership to make sure the vehicle you want is available. Work with your lender and the dealership to work out the details on pricing, your down payment, monthly payments and how you’ll make these payments (usually through an automatic withdrawal from your chequing account). The dealership will be in contact with you to sort out a pick-up date for your new car.

5. Review and submit your contract

Read your contract carefully to find out how much you’ll be paying in interest over the lifetime of your loan, whether any fees apply, and if you can make extra payments and pay your loan off early. Sign and submit when you’re ready.

How to increase your chances of approval

If you’re worried your credit score might hinder your prospects, here are a few things you can do to help improve your chances of getting approved.

Improve your credit score

If you can wait at least 6 months to buy a car, try to get your credit into better shape. Pay down your credit card debt as much as you can and make sure you aren’t late or missing any payments on any of your debts. This will help improve your credit score and show lenders you can handle your current debt better.

Check your credit report

A mistake on your credit report can cost you points on your credit score. So it’s worth checking your credit report before applying for a bad credit car loan to ensure all the details are in order. You can get a copy of your credit report for free and fix mistakes by contacting the creditor.

Ask for a small loan only

Lenders are more likely to approve low amounts than large ones. With a small loan, the lender loses less money if the borrower defaults.

Apply with a cosigner

Bringing on someone with a higher credit score or a higher income can increase your chances of approval for car financing if you have bad credit.

Benefits of bad credit car loans

• Easy online applications with quick pre-approvals. After you fill out an application form online, you can get pre-approved as quickly as a matter of minutes.
• No down payment. It’s possible to get a bad credit car loan without paying any money out of pocket to buy a vehicle. Lenders usually focus on determining if you have a steady source of income to help you afford your repayments.
• In-house dealership loans. Rather than working with a conventional lender, some bad credit loans are provided by auto dealerships that offer convenient in-house financing for your car purchase.
• Large inventory. You can choose from new and pre-owned cars, trucks, SUVs and minivans on offer from dealerships partnered with bad credit car lenders.
• Could improve your credit score. As long as you keep up with your monthly repayments, your bad credit car loan can actually help to rebuild your credit, setting you up for better terms and interest rates for future loans.

What to watch out for with bad credit auto loans

• Going over budget. Work out how much money you’ll pay back over the course of the loan—is the amount plus interest worth it? More importantly, can you afford it? Learn more about car loan affordability.
• High interest rates. You may be able to secure auto financing despite having bad credit or no credit at all, but you could end up paying interest rates as high as 29.99%.
• Hidden fees and penalties. Triple-check your loan’s terms and conditions to make sure you understand all the details in the fine print. Look for origination fees, late payment penalties, extra payment fees or other changes to your loan.
• Extremely long loan terms. Some lenders offer bad credit car loan terms of over 7 years that can accrue major interest over time. Sure, the monthly payments will be lower, but if it’s not absolutely necessary, avoid longer terms to save money.
• Being unprepared. Check your credit score before you do any car shopping to avoid applying for loans you’re unlikely to get approved for. Each full application requires a hard pull on your credit, which can hurt your credit score. Once you know what interest rates you can qualify for with your credit score, you can better compare your options.
• Making an impulsive purchase. Of course your dream car is out there. But if you have poor credit, it may have to wait so you can buy a car you can afford.
• Falling for a scam. Don’t let a predatory lender push you into making the wrong financial move. Learn more about car loan scams.

Alternatives to bad credit car loans

If a bad credit car loan isn’t the right choice for you, there are a few other options to consider:

• Use a credit card to buy a car. If you already have a credit card with a high credit limit, you may be able to pay for your car with plastic. The smart way to pay for a car purchase with a credit card is to buy a cheap car and take advantage of a low interest rate or 0% offer. This way, you pay off the balance gradually without the hefty charges associated with a regular credit card or a personal loan.
• Apply for a guarantor/cosigned loan. If you can’t qualify for a traditional car loan on your own, you can ask a family member or close friend to cosign on your loan and act as a guarantor. The catch? If you default on payments, your guarantor will have to pick up your loan, so make sure they’re aware of what they’re committing to. Both of your credit scores will take a hit if you default on your loan.
• Get a personal loan instead of a bad credit auto loan. You can also work with your bank or an online lender to secure a personal loan you can use to purchase a new car. Your personal loan can be secured, using one of your assets as security, or it can be unsecured with a higher interest rate.

Bottom line

Bad credit car loans in Canada are available to those with less-than-perfect credit or even no credit history. Compare your options to finance a car with bad credit and get pre-approval to narrow down the best deal. Before you sign on the dotted line, make sure you can afford the repayments and understand the total cost of your car loan.

Frequently asked questions

• Can I get a bad credit car lease?

  While there's typically no posted minimum credit score required to lease a car, dealerships will still run a credit check and use your credit score to approve you for a car lease. Like with bad credit car financing, a lower credit score will translate to a higher lease interest rate.

• Is a bad credit car loan actually the right solution for me?

  It really depends on your financial situation. If you need a car right away and you can afford to repay what you borrow, a bad credit car loan could be a good fit for you. Many of our top picks for borrowers with bad credit will work with borrowers who don't have credit or have even filed for bankruptcy.

  But bad credit car loans come with high interest rates that make them expensive to repay. So if you can afford to wait 6 – 12 months while you improve your credit score, you could then qualify for a lower car loan interest rate that will save you plenty of money in the long run.

• Do I need to complete a credit check to get a car loan?

  No credit check car loans aren't widely available in Canada, and most lenders will usually perform a credit check before approving you for a car loan. Some lenders advertise no credit check car loans, but you will need to watch out for steep interest rates as well as the risk of falling victim to a scam. Learn more in our guide to no credit check car loans.

• What do bad credit car loan lenders look for?

  Bad credit auto loan lenders require you to have a steady source of income so they know you can stay on top of your monthly payments. You'll pay a higher interest rate because they're taking a bigger risk by lending you money. You can help to offset that risk by either securing your loan or by contributing a large down payment.

• Can I get a car loan with bad credit and no cosigner?

  Yes. Learn more in our guide to getting a car loan with bad credit and no cosigner.

• How do I choose a reputable car loan lender?

  Do your research. Get online and see what other people are saying about their experiences with different lenders on sites like Trustpilot and the Better Business Bureau. Talk to people you know who have applied for bad credit car loans, and read the loan agreement carefully before signing on.