Whether you're looking for a family van, a sports-car, or something simpler, owning the right reliable vehicle is a big part of the average Canadian's life. And finding the best and most affordable financing is an important step in the car-buying process. When it comes to applying for and getting approved for a car loan, a healthy credit score does come with benefits. But, luckily for the 20 or so percent of Canadians with a subpar credit score, there are car financing options for all credit situations. Keep reading for everything you need to know about buying a car in Canada and the role your credit score plays.
Minimum Credit Score Needed for a Car Loan in Canada
Generally speaking, lenders are looking for a credit score in the mid-600s for car loans in Canada. More specifically, a credit score somewhere between 630 and 650 is typically what lenders want.
That being said, there is some flexibility around this credit score requirement depending on the lender and borrower. Some lenders, including most banks, will be more stringent and look for higher credit scores. Whereas alternative lenders are often willing to accept lower credit scores. Some dealerships can also help borrowers find financing to meet their specific credit needs.
If your credit score is below 630, don't panic! You still have a great chance of getting approved for a car loan. You can click here for more information about getting approved for a bad credit car loan. When shopping around, you will need to keep an open mind and stay realistic. It can take some time to find an honest lender that will work you're your lower credit; patience is essential.
Better Credit, Better Loan
A credit score in the mid-600s is average for a car loan. Credit scores between 680 and 720 are considered to be good for car loans. Even further, credit scores of 720 to 900 are excellent credit scores which are ideal for car loans.
The credit score range you fall into can tell you a lot about the car loan offers you can expect to get. Naturally, the higher your credit score, the better the rate Everyone wants to access low-interest rates, low monthly payments, and larger loans. The higher your credit score, the easier it will be to get these ideal loan offers. In addition, a higher credit score will allow you to get approved quickly and easily.
But, just because you can access lucrative offers, doesn't mean you should automatically accept them. It is still important to consider your current financial position and future financial goals. Having a great credit score leads to better deals, just don't let that stop you from making smart, educated financial decisions.
Finding the Right Car Loan Lender
Because car loan lenders vary in their credit score requirements, the task at hand is to find a lender that will work with your credit to extend financing for a car. What many borrowers forget is that lending is a two-way street. Borrowers have just as much of a right as lenders to get a deal they want and that works for their financial situation.
To get the best deal possible, ask yourself the following questions when evaluating your lender:
- Are you pressed for time to get approved for financing?
- Do you have bad credit?
- Is convenience important to you
- Are you willing to shop around to find the best deal possible?
- Is this your first car loan and you don't know where to start?
- What are your current and long-term financial goals?
- Do the car loans offered align with your financial goals?
How to Improve Your Credit Score and Increase Your Chances for Approval
Before applying for a car loan, you should understand your credit score and do whatever you can to boost it. You can further increase your chances of approval by researching the car loan market and lenders you're interested in working with. More often than not, choosing the right lender is the first in getting approved for the car loan you need.
If you're interested in improving your credit score before applying for car financing, make sure that you:
- Check your credit score to see where you stand
- Contact credit bureau to fix any mistakes you find in your credit report
- Pay off as much outstanding debt as you can afford
- Start making on-time, full and consistent payments towards other debt
- Gather multiple car loan offers, compare, and negotiate with lenders
- Consider saving up a down payment of 20-percent
- Consider your budget, specifically how much you can afford to pay in car loan payments and car insurance
Depending on the state of your credit, trying out even a few of these can help give your credit score the boost you want.
Find the Car Loan of Your Dreams Today
While a healthy credit score is beneficial when it comes to getting approved for the car loan you need, less than perfect credit won't exclude you from being a car owner. Now that you know what is required to get approved for a car loan in Canada, you can start working toward obtaining the car of your dreams.