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Car loans for fair credit

Learn about fair credit car loans for borrowers with credit scores between 560 and 659.

Shopping for car loans for fair credit? While you might have trouble financing a car through conventional lenders, you’ll still have access to a wide range of online lenders. But you may need to pay higher interest rates.

Here’s what you need to know about car loans for borrowers with fair credit, how to apply and what to look out for in the fine print.

Compare car loans for fair credit

1 - 5 of 5
Name Product Ratings APR Loan Amount Loan Term Requirements Long Table Description
CarsFast Car Loans
Customer Survey:
3.90% - 29.90%
$500 - $75,000
12 - 96 months
Requirements: Min. income of $2,000 /month, 3+ months employed
Loans Canada Car Loans
Customer Survey:
0.99% - 46.96%
$500 - $35,000
3 - 60 months
Requirements: Min. income of $1,800 /month, 3+ months employed
Clutch Car Loans
Customer Survey:
From 8.49%
$7,500 - No max.
12 - 96 months
Requirements: 3+ months employed, Max.1 bankruptcy, Ontario & Nova Scotia only
Drive Away Car Loans
Not yet rated
3.90% - 29.99%
$300 - $75,000
12 - 96 months
Requirements: Min. income of $2,500 /month, employed
Canada Auto Finance
Customer Survey:
4.90% - 29.95%
$500 - $45,000
3 - 96 months
Requirements: Min. income of $1,500 /month, 3+ months employed

What is considered fair credit?

If your credit score is somewhere within the range of 560 and 659, you fall into the “fair credit” category, according to credit reporting bureau Equifax. Here’s how Equifax breaks down credit score rankings:

  • 760 and up: Excellent
  • 725 to 759: Very good
  • 660 to 724: Good
  • 659 to 560: Fair
  • Below 560: Poor

If you fall into the fair credit category, you’ll be less likely to qualify for better interest rates for your car loan, and the range of lenders willing to offer you a loan will be smaller too. And once your credit score dips below 560, you’ll need to narrow your focus to lenders that offer bad credit car loans.

Where can I get car loans for fair credit?

The following options are available to you:

  • Dealerships. You can go directly to a dealership. This dealership is partnered with a range of lenders and can take your application to lenders who finance borrowers with fair credit.
  • Online brokers. You can apply to an online broker that’s partnered with hundreds of dealerships and will match you with dealerships that are open to your financial situation.

Both options provide car loans for fair credit and poor credit car loans. To compensate though, you’ll encounter higher interest rates and fees for any loans you are approved for. You’ll need to make sure you have enough employment income to take on more debt because this is the key factor they’ll focus on instead of your credit score.

What are the eligibility requirements of car loans for fair credit?

While each lender will have its own set of eligibility criteria you’ll need to meet, expect these baseline requirements if you’re applying for a fair credit car loan:

  • You must be a Canadian resident or citizen who is at least 18 years old. Government-issued ID is required for identity verification.
  • You must have a valid Social Insurance Number, and in most cases, consent to a credit check.
  • You must be employed for at least 3 months. Keep in mind that some lenders may have a minimum income requirement you must meet. You may be asked for income verification with bank statements, pay stubs or a letter of employment.
  • You must have a valid Canadian bank account to arrange a deposit of your funds and automatic withdrawals for loan repayments.
  • You must have a Canadian address (proof via utility bills or other documents).

How to get the best car loan for fair credit

If you want to catch a break and score a decent fair credit car loan, follow these steps:

  • If you can, improve your credit first. Before you apply for a car loan, try your best 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. A boost in your credit history will help you secure a better rate. Learn more about how to improve your credit.
  • Shop around. Do your research and handpick a few lenders that have eligibility requirements you can easily meet. Then apply for car loan pre-approval with these options to see what rates and terms they qualify you for. If they run a hard credit check, make sure to keep your applications within a few weeks to avoid hurting your credit score.
  • 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.

How to evaluate car loans for fair credit

You’ve submitted your loan application and received a loan offer to help you buy your car, but how do you decide if it’s good or not? Here’s what to focus on to help you find the best car loan for fair credit:

The interest rate

Are you happy with the interest rate? Shopping around for the lowest interest rate will save you money over the lifetime of your loan. Focus on the annual percentage rate (APR), which is the annual interest rate plus other fees you’ll pay to get the loan. Learn more about car loan rates in Canada.


Are you comfortable with the repayment conditions, such as the amount of time you have, the payment frequency and the payment amount? Also check if the car loan has prepayment penalties, especially if there’s a chance you’ll refinance your car loan to get a lower interest rate once your credit score improves.

Principal versus interest

Examine the payment schedule and know how much of your payment is going towards paying the interest versus reducing the principal.

Fees and charges

Fees can drive up the cost of your loan. Besides prepayment penalties, charges you should watch out for include origination fees (fee to process your loan), NSF fees, late payment fees and loan insurance.

Ways to increase your credit score

Aiming to improve your credit score several months before applying for a car loan is your best bet to help you secure a lower interest rate. You can do this by doing the following:

Pay your bills on time

Get into the habit of paying your bills on time because this is precisely what lenders want to see on your credit report. You’ll avoid late fees and your credit report will get that boost you need ahead of applying to lenders.

Keep credit card balance low

To indicate to lenders that you’re a responsible borrower, only carry a balance with a credit utilization ratio of 30% or less. For example, if your credit limit is $1,000, keep your balance below $300 – which is 30% of your limit.

Avoid too many hard credit inquiries

Every time you apply for a credit card, line of credit or loan, it’s listed on your credit report as what’s known as a hard inquiry and pulls down your score. Try to avoid applying for more credit before shopping for a car loan so lenders won’t think you’re shouldering more and more debt.

Build a credit history

If you don’t have a credit history, you’ll need to start building your credit. You can start small by opening a mobile phone plan or an Internet account in your name. Gas and other utility accounts also factor in, as do store credit cards.

Correct late payments

Let’s say you have one delinquency with a credit provider, they may remove that black mark from your credit report if your account was in good standing and you have a legit excuse as to why you missed that payment.

Bottom line

If you’re shopping for a car loan with less-than-perfect credit, there are plenty of lenders that offer car loans for fair credit. Spend your time researching lenders that provide loans with a minimum credit score requirement that you can meet. From there, shop around to figure out which lenders will offer you the best interest rates and conditions.

Ultimately, a fair credit car loan can be just the ticket to help you get the keys to your new car. It’ll help you rebuild your credit in the process, too.

Frequently asked questions about car loans for fair credit

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