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Unsecured car loans

You can get an auto loan without putting up your car as collateral.

With unsecured car loans, you borrow a specific amount to buy a car without having to put up the car as collateral. Since an unsecured car loan is not tied to collateral, you may face higher interest rates and stricter eligibility criteria than a secured car loan. However, you also get faster application processes and more flexible loan amounts.

Can you get an unsecured car loan?

Yes. Although car loans are traditionally secured, there are some lenders that offer unsecured car loans. Your car won’t need to meet any lending criteria, but since the lender is taking on more risk by not getting collateral, you may be subject to stricter eligibility requirements, such as a good credit score (above 660).

Top pick for unsecured auto loans: Coast Capital

Coast Capital logo

Key features: Coast Capital is a major credit union that can finance a wide range of vehicles. The car loan is unsecured. There is no maximum loan amount, and a membership is not required. Interest rates vary based on personal factors.

How to apply: Apply online in as little as 10 minutes and get a response on the same business day to learn about your rates and terms.

Eligibility requirements: Able to service debt payment of $300/month, minimum credit score of 650, minimum age of 19.

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Compare unsecured car loans

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
CarsFast Car Loans
$500
4.90% to 29.90%
12-96 months
300
Min. income of $1,800 /month, 3+ months employed
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs. Apply online to purchase a new or used vehicle and get the vehicle delivered to your door.
Loans Canada Car Loans
$500
0% to 29.99%
3-96 months
300
Min. income of $1,800 /month, 3+ months employed
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Car Loans Canada
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Search thousands of vehicles online, including $0 down options, from dealers across the country and get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
Coast Capital Car Loan
$10,000
Varies
18-84 months
650
Able to service debt payment of $300/month
Finance or lease both new and used vehicles with competitive rates and flexible terms from one of Canada's largest credit unions. No credit union membership required for this product.
Canadian Auto News
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Answer a few simple questions to get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
LoanConnect Car Loans
$500
9.90% to 46.96%
3-120 months
550
No min. income requirement
Get access to 25+ lenders through LoanConnect's brokerage. Receive pre-approval in as fast as 60 seconds and get your funds in as little as 24 hours.
Canada Auto Finance
$500
4.90%-29.95%
3-96 months
300
Min. income of $1,500 /month, 3+ months employed
Canada Auto Finance is a broker that connects borrowers with partnered local lenders. Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
Carloans411 Car Loans
$500
1.90% to 19.99%
Up to 72 months
300
Min. income of $1,600 /month, 3+ months employed
Get connected with suitable lenders through CarLoans411. Finance your next car, van or truck with loans available in amounts from $500 to $50,000. Check eligibility for this loan through LoanConnect.
Fairstone Secured Personal Loan
$5,000
19.99% to 23.99%
36-120 months
560
Established credit history and own your home
Fairstone offers secured personal loans up to $50,000.
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What rates can I expect on an unsecured car loan?

Depending on the lender, you can apply for an unsecured car loan with a fixed or variable interest rate. Each one comes with its own pros and cons. Banks and credit unions offer variable or fixed interest rates, while online lenders offer fixed interest rates only.

Fixed interest rate

This means that the interest rate you pay on the car loan won’t change for the duration of the loan. You’ll know exactly how much you have to pay each month. If your loan term is 5 years, adjust your budget without worrying about fluctuating costs. Learn more about fixed-rate car loans.

Variable interest rate

This means that the lender can change the interest rate at any time, depending on the prime lending rate, which is determined primarily by the Bank of Canada and also by major banks. The prime lending rate is impacted by the economy and can fluctuate, thus changing your interest rate throughout the course of your loan term.

If prime is low enough, your interest rate could be lower than it would be with a comparable fixed-rate loan. However, if prime rate happens to raise, you could be stuck paying higher interest fees than you would with a fixed-rate loan. Basically, it’s a gamble – you could win sometimes, but you could lose sometimes too. If you want predictable monthly payments, then a fixed-rate car loan may be better for you. Learn more about variable-rate car loans.

3 factors to compare on unsecured car loans

Here are some quick tips to help you focus your decision:

  • Check out the interest rate. Every loan offers a unique interest rate. Even if you have the best credit and a superb history, you may not be eligible for the lowest rates from certain lenders, so save yourself time and frustration by getting pre-approval loan offers in order to compare rates between lenders.
  • Consider the fees. Does your lender have an origination fee (a fee to process your loan)? A fee for paying off the loan early or for making extra payments? These stack up and add to the total cost of your loan. Find a lender with minimal fees so you can spend more on getting the car that you want.
  • Find the APR. The APR (annual percentage pate) is the final cost of the loan. It reflects the total cost of your loan over the course of a year including interest, fees and all costs associated with getting the loan. By comparing the APR of different lenders, you’ll see how much 1 loan could cost you when compared to another.

Benefits and drawbacks of unsecured auto loans

  • You don’t need to provide collateral against your loan, which means the application process is generally faster.
  • The lender cannot repossess your vehicle if you default on your payments.
  • The loan amount is more flexible since it’s not tied to the value of your collateral.
  • Unsecured car loans are a good option if you’re looking for classic car financing. Lenders have an age limit for cars and usually do not want to finance older cars, so a way for you to get car financing is to apply for unsecured auto loans.
  • The interest rates are almost always higher than secured car loans because there is more risk for the lender.
  • Because the loan has a higher risk, you may be eligible for a smaller amount than with a secured loan.
  • Lenders may have stricter eligibility requirements since they’re taking on more risk.

Be cautious of overborrowing

If you borrow more than the cost of your car in order to have a little extra, be careful not to apply for more than you can afford. Work out a budget to ensure you will be able to afford your repayments. Unsecured personal loans tend to come with higher rates than secured car loans, so take this into account when submitting an application.

Can I afford the repayments?

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Do I qualify for an unsecured car loan?

While the eligibility requirements for unsecured car loans vary by lender, you generally need to meet the following criteria:

  • Be the age of majority in your province.
  • Be a Canadian citizen or a permanent resident.
  • Have a good credit history.
  • Have a steady source of income (usually at least $1,500-$1,800 is required).

At some point in the application process, you’ll likely need to provide:

  • Your name, contact information and personal details.
  • Valid government-issued ID such as a driver’s licence or a passport.
  • Your employment and income details.
  • Information about your debts.

How to apply for unsecured auto loans online

  • Fill out the application. Provide information about yourself and your finances.
  • Wait for a response. A team member will reach out to you to discuss your application, including interest rates and terms.
  • Gather supporting documentation. If you like the loan offer, provide documents to verify the information you provided on your application.
  • Wait for the lender’s decision. Once you’ve submitted your supporting documents, your lender will either notify you of its decision or ask for further information.
  • Review and sign the contract. If approved, your lender will send you a loan contract for review. This contract contains vital information including your loan term, repayment schedule and interest rate, so take your time reviewing it. After reviewing, if you’re comfortable with the terms, sign the contract and return it to your lender.

    Should I buy any dealer extras?

    When you have an unsecured car loan, you can use your funds to purchase more than just the car. Dealer extras can be a good deal if you know what you’re getting and what you want to avoid. However, it’s often not worth it since you can often get the same service elsewhere for cheaper — if it’s even necessary at all.

    You might want to avoid these dealer add-ons

    Here is a list of common dealer extras and when you might not want to go for them.

    • Rustproofing. It may not be worth getting this done at the dealer unless you’re buying a used car. This is because many modern manufacturers will seal the car against wax and keep in under warranty for five to ten years.
    • Fabric protection. Generally not worth it. You can buy fabric protector and do the job yourself for much cheaper than the dealer’s price.
    • Paint protection. Much like fabric protection, you can do this yourself with a can of wax or have it done later for much less than what a dealer is offering.
    • Extended warranty. New cars usually come with a manufacturer warranty, but if you’re buying a used car, opting for an extended dealer warranty can cover any unexpected expenses after your purchase.
    • Prepaid maintenance plans. This depends on the car you’re buying. If you’re picking up a clunker or a car with an incomplete owner history, a prepaid maintenance plan may be worth the money. Otherwise, you might want to skip it.
    • Extra tinting. Most cars come with some tinting, and it’s usually cheaper to have extra tinting done elsewhere.
    • Extra insurance. Most policies, like GAP insurance, that are sold by dealers are usually unnecessary. Unless you’re prepared to pay a premium price just in case something happens, you may want to skip extra insurance.
    • Headlight protectors and towbars. If you know the dealer is offering a good deal, go for it. Otherwise, you can likely have them installed aftermarket.
    • Nitrogen inflation. Nitrogen inflation does have performance benefits, but you’re unlikely to notice. If you really want it, you can save money by having it done somewhere else.

    Bottom line

    Unsecured car loans can be a quick way to finance your next vehicle, but they comes with their own risks. Unsecured auto loans tend to have higher interest rates than secured auto loans, and since they’re not tied to the value of your car, you might end up borrowing more than you need.

    If you’re interested in a traditional auto loan secured by your vehicle purchase, you can visit our page on secured car loans to compare lenders.

    Frequently asked questions

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