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Compare bad credit car loans

If you need a car loan with bad credit, here are your options in Canada.

Do you need a car loan but have bad credit? You might have trouble financing a new car through conventional loans, but you aren’t without options. In fact, some lenders specialize in offering bad credit car loans. Here’s everything you need to know about bad credit car loans, how to apply and what to look out for in the fine print.

Popular bad credit car loans in Canada

Bad credit car loan lenderMin. credit scoreOther requirements
CarsFast logoCarsFast Car Loans300Min. income of $2,000 /month, 3+ months employedGo to site
Loans Canada logoLoans Canada300Min. income of $1,800 /month, 3+ months employedGo to site
Canada Auto FinanceCanada Auto Finance300Min. income of $1,500 /month, 3+ months employedGo to site
Picture not describedSplash Auto Finance300Min. income of $2,200 /month, 3+ months employed
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Car Loans 411Carloans411300Min. income of $1,600 /month, 3+ months employedGo to site
Picture not describedCanada Drives400Min. income of $1,800 /monthGo to site

Can I get a bad 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 options, there are plenty of lenders who offer bad credit car loans as long as you have a steady source of income. You’ll likely encounter higher interest rates and fees for any loans you are approved for though.

Car dealerships and online lenders offer bad credit car loans to consumers 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.

credit score scaleWhat 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 form 300 to 900. By many auto financing standards, bad credit scores often encompass both “poor” credit (300-559) and “fair” credit (560-659) ranges.

Car loan lenders use your credit score to assess your eligibility because it’s a good indication of how well you handle debt. Your credit score indicates things like how much debt you’re carrying, if you consistently make repayments and if you tend to max out your debts.

A higher credit score means that you’ve consistently managed those factors well, which is a sign to lenders that you’re a responsible borrower. A lower credit score indicates to lenders that there’s a greater chance you may default on your car loan.

Where can I get bad credit car loans in Canada?

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

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

Dealership financing 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 that 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 going into the dealership to give you some 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. Because of that, your chances of approval are much better with these types of lenders. Of course, 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. To help you navigate that space safely, we’ve designed a full guide to legit car loan lenders and common scams here.

Compare legit bad credit car loans

Can I afford the monthly payments on a bad credit car loan?

You can use the car loan monthly payment calculator below to see how much you may end up paying on a bad credit car loan.

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

Bad credit car loans typically range from 9.90% to 29.99%. Your rate will vary depending on a handful of key factors, including the following:

  • Your financial situation. Your income, how stable it is and your down payment are taken into account when lenders are deciding on your interest rate for a bad credit car loan. They need to know you’ll have steady funds to stay on top of repayments.
  • Your creditworthiness. Credit scores range from 300 and 900 in Canada. Where your credit score falls in this range helps lenders determine how much risk they’re taking on by offering you a bad credit car loan. Ideally, you’re staying on top of existing debt repayments before you apply to lock in a better car loan interest rate.
  • Your loan needs. Lenders need to know how much you need to borrow, how long it’ll take for you to repay your loan and what type of car you’re buying.

Example: Interest on a $36,000 car with a loan term of 7 years

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 ratingCredit ScoreInterest Rate (hypothetical)Monthly paymentTotal interest paid
Poor300-55915%$715.52$23,023.99
Fair560-65910%$615.57$14,628.04
Good660-7244.5%$515.42$6,215.11
Very good725-7593.99%$506.67$5,480.17
Excellent760-9003.49%$498.18$4,767.19

Is a bad credit car loan right for me?

It depends on your credit rating, the type and cost of the car you’re looking to buy and your financial situation. Be sure to make thorough comparisons and don’t neglect other alternatives, such as using a credit card to pay for a low-cost car or getting a personal loan instead of a car loan.

Typically, bad credit car loans are earmarked for people who have a steady source of income but meet at least one of the following criteria:

  • Bad credit (anything under 659)
  • Little to no credit history
  • Filed for bankruptcy or insolvency
  • Can’t secure a conventional car loan

How to get a car loan with bad credit

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:

What information do I need to apply for bad credit car loans?

Most lenders ask to see at least three documents when you apply for a bad credit car loan. Online lenders typically allow you to upload documents and forms as PDF files.

  • Your driver’s licence. Your lender might ask to see your licence or require your licence number. Either way, have it on hand. Your license can also serve as your proof of address.
  • Your car insurance card. Since car insurance is mandatory in Canada, lenders may require you to show proof of insurance before applying for a loan.
  • Employment verification. You might be asked to submit tax returns, bank statements or recent pay stubs to prove you make enough to afford your car loan.

How to increase your chances of approval for bad credit car loans

  • Improve your credit.
    If you can wait at least six months, 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 you put your best foot forward to lenders. Learn more about how to improve your credit.
  • Check your credit report.
    A mistake on your credit report can cost you points on your credit score. You can get a copy of your credit report for free and fix mistakes by contacting the creditor. Get your credit score.
  • Set your budget.
    Come up with a limit to how much you’re willing to spend on a car, how much you can afford for the down payment and how much you can pay each month. Lenders may offer you more but if you’ve already done your homework, you’ll know precisely how much you can realistically afford.
  • Compare, compare, compare.
    Apply for pre-approval with a few lenders to see what rates and terms you’re eligible to qualify with. If they run a hard credit check, make sure to keep your applications within a few weeks to avoid hurting your credit score.
  • Read the fine print.
    Many provinces have limits on car loan APRs, and some bad
    credit lenders try to sneak around these by tacking over-priced extras into the contract.
  • Ask an expert.
    Worried you won’t qualify? Sign up for a credit counselling session to have an expert guide you through your options. Visit the government of Canada’s website where you can find a credit counsellor who can help you get your finances back on track.
  • Apply with a cosigner.
    Bringing on someone with a higher credit score can increase your chances of approval for a loan. And if you plan on sharing the car, you’ll share the responsibility for paying it off.

Questions to ask when choosing a bad credit car loan

Before you apply for any loan, find out as much as you can about the offer you’re getting. Ask yourself these questions before you apply.

What to watch out for

Make sure you know exactly what you’re getting into before you sign up for a car loan (or any loan). If you don’t do your research, you could find yourself in a financial nightmare or, worse, a scam. Here are some red flags to be aware of:

  • Going over budget. Work out how much money you’ll be paying back over the course of the loan to get an idea of how much you’ll be spending overall on your vehicle – is the amount plus interest worth it? More importantly, can you afford it? Learn more about car loan affordability.
  • Hidden fees and penalties. After you’ve done your research on your lender, triple-check your loan’s terms and conditions to make sure you’re on board with all the details in the fine print. You may be committing to paying for origination fees, late payments penalties, extra payment fees or other changes to your loan.
  • Extremely long loan terms. Some lenders offer loan terms of over seven years that can accrue major interest over time. Sure, the monthly payments will be lower, but if it’s not absolutely necessary, you should 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 approval 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 and one that has lower rates.
  • Falling for a scam. There are some common scams and tactics you should be aware of when you’re shopping for a bad credit car loan. Don’t let a predatory lender push you into making the wrong financial move.

Benefits of bad credit car loans

Bad credit car loans in Canada are a godsend if you have less-than-perfect credit and need to secure financing to buy a car. They come with a series of other perks too:

  • Easy, secure online applications with quick pre-approvals. After filling out an application form online, most online lenders that specialize in bad credit car loans work quickly to get you pre-approved and working with a lender of your choice to secure your loan.
  • Loans provided with no bad credit or no credit. Lenders providing bad credit car loans offer car financing for any type of credit situation, including bankruptcy.
  • No down payment. It’s possible to get a bad credit car loan without paying any money out of pocket to secure your vehicle. The focus tends to be on proving that you have a steady source of income to make your repayments to your lender.
  • Lengthy terms. You’ll be able to lock in a term lasting up to seven years to help bring your monthly payments down.
  • Large sums of money. Bad credit car loans provide you with large amounts of money to buy the car you want. Make sure you’re not overcommitting and only borrowing what you need and can afford to repay.
  • In-house dealership loans. Rather than working with a conventional lender, some bad credit loans are provided by auto dealerships that offer 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.
  • 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.

Drawbacks of bad credit car loans

On the flip side, poor credit car loans come with their fair share of red flags to keep an eye on. These include the following:

  • Potential for additional fees. Bad credit car loans tend to come with more fees and penalties worked into the fine print. Monthly account fees and origination fees can significantly increase the amount you have to pay back. Some loans will also include a fee for early repayment, so make sure you know the ins and outs of your loan.
  • Steep interest rates for bad credit. 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 29.95% or more for your loan.
  • Predatory lenders. Consumers with bad credit could fall prey to scams since predatory lenders know your loan options are limited. Your job is to make sure you carefully read over your loan’s terms and conditions and ask any questions before you sign any contracts to lock in your financing.

What types of car can you get with a bad credit car loan?

You’ll have your pick of new and used cars if you’re working with a lender that specializes in bad credit car loans. This is because most of these lenders work in partnership with car dealerships across Canada, providing them with a large inventory of vehicles, from cars and vans to SUVs and trucks that are both brand new and pre-owned.

You can expect to come across major brands with vehicles at all price points, including Toyota, Honda, Volkswagen, Mazda, Hyundai, Mazda, Subaru, BMW and Lexus.

Choose carefully, though. 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 more economical vehicle. Your lender’s priority is to ensure you can afford to keep up with your repayments to them.

Compare bad credit car loans

1 - 6 of 6
Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
CarsFast Car Loans
$500 - $75,000
4.90% - 29.90%
12 - 96 months
300
Min. income of $2,000 /month, 3+ months employed
Get a new or used vehicle delivered to your door.
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs.
Loans Canada Car Loans
$500 - $35,000
0% - 31.99%
24 - 120 months
300
Min. income of $1,800 /month, 3+ months employed
Compare rates from 60+ lenders.
Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered. 0% APR for new cars only, used car rates start at 7.99%.
Canada Drives Car Loans
$7,500 - $99,999
4.75% - 29.99%
12-84 months
400
Min. income of $1,800 /month
Buy a used car online and get it delivered to your door in under 24 hours.
Get pre-approved for financing in 3 minutes with no impact to your credit score. No fees or penalties for early loan repayment.
Carloans411 Car Loans
$500 - $50,000
1.90% - 19.99%
Up to 72 months
300
Min. income of $1,600 /month, 3+ months employed
High application approval rate.
Get connected with suitable lenders to finance your next car, van or truck. Check eligibility for this loan through LoanConnect.
Canada Auto Finance
$500 - $45,000
4.90% - 29.95%
3 - 96 months
300
Min. income of $1,500 /month, 3+ months employed
Get financing from partnered local lenders.
Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
Splash Auto Finance
$10,000 - $50,000
9.90% - 29.90%
24 - 84 months
300
Min. income of $2,200 /month, 3+ months employed
Apply with any credit score.
Get financing for a new or used car. Auto loans for borrowers with fair credit, bad credit, no credit or bankruptcy.
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Compare up to 4 providers

Bad credit car loan alternatives to consider

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

  • Work towards improving your credit rating. By controlling your debts, managing your finances and knowing what’s on your credit file so that you can remove any errors or disputes from your file, you will improve your credit rating. You can apply for a conventional car loan when your credit score is in better shape.
  • Use a credit card to buy your car. If you already have a credit card with a high balance to work with, 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.
  • Apply for a personal loan instead of an 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 are available in Canada to those with less-than-perfect credit or limited credit history. Compare lenders and get car loan pre-approval to get 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.

Bad credit commodore

Frequently asked questions about bad credit car loans

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