Bad Credit Car Loans

Some Essential Fundamentals to Know

Owning a car is not a luxury but an everyday necessity for most people. For Canadian citizens public transit, taxis or hired vehicles (Uber) might be options to travel but most people want to have their own car for convenience. Nevertheless, many cannot afford to purchase a new car or even a used one due to high payments. Therefore, financial institutions and banks offer financial assistance to these people to get a car loan. But approval for a car loan might be difficult if you have a bad credit profile. There are options available to secure a car loan despite the poor credit report of the interested buyer in Canada. Many private lenders, creditors, banks and other traditional financial institutions are offering car loans to those to people eager to purchase a car despite their bad credit record.

 

What is Bad Credit Car Loan?

In Bad Credit Car Loans lenders treat the low credit scores differently. These loans are made specifically for consumers with low credit scores. Not all lenders will grant car loans to someone with bad credit score but there are certain car financers that will work with the loan applicant. This is negotiable. First though you should have some idea about the process of credit score ratings in Canada that are used to determine your eligibility to get approved for a car loan.

There are five major factors to determine a loan applicant’s worthiness and to calculate the credit score accordingly. Equifax and Trans Union in Canada are the two major credit bureaus that maintain a central record of all your credit transactions.

  1. Payment History: This is a history of payments you made on any bills. Failing to pay your bills in time or not pay at all will add a negative marking to your credit score. Applicant’s Payment History equals 35% of the total credit score.
  2. Credit Information: This is the amount of debt you are carrying. Suppose you owe a credit card with a limit of certain amount and you reach that limit during every month. Both the limit and balance will determine your score. So, it is advisable to pay more than the minimum payment and to keep the balance lower than 70% of the limit of the credit card. This equals 30% of the total credit score.
  3. Credit Length: The more time you have your credit card and functional more points will be added to your score. So, for example if you have more than one credit card and want to discontinue at least one of them, surrender the newest one. This equals 15% of your total credit score.
  4. Inquiries: This is the number of times your credit report is queried by potential creditor. This is also factors into your credit performance. In financial services it is termed as “Hard Inquiries” which is done by the potential creditors like banks, lenders and creditors while you are considered by them for a loan or consumer credit. Too many credit applications made by you effect the scoring. However, it is only the 10% of the total score.
  5. Credit Diversity: If you are handling a larger variety of credit products satisfactorily and responsibly it will add numeric to the score. This equals 10% of your total score.

 

A credit score ranges between 600-900. A good credit score in Canada determines the amount of loan interest rate, smaller down payment and longer repayment period. But, a score lower than 500 is deemed as a bad credit score for a consumer.

You should not give up your search for a car loan even if you have a low score. If you are shopping around for a lender for Bad Credit Car Loans, Canada Auto Experts offer do their best for you.

Make your venture easy with the auto financing experts working with Canada Auto Experts. They will help you to get the best deal.
You can submit your queries and application online. You will certainly get your own car with our financial assistance.

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