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Low interest car loans

Here's how to find low interest car loans and how to get lower monthly payments.

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Car loans from CarsFast

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  • Rates from 4.90% - 29.90%
  • Terms from 12 - 96 months
  • New and used vehicles
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Low interest car loans let you save money on your monthly payments and the overall cost of your vehicle. These loans are offered by banks, credit unions and private lenders. Learn how you can sign up for a low interest car loan and learn what you can do to secure the best rates for your new or used car.

What is a low interest car loan?

A low interest car loan is any car loan that offers an interest rate below 6%. These loans are usually reserved for people who have good to excellent credit and a long history of repaying debts on time. It will be more difficult to get low interest car loans for bad credit, unless you find a lender willing to consider other eligibility criteria such as your income or assets.

You can apply for low interest car loans through your bank, credit union, dealerships or online through a private lender. Once approved for funds, you’ll need to repay your low interest car loan through monthly, bi-weekly or weekly payments. You’ll typically do this by authorizing automatic withdrawals from your bank account.

Who actually qualifies for the lowest rate?

Just because you see a particular lender advertising a low-interest rate for a car loan, don’t automatically think that’s how much you’ll end up paying. Those ultra-cheap interest rates may only be available to you if you have excellent credit or if you are buying a certain type of car.

Where can I find low interest car loans in Canada?

You can find low interest car loans in Canada from banks, credit unions, private lenders and dealerships.

Compare low interest car loans in Canada

Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements Table description
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% - 29.99%
3 - 96 months
300
Min. income of $1,800 /month, 3+ months employed
Compare rates from multiple lenders.
Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered.
AutoLoanProviders
$7,500 - $85,000
3.99% - 29.99%
12 - 96 months
300
Min. income of $1,800 /month, 1+ months employed
Available in Ontario only.
Apply online and get your new vehicle delivered to your door anywhere in Ontario free of charge. All credit scores considered.
Coast Capital Car Loan
$10,000 - No Max.
Varies
18 - 84 months
650
Able to service debt payment of $300/month
Competitive rates and flexible terms.
Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.
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.
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Compare up to 4 providers

Secured vs unsecured low interest car loans

There are 2 types of low interest car loans you can take advantage of, based on whether you want to use an asset to secure your loan payments.

  • Secured car loans. Secured loans typically come with lower interest rates, but you’ll need to use your car or another asset to cover your loan if you miss your payments.
  • Unsecured car loans. These loans tend to come with higher rates than secured loans and rely on your credit score to determine your eligibility.

How much do low interest car loans cost?

You’ll pay different amounts for your loan based on which lender you choose. You should consider the following factors when attempting to determine how much your loan will cost:

  • Interest rate. You’ll usually pay between 0% and 6% interest on a low interest loan.
  • Fees. You could end up paying hundreds of dollars more based on what fees you pay. These can include origination fees, early repayment fees and late payment fees.
  • Length of term. You’ll pay more interest with lower monthly payments if you pick a longer term (3 to 7 years). You’ll pay less interest with bigger monthly payments if you choose a shorter term (1 to 3 years).

Representative example: Casey gets a low interest car loan

Casey wants to buy a new car and has excellent credit. He applies for a low interest car loan worth $20,000 and finds 2 suitable options. There is a loan that comes with an interest rate of 3.5% and a one-time origination fee of 3%. The other loan comes with a 4.5% interest rate and no fees.

This is what Casey’s options will look like over a 5-year term.

Low interest loan details3.5% interest rate4.5% interest rate
Loan amount
$20,000
$20,000
Loan term
5 years
5 years
Monthly payment
$364
$373
Total interest paid
$1,830
$2,372
Total loan cost
$22,430 (with fee)
$22,372

In this case, the loan with the higher interest rate is the better option because you won’t have to pay an upfront fee.

Personal loan calculator: how much are you eligible for?

How can I pay less interest on my car loan?

Low interest rates are usually reserved for those with good credit and a regular income. You may be able to get a lower interest rate if you follow these tips:

  1. Shop around. Compare multiple lenders and car loans to find the option that will give you the lowest interest rate.
  2. Improve your credit score. Pay your debts on time, correct errors on your credit report and take actions to improve your credit to qualify for lower rates.
  3. Save up for a deposit. Save up as much as you can in advance to bring down the cost of your loan and reduce the interest you pay over time.
  4. Choose a shorter term. Pay higher monthly payments to pay your loan off faster so that you can save money on interest.
  5. Get a cosigner. Sign up with a cosigner who has good credit if you want to secure low interest car loans with bad credit.
  6. Buy a cheaper car. Look for a less expensive car so that you can pay less interest on a smaller loan.
  7. Buy a new car. Apply for low interest loans for new cars instead of hoping to buy a used car with a low interest used car loan.
  8. Negotiate with your dealer. Negotiate your interest rates in advance if you’re going to borrow a car loan directly from your dealer.

Can I get low interest car loans with bad credit?

You can’t get low interest car loans with bad credit with the majority of lenders. This is because lenders will typically charge higher rates if you have bad credit to compensate for the chance that you might not make your repayments on time.

That said, you may be able to secure a lower interest rate if you apply with a cosigner. You can also secure your loan with an asset (such as your house or the car you want to buy) to get lower interest rates.

How to find the best low interest car loan

Compare the following factors to find the best low interest car loan:

  • Interest rates. Rates can be fixed or variable, and tend to fall between 0% and 6% for low interest car loans in Canada. Look for the loan that comes with the lowest interest rates and monthly payments that fit your budget and lifestyle.
  • Loan amounts. Low interest car loans usually range between $500 and $25,000. Only apply for a loan amount that you can afford to repay, and cut down on how much you owe by putting down a bigger deposit.
  • Turnaround time. You’ll usually get a decision on a low interest car loan in a couple of hours or days with most lenders. Settle on a lender that offers a quick turnaround and gives you the money you need in a reasonable timeframe.
  • Loan terms. Loan terms range from 1 to 8 years. You’ll usually pay higher monthly payments and less interest overall when you choose a shorter term loan. The opposite is true for long-term low interest car loans.
  • Fees. Some private loan lenders charge fees that you’ll need to factor into your overall loan cost. These can include origination fees, late fees and early repayment fees. Pick a lender that offers the fewest fees with the lowest interest rates.

How to apply for low interest car loans in Canada

You can follow these steps to apply for low interest car loans in Canada:

  1. Visit your bank or credit union in person, or fill out an application on the website of the lender or dealer you’re interested in.
  2. Input personal information such as your name, email address, proof of ID and relevant documents.
  3. Review and submit your application.
  4. Get verified and negotiate the terms of your loan if you meet the eligibility requirements.

Eligibility criteria and documents to qualify

You may need to meet the following eligibility criteria to qualify for low interest car loans in Canada:

  • Be at least 18 years of age or the age of majority in your province or territory
  • Be a Canadian citizen or a permanent resident with a valid Canadian address
  • Be employed and have a steady income
  • Meet credit score and income requirements

Required documents

To apply for low interest car loans in Canada, you’ll usually need to provide the following documents:

  • Identity documents. Personal identification such as your passport or driver’s licence.
  • Proof of income. Pay stubs, employment records, tax records and other documents.
  • Debt-to-asset ratio. Lists of assets and debts to make sure you can qualify for funding.
    Credit score. Consent for your low interest car loan lender to run a credit check.

Bottom line

Low interest car loans usually have interest rates that sit below 6% and they are typically reserved for borrowers with good to excellent credit. Compare low interest car loans from banks, credit unions, private lenders and dealers to find the lowest rates and best loan terms for your budget and lifestyle.

Learn more about getting a car loan

Frequently asked questions

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