If you're reading this, you probably need a car. And to buy that car, you need a car loan. The only problem? Your credit score is less than perfect. Don't worry, you're not alone. Millions of Canadians have poor credit and struggle to get approved for car loans.

But don't let your credit score keep you from getting the car you need. With a little knowledge and research, you can find options for bad credit car loans that can help you get on the road in no time.

In this guide, we'll cover:

• Bad credit car loan lenders (their rates, terms, pros & cons)
• Requirements for qualifying for low credit car loans
• Tips to improve your chances of approval
• How your credit score will affect your loan terms
• Refinancing options
• Risky lending practices

Let's get into it!

By the way — do you own your home? Homeowners can use the equity in their properties to finance big purchases like car loans with much more favourable interest rates. At Lotly, we help homeowners find the best home equity loan deals for their personal needs. Get a free consultation to see what we can do for you.

3 lenders offering bad credit car loans

Several lenders in Canada will offer options for car loans with low credit:

1. CarsFast
2. LoanConnect
3. Car Loans Canada

1. CarsFast

CarsFast is a platform that connects borrowers with various lending institutions like TD, Scotiabank, and BMO. They specialize in offering car loans to individuals with poor credit.

• Interest Rates: Varies (depending on the lender) from 3.90% to 29.90% APR.
• Loan/repayment terms: 12-96 months
• Best For: Individuals with poor credit residing in any province with a stable monthly income of at least $2,000.

Pros:

• High maximum loan amount (up to $75,000)
• Broad network of reputable lenders
• Flexible loan terms

Cons:

• Interest rates vary significantly based on lender
• Limited availability to certain provinces
• Potentially higher rates for poor credit borrowers

2. LoanConnect Car Loans

LoanConnect is a search engine that helps users find personal loans, including car loans, from various lenders across Canada.

• Interest Rates: 6.99% to 46.96% APR
• Loan/repayment terms: 72-84 months
• Best For: Those who want a wide range of loan term options and access to multiple lenders through a single platform.

Pros:

• Wide range of loan terms
• Quick pre-approval process
• High maximum loan amount (up to $50,000)

Cons:

• High potential interest rates for low credit borrowers
• Loan fees vary by lender
• Not a direct lender, so rates and terms depend on the matched lender

3. Car Loans Canada

Car Loans Canada provides car loans across several provinces, including Ontario, British Columbia, and Alberta. They cater to many borrowers, including those with poor credit.

• Interest Rates: 7.49% to 34.99%
• Loan/repayment terms: 12-96 months
• Best For: Individuals looking for car loans in Ontario and BC with various loan term options.

Pros:

• Large service area across multiple provinces
• High approval rate for low credit borrowers
• Quick turnaround from approval to driving off the lot

Cons:

• Interest rates can be high
• Not available in all provinces
• Terms may vary significantly based on location

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How to qualify for low credit car loans (requirements)

As you can see, despite having a low score, you can still get credit for car loans with low credit. Car loan requirements may vary between lenders, but generally, you want to do the following:

• Prove stable employment and income. Typically, this looks like a minimum of 3 months of employment and income of at least $1,500-$2,000 per month.
• Provide proof of residency. This typically looks like a utility bill or other official document with your current address.
• Provide proof of identity. Often, this is a photo ID like a license or passport.
• Have a valid driver's license.
• Have a co-signer with good credit (if necessary).
• Provide proof of car insurance. Lenders usually want you to have full coverage insurance for the duration of your loan.
• Have a down payment ready, ideally 10-20% of the car's purchase price.

It's important to note that each lender may have additional specific requirements, so it's best to check with them directly before applying.

Tips for improving your chances of loan approval

While loan approval is ultimately in the hands of the lenders, there are steps we can take to increase our chances of getting approved for a bad credit car loan. Here are some helpful tips:

• Check and improve your credit score: Before applying for a bad credit car loan, it's essential to know where you stand in terms of your credit score. Review your credit report for any errors or discrepancies and work on improving your score as much as possible.
• Build up savings: Having some money saved up can show lenders that you can make timely payments on your loan. It also gives you more negotiating power when discussing terms and interest rates.
• Consider a cosigner: A cosigner with good credit can help improve your chances of getting approved for a bad credit car loan. They become responsible for the loan if you cannot make payments, so make sure you have an honest conversation with them about their responsibilities and your ability to make timely payments.
• Be realistic about your budget: When applying for a car loan, be realistic about what you can afford. Consider not only the monthly payment but also additional costs such as insurance, maintenance, and gas. Make sure you have enough room in your budget to comfortably cover all expenses related to owning a car.
• Consider prequalifying for a loan: Some lenders offer prequalification for car loans, which can give you an idea of the interest rate and terms you may qualify for before officially applying. This can help you narrow down your options and save time in the loan application process.
• Provide a down payment (often at least 10% of the car's value). Increasing the down payment you’re able to provide can lower the overall cost of your loan and may make lenders more willing to work with you.
• Seek alternative options, like a home equity loan. If you own your home, you can use part of your ownership in the property to secure a loan. This can be an alternative option for those with poor credit, but you must consider the risks and obligations associated with using your home as collateral.

Loan approval can be tricky, which is why Lotly works with lenders nationwide to find the best deals for your personal needs.

How your credit scores impact loan terms

A low credit score can lead to higher interest rates, larger down payments, and stricter loan terms. On the other hand, having a high credit score can result in lower interest rates, smaller down payments, and more flexible loan terms:

• Interest rates: Lenders use credit scores to determine the risk of lending money to an individual. A higher credit score typically means a lower risk, which can lead to lower interest rates.
• Down payments: In some cases, lenders may require a larger down payment for individuals with low credit scores as a way to mitigate the risk of lending them money. This can make it more difficult for those with poor credit to afford a car.
• Loan terms: Individuals with good credit may have more options when it comes to loan terms, such as longer repayment periods or lower monthly payments. Those with low credit may be limited in their choices and face stricter terms to secure a loan.

Improving your credit score can not only help you get a better interest rate on a car loan, but it can also open up more options for you in terms of lenders and loan terms. So, it's important to maintain good credit habits such as paying bills on time, keeping low balances on credit cards, and monitoring your credit report regularly.

Refinancing options for bad credit car loans

If you have a bad credit car loan, there are still options available to improve your loan terms. One option is refinancing your car loan, which involves taking out a new loan with better terms to pay off your current one.

Here are some potential benefits of refinancing a bad credit car loan:

• Lower interest rates: If your credit score has improved since you initially took out the car loan, you may be eligible for lower interest rates with a refinance. This can save you money in the long run.
• Extended repayment period: Refinancing can also allow you to extend the length of your repayment period, leading to smaller monthly payments that may be more manageable. However, keep in mind that a longer repayment period may result in paying more interest over time.
• Improved credit score: As you make timely payments on your refinanced car loan, it can help improve your credit score over time. This can then open up even better loan terms for future purchases.

Before considering refinancing a bad credit car loan, it's essential to research and compare different lenders, as some may have higher fees or less favorable terms. Review the terms of the new loan and make sure it is indeed a better option than your current one.

Risky lending practices to watch out for

Many low credit loan lenders engage in risky, predatory practices to take advantage of individuals in need of a car loan. Be wary of these practices and avoid them if possible.

Some red flags to watch out for when researching bad credit car loans include:

• High interest rates: Some lenders may offer extremely high interest rates, often referred to as "subprime" or "predatory" lending. These can make it even more challenging to pay off the loan and may result in paying significantly more than the actual value of the car over time.
• Unnecessary add-ons: Be cautious of lenders who try to push additional products or services, such as extended warranties or gap insurance, onto your loan. These can significantly increase the overall cost of your loan and may not be necessary.
• Balloon payments: Some lenders may offer low monthly payments, but with a large balloon payment due at the end of the loan term. This can result in being unable to pay off the total amount and potentially losing your car.
• Prepayment penalties: Some loans may come with penalties for paying off the loan early. Be sure to carefully review this before agreeing to a refinanced car loan, as it can limit your ability to save money on interest by paying off the loan sooner.

Ultimately, you’ll need to thoroughly research and compare different options before making a decision about refinancing a low credit car loan.

Own a home? Get a safer, stable loan with Lotly

Let's quickly recap everything we've covered:

• Explore various lenders offering car loans for poor credit in Canada. Options like CarsFast, ZoomCarLoans, LoanConnect, and Car Loans Canada provide specialized services with varying terms and interest rates.
• Understand key requirements to qualify for bad credit car loans. Stable employment, proof of identity, and a down payment are typically necessary to improve your chances of approval.
• Take proactive steps to enhance loan approval chances. Improving your credit score, building savings, and considering a cosigner can significantly increase the likelihood of getting approved for a car loan.
• Be aware of risky lending practices associated with low credit loans. Watch out for high interest rates, unnecessary add-ons, and prepayment penalties that could make the loan more costly in the long run.

If you're looking for a less expensive way to finance a car purchase — with far more favorable terms — Lotly might be the right fit for you.

We work with 50+ lenders nationwide to help you turn your home equity into cash, with safe and fair interest rates far below the ones you'll see on bad credit car loan terms. Book a free consultation today to see what we can do for you.

FAQs

What is the lowest credit score for buying a car?

There isn’t any actual minimum credit score. The minimum credit score to buy a car varies among lenders, but it typically falls around the 600-650 range, sub-500 for low credit lenders. However, keep in mind that having a higher credit score will make you eligible for better interest rates and loan terms.

Can you get a car with low credit in Ontario?

Yes, getting a car with low credit in Ontario is possible. Some specialized lenders offer low credit car loans and provide options for individuals with poor credit scores. However, be aware of potential risks associated with these loans and take proactive steps to improve your chances of approval and secure better terms.

What is the best car to buy with low credit?

There is no specific "best" car to buy with low credit, as it ultimately depends on your personal needs and financial situation. Be mindful of your budget and avoid purchasing a car that may be difficult to afford in the long run. Consider opting for a reliable, affordable option rather than a luxury vehicle with higher costs associated with maintenance and insurance.