What is a Credit Score?

The formula for a credit score is fairly complicated. It is based on several major factors.

Some of these factors are;

1) Previous payment history ie/ do you pay your payments on time and as agreed? And do you keep your credit under or within the credit limit provided by the creditor?

2) The amount of credit you have established ie/ how much have you proven over the years that

You can afford and how many loans or credit cards you have reporting on the credit bureau.

3) How much you currently owe in outstanding debt. TDS Total debt service is a issue when getting approved. On average, a bank will only allow a total of 40% of your gross income to go to credit bureau debt. So if you make $2000 per month only $800 is available to pay for a car loan credit cards mortgage/rent, and any other obligations on the credit bureau.

4) There are 2 types of credit revolving credit and installment credit. A car loan is installment and credit cards are revolving. Lenders like to be able to see both types of credit reporting.

5) What level you have established to in the past. IE If the most credit you have on your bureau is one $500 credit card it is very difficult to then jump up to $30k on a car loan. As you have only proven the ability to pay on S500.

6) Also your credit score can be affected by having too many credit inquires. Nothing wrong with a 2nd opinion but the more you shop your credit the more questions the banks will have and the harder it will be to get you approved.

And ranges on average from 400-800 in Canada with 2 local agency’s Equifax and Transunion.

Will I need money down?

Or, the pros and cons of no-money-down car loans

Will you need money down? In a word, “No.” But that doesn’t tell the whole story.

While money down on a car loan is not always necessary, it is always recommended. Why? That’s what we’re here for. So take a few minutes to learn what’s best for you and your situation. We’re sure it’ll save you a few headaches—it may also save you thousands of dollars.

What is a down payment?

If we’re starting from the very beginning, we should start by defining a down payment. A down payment is something of monetary value that covers the gap between the cost of your vehicle and the amount of financing you receive. For example, if you plan to purchase a $20,000 car and finance $15,000 of that purchase, you’ll need a $5,000 down payment. Simple, right?

In most cases, your down payment will be made in cash. However, there are other alternatives. If you’re trading in an existing vehicle, the value of that vehicle can count toward your down payment. Just know that the Kelley Blue Book value of your car may be more than a dealer can reasonably offer, especially if your car is in sub-optimal condition. Selling your car privately and bringing the cash as a down payment may be a better option.

Some lenders accept other items of value, from home stereo equipment to power tools. These exchanges are less common, but the principle remains the same: The dealer needs something that can be readily converted into cash.

The purpose of a down payment

If you can obtain financing for the full amount of your vehicle, why shouldn’t you take it? The answer requires a bit of explanation. For some customers, 100 percent financing is their only opportunity to drive away in a car—they have no cash reserves or other items of value to exchange.

But a no-down-payment car purchase opens the door to other, negative possibilities, namely the potential to become “upside down” on your car loan. This occurs when you owe more money than your car is worth. It is the greatest risk of no-down-payment auto loans.

It’s easy to get upside down on a new car loan because the moment you drive off the lot, your vehicle loses its value (depreciates) by almost 20 percent. So, returning to our earlier example, a new car purchased for $20,000 is worth just $16,000 as soon as you leave the dealership. (You can calculate a more specific depreciation by dividing the trade-in value of your car after one year of ownership by the purchase price.) So, if you finance the entire purchase, you’ll still owe $20,000 on a vehicle worth $4,000 less.

If your car is stolen or totaled in an accident, most insurance companies reimburse you for the current value of the car, not its original purchase price. (Some policies offer new-car replacement within the first few years of ownership.) Likewise, if you lose your job and need to sell your car, you may receive a fair market price without being able to pay back your lender fully. You’ll be upside down on your car loan.

On the flip side, a reasonable down payment may provide near-immediate equity in your vehicle, allowing you, at any point, to trade in your existing vehicle for a new one without significant out-of-pocket expenses.

Lenders like to see a down payment, even a small one, for several reasons. Most obviously, it decreases their risk—they’re lending a smaller amount of money. But it also shows commitment on the part of the buyer, as you’ve invested your own cash into the new vehicle. This commitment, in turn, has been shown to reduce the risk of default, making the lender more likely to provide a better interest rate. Combine an improved interest rate with a smaller loan amount, and you may save hundreds if not thousands of dollars over the term of your loan!

If you have poor credit history, a down payment may be required to obtain a vehicle. Still, every situation is unique. A steady place of residence and work history may allow you to qualify despite blemishes in your financial background.

How much money should you put down?

Most financial experts recommend a down payment of 20 percent to cover the initial depreciation of your new car. As you drive off the lot, the amount of money financed for your car purchase will equal your vehicle’s value.

Still, recent history has shown that the average car buyer puts down less than 20 percent on a new vehicle, with average down payments in 2013 hovering around 12 percent for car buyers. There are two theories on why the down payment has fallen short of recommendations. For one, the cost of a new vehicle has risen faster than the median wage, making it difficult for many families to keep pace. Second, national fiscal policy has maintained low interest rates to help the global economy recover from the financial crisis of the late 2000s, making financing more attractive.

Because used cars have already experienced this immediate depreciation, they can be a much safer alternative for any car buyer, especially for those financing 100 percent of the purchase. You’re less likely to be underwater with a used car purchase, and, even if you are, your financial exposure will be less. Experts agree that a down payment of 10 percent is sufficient to protect yourself when buying a used car, which may seem more feasible.

Gap insurance provides a third alternative. For a few hundred dollars, gap insurance insures you against the difference between what insurance companies pay for in the event of a damaged or stolen car and what you may still owe your lender.

So, if you have plenty of cash, why not increase your down payment to 30 or 40 percent? Or even pay for the car outright? For some people, that may be the right decision. Debt always incurs risk, even in stable financial circumstances. But cars are also depreciating assets. Unlike a home, they continually lose their value. Car buyers able to obtain the best interest rates may find that investing unspent cash in stocks or bonds returns greater value than sinking that cash into a car. Additionally, if money is tighter, saving cash for your emergency fund makes more sense than locking it into a vehicle, where it remains inaccessible unless you sell your car.

Lenders, down payments, credit scores, interest rates, and loan duration

You shouldn’t consider a down payment in isolation of other financing factors. At the end of the day, getting the right financing depends on your lender, down payment, credit score, interest rate, and loan duration.

The lender
The first aspect, the lender, is simple to understand. You need a partner that understands your situation and has your best interests in mind. Also, like any other purchase, shopping around makes sense. Take the time to find the best lender to meet your needs.

Compared to banks, dealerships often are more willing to extend credit to buyers because they have the added incentive of selling a car. Additionally, local businesses, whether dealerships or banks, will have a better understanding of the local economy and the ability to empathize with local hardships, like large-scale job layoffs at a city factory.

Down payment
Your down payment is the second key factor. In addition to preventing you from becoming upside down on your loan, your down payment reduces the total amount you need to finance, which may help you secure lower monthly payments. It’s intuitive: Your monthly payments are the amount of the loan (plus interest) divided by the period of repayment. Financing a smaller portion of the purchase price leads to lower monthly payments. On average, every $1000 you put toward a down payment reduces your monthly payment by about $20.

Likewise, a shorter loan duration means paying less overall interest to the lender. However, be aware that a shorter term also results in higher monthly payments because the loan amount is divided by fewer months. Ultimately, however, it creates a lower total cost.

Credit score, interest rates, and loan duration
Your credit score affects your interest rate, and a higher credit score will give you access to the lowest interest rates, which may be as low as 0.00%. The interest rate you receive depends on your personal financial history as well as broader economic policy. Ultimately, the interest rate is the price you pay the lender for the privilege of borrowing money.

However, it’s important to take into account the annual percentage rate (APR) of your auto loan, not just the interest rate. The APR is the total finance charge of your loan expressed as an annual rate. It provides a fuller understanding of out-of-pocket expenses, which may include document preparation fees, title fees, filing fees, and warranty charges, rather than focusing on the interest rate alone.

This is also where interest rate and loan duration intersect. A lower interest rate means you’ll pay less interest, but monthly payments may be high, depending on the duration of the loan. A longer loan duration means a higher interest rate and greater overall expense but smaller monthly payments. Let’s break it down:

1. The interest rate is higher because it represents an extended risk to the lender.

2. The overall expense is greater because you’re paying monthly interest for a longer period of time.

3. The monthly payment is smaller because you’re dividing the amount of your loan by a larger number of months.

This final point is key because many buyers simply see a smaller monthly payment in a financing offer and jump on it—even as it locks them into thousands of dollars of additional interest. Most auto loan durations are for 36, 48, or 60 months. Some may be as long as 72 or 84 months, but these should be avoided, if at all possible.

Why? Here’s an example. A $20,000 loan for 72 months at 7 percent interest would cost you about $4550 in interest. That’s almost three times the interest you would pay for a 3-year, 5-percent loan. If you need a 72-month loan to pay off your car purchase, you should probably consider a less expensive car.

Apart from a higher interest rate and greater total interest, you may also expose yourself to the risk of looking for a new car before paying off your existing vehicle. Most North Americans keep their cars for about 4.5 years, and it doesn’t make any sense to pay back a loan for months or years after discarding a vehicle.

Some lenders allow car buyers to roll an existing loan into their next vehicle purchase, but this can put you upside down in a hurry—and for longer. Remember: No matter how you set up your loan, you will pay for the car one way or another. Don’t let a low monthly payment obscure the fact that a vehicle may still be out of your budget.

Is a long-term loan ever a good idea? Only for those with current financial stability but an uncertain economic future. Securing a long-term loan at a low interest rate can provide protection down the road. In the near term, pay off the loan as quickly as possible. Then, if your income later declines, you’ll have a lesser burden of monthly auto payments. Even adding $20 or $30 to your regular monthly payment may save hundreds in finance charges over time.

If you are taking out a long-term auto loan, make sure you choose a car that has high reliability and longevity. That way, you give yourself the best shot at avoiding car replacement before the loan is repaid.

When no down payment may be the right choice

There are best practices when it comes to financial planning, and then there are life’s unexpected events. We know that even savvy, spend-thrift people can run into financial trouble. And that’s why we recognize that there may be a time when no down payment is the right choice—because it may be the only choice.

So when is it the right choice?

1. When your current vehicle has become unusable

2. Personal transportation is still necessary

3. You have no way to provide a down payment on your next vehicle

4. And you’re willing to assume more risk with your car loan to preserve emergency savings for repairs to your home or medical expenses—the inflexible, urgent needs.

But, as you may have already noticed, a no-down-payment loan is a way to manage a difficult situation, not an ideal scenario for borrowers. Remember, too, that “no down payment” doesn’t mean no cost to the buyer. Some lenders lure buyers to their businesses with promises of no down payment only to add fees and closing costs to the purchase. These costs can be particularly onerous because, unlike a down payment, the out-of-pocket money goes straight to the lender rather than paying off your vehicle.

It’s another reason why taking a few months to save up money for even a small down payment can be well worth the wait. It protects you from being upside down on your loan or falling victim to unfavorable, even predatory lending practices.

When you’re ready for a detailed analysis that takes into account your unique financial situation and transportation needs, just get in touch or take a moment to fill out our credit application. Find out how we can work together to find a solution that works for your life and your budget.

What if my own bank turned me down ?

As a general rule local banks do not like to extend new credit to customers who appear to be struggling with their current debt loans. Unless you have some strong collateral ie/ home equity they will shy away from subprime loans and my even in some cases even call in some of your outstanding credit with them if they see that you are falling behind.

What if I owe more on my trade than it’s worth ?

No, we maintain and manage our own inventory that we can ensure have top-quality reconditioning and condition. Together, we will find you the best vehicle options for your lifestyle needs and situation.

What if I’ve been bankrupt?

Or, how a car loan may help you rebuild your credit

Bankruptcy presents a challenge to car loan approval, but it’s not an impassable barrier. Every situation is unique, from the cause of your bankruptcy to the extent of your debt. As we’ll explain, a car loan can be the perfect place to start rebuilding your credit, even if you’re emerging from personal bankruptcy. Here’s everything you need to know.

Bankruptcy in Canada

The Canadian bankruptcy process is governed by federal law through the Bankruptcy & Insolvency Act. While potentially losing some of your possessions or property is a painful process, the goal is to allow you to escape your debts and start again without your existing financial burden. After your debtors have been paid, the remaining debt you owe will be cancelled, with a few minor exceptions.

To file for bankruptcy in Canada, you must owe creditors at least $1,000 and be unable to repay your debts. (You must also live or work in Canada.) If you’re in this situation, the process starts with the hiring of a federally licensed bankruptcy trustee, who helps you file for bankruptcy. Trustees charge fees for their services, but regulation ensures fees are reasonable and that the bankruptcy process does not become another major financial burden to you.

The Role of the Trustee
With your help, the trustee catalogs all of your existing assets, as well as any assets you have discarded in recent years. You also are required to surrender all credit cards to the trustee. However, you are no longer required to make payments to creditors, subject to wage garnishments, or liable for lawsuits filed against you by your creditors.

The trustee sells your remaining assets to generate as much cash as possible, which is held in a trust. From this trust, the trustee settles your debts with existing creditors, usually by agreeing to pay a percentage of what’s owed. Assets may include your car, house (if you own it outright), or other items of value. If your income exceeds a sliding threshold for a federally defined standard of reasonable living, you may be required to submit “surplus income” to your trustee for distribution to creditors.

Discharge and Debt Cancellation
The process of discharging your bankruptcy takes about nine months for your first bankruptcy. If you qualify as having surplus income, it could take up to twenty-one months as you continue to make payments to creditors. If you are filing for bankruptcy a second time, the discharge process can last for up to three years. Instead of an automatic discharge based on elapsed time, a hearing may be called to confirm or deny your discharge, depending on the situation.

During the bankruptcy period, you must complete certain responsibilities to finalize the process, such as attending two financial counseling sessions and assisting the trustee with the distribution of assets. It is critical that you are fully honest with your trustee and other parties at all times during your bankruptcy proceedings.

After discharge, your debts are cancelled, with some exceptions. You will still owe payments for alimony, child support, student loans, court fees, and debt accrued from fraudulent practices.

Bankruptcy and Your Credit Report
Immediately after emerging from bankruptcy, you have the lowest possible credit rating. A note on your credit report about your bankruptcy remains on file for six or seven years following your first bankruptcy. For subsequent bankruptcies, it may remain for up to fourteen years.

This is a primary hurdle when it comes to securing credit for a car loan or other major purchase, but it doesn’t tell the entire story. In many cases, a work-related injury or job loss may have caused the bankruptcy, not irresponsible spending habits. Factors specific to your bankruptcy come into play as you look to rebuild your credit and secure financing.

Getting a Car Loan after Bankruptcy

For lenders, the obvious concern is getting repaid. A bankruptcy in your recent history means lenders face above-average risk if they decide to loan you money. For anyone applying for a car loan, lenders may look as far as ten years into previous credit history, but the most important time period is the most recent two years. If you’ve already made it through this window post-bankruptcy, it’s a positive sign to a lender.

That said, you’ll still want to spend time evaluating all your options. While consumers with high credit scores enjoy low interest rates from most if not all lenders, people with a bankruptcy in their past may find it difficult to get a manageable rate—or even approved at all. Make sure you explore your options thoroughly before deciding on a lender.

Factors Lenders Consider
When automotive lenders begin investigating the credit of someone with a past bankruptcy, the single most important factor for approval is a successfully repaid car loan. To the lender, it demonstrates commitment and establishes a positive history. If you’re currently up-to-date on payments for an existing vehicle, all the better.

In some cases, this includes maintaining payments during the bankruptcy process. If your debts are not excessive, you may be able to continue making car payments—and keep your car—as you go through bankruptcy. This is a very positive signal to an auto lender. A repossession of a car is far more detrimental to your ability to secure a loan than a general bankruptcy.

Paying your mortgage is another major factor, although the financial crisis of the late 2000s shifted lenders’ emphasis away from mortgage status as a leading determinant. During the financial crisis, so many consumers were behind or “underwater” on their home payments (they owed more than their home was worth), that focusing on mortgage status eliminated many legitimate loan seekers.

Often, local lenders provide a better option because they understand local economic situations, like a rash of job layoffs. Additionally, you may find that dealerships are more willing to extend credit as it’s mutually beneficial. You get to drive away in a car you need while rebuilding your credit, and the dealership gets to move a car off its lot.

Part of what makes car loans an effective way to build or rebuild credit is that the car you purchase serves as collateral for the loan. You’re not required to have a separate asset to secure the car loan. Still, smart lenders should help you find a car that matches your current income level. In general, the more of a financial stretch the monthly payment may be, the more money you should expect to put down in advance. More money down protects the lender in the event of a default or repossession.

Cautions and Alternatives
And while it may be difficult to find a willing lender, be cautious of any lender offering guaranteed loans regardless of your credit, or a lender demanding upfront fees or wire transfers before processing your loan. These are tell-tale signs of irresponsible or potentially fraudulent lending practices.

If you’re unable to get approval for a car loan, the fastest and easiest way to build your credit is with a secured credit card. Unlike regular credit cards, secured credit cards require a security deposit equal to the credit limit. You then use a secured credit card like a regular credit card and pay off the balance each month. The lender is protected by your security deposit, which covers any balance you’re unable to repay.

Like monthly payments for traditional credit cards, payments on the balance of your secured credit card are reported to credit bureaus to help rebuild your credit. The setup isn’t appealing for those with good credit, but it’s a useful interim measure to demonstrate your ability to manage credit.

The Lender’s Perspective

Because the car serves as collateral for the loan, it represents less risk from the lender’s standpoint. However, it’s still not without risk. This is in part because some 20 percent of the value of your car disappears as soon as you drive it off the lot. So, if you buy a car for $20,000 and finance the entire purchase, that car is worth only $16,000 the moment you leave the dealership, even though you’ll still owe $20,000.

The dealer also takes on risk for potential damage to the car beyond normal wear and tear. That’s why, even if you’ve undergone bankruptcy, a clean driving history without recent or repeat accidents or traffic violations might help you secure a car loan. If your car is repossessed but has no damage, the car will be worth more, and the lender will be able to recover more. All other factors being equal, a good driving record can help tip the balance in your favor. The converse is also true.

Still, the process of repossession represents an expense to the lender. The lender needs to pay a repossession service to obtain and store the car, and cover auction fees for your vehicle. At auction, most cars sell below their “book value,” which also is likely to be less than the amount of the loan.

The Value of a Down Payment
If you’re able to provide a 20-percent down payment for your vehicle, it decreases the risk to the lender because after you drive off the lot, your loan amount will equal—not exceed—the value of your car. You’ll never be “underwater” on your car loan. In many cases, rebates offered on certain cars can be put toward a down payment, which bolsters the likelihood of approval and makes monthly payments more manageable.

If you’re able to provide an even greater down payment, say 30 to 40 percent, it provides added security for the lender and increases your chances of approval. As always, financing a smaller part of your purchase results in lower monthly payments, which may help you stay on track over the long term.

Final Thoughts

As we mentioned at the top, every situation is different. But bankruptcy still leaves open the possibility of obtaining an auto loan. In fact, an auto loan may be the perfect way to help you recover from a troubled financial past.

To find out where you stand, get in touch with a lender that’s committed to helping you make the right decision, whether that’s choosing an appropriate car or finding ways to build your credit to increase your eligibility. Take the first step today.

How do I know if I qualify for an Auto Loan?

Because ALL vehicles depreciate most people who are currently financing and making the minimum payment will be backwards on their trade. This difference is called negative equity and for qualified buyers can be rolled over into the new finance application. If you don’t owe money on your trade you can use it as money down to reduce your payment.

How do I know if I qualify for an Auto Loan?

Because ALL vehicles depreciate most people who are currently financing and making the minimum payment will be backwards on their trade. This difference is called negative equity and for qualified buyers can be rolled over into the new finance application. If you don’t owe money on your trade you can use it as money down to reduce your payment.

What interest rate can I expect to pay?

Interest rates are determined by the actual lenders and are influenced by several factors, including the severity of credit problems, the amount of down payment, the vehicle age, employment stability and the degree of credit risk. We will explain these factors, and tell you exactly what your interest rate will be after having received your car loan request.

Will I need a co signer?

Co signers are generally a good idea. A co signer brings their strong credit to the table allowing you to have better terms and conditions. Because they are responsible in the event you default the bank will give a lower interest rate or longer finance terms as the risk to them is considerably lower.

1st time buyers or young buyers with no money down will generally need a co signer unless they have established other credit to an equal level as the car loan they are seeking.

What is a sub prime car loan?

Subprime or special finance is a loan that is offered to individual’s whose credit has had some challenges. These loans are usually automotive loans or mortgages where the vehicle or home can be used as collateral. Interest rates are generally higher then prime loans and there may be more conditions on the loan.

How can a car loan help rebuild my credit?

An automotive loan like many forms of credit report monthly to the credit bureau. Generally car loans established credit faster than a credit card can and the amount reporting is higher. For example if you qualify for a 25k car loan and establish 25k worth of credit in a year or two this credit can dramatically offset previous issues. Verses a $500 credit card. Also you will be showing future lenders that you can handle this level of debt. Many people who are looking to rebuild their credit will start out slow and try to have credit card limits increased over time and this does help but takes years to get to the same level of credit. Also lenders like to see both installment and revolving credit reporting on the credit bureau. (See question 1 item 4).

How do I know if I qualify for a car loan?

Or, what you should know about auto loan rates and bad credit auto loans

Can’t wait to drive off the lot in your shiny new vehicle? Not sure what it will take to make that happen? We’ve laid out each factor to consider to help you learn whether you’ll qualify for a car loan, as well as each piece of personal and financial information you’ll need on-hand throughout the process.

How to know if you’ll qualify—and for how much

As you may imagine, the key determinants in qualifying for a car loan are your personal finances—everything from your current income to credit history. The amount of money available to you depends on several factors, notably your work history and income, outstanding debt and monthly expenses, and your credit score.

1. Work history and income
When it comes to work history, most loan providers look to see whether you’ve had the same employer for at least two years. Being in a new job doesn’t mean you won’t be approved, but having demonstrated a stable, multi-year work history certainly counts in your favor.

To verify your income to a lender, expect to bring recent pay stubs and bank statements that offer clear proof. Some lenders may call your employer to confirm your work status.

2. Outstanding debt and monthly expenses
Determining how much you can afford to borrow is a task for you and your lender. Before applying for a car loan, assess your ability to purchase a new car and what type of car fits reasonably within your budget. You can calculate many of the same variables the lender uses to determine your eligibility.

For your own internal calculations, remember to include rough estimates for aspects beyond the initial car purchase, such as gas, maintenance, insurance, and interest. While you may not be able to budget hard numbers until after purchase, you can better predict the overall expenses associated with the new vehicle.

Most financial experts recommend that your total expenditure on cars—no matter how many you own—should not exceed more than 10 percent of your gross income. To give an example, the median family income in British Columbia is about $72,000, or about $6,000 per month. Ten percent of that amount is $600, so your car payment should come in at or under that figure.

When you complete a full credit application, anticipate deep research into your financial history, including whether you’ve filed for bankruptcy within the past seven years. Some lenders will also ask about your marital status in order to determine whether you owe alimony.

Whether you’re filling out an online application or providing in-person responses, be open and honest with all of your answers. Intentionally misleading the lender on your credit application is illegal and, even if it goes unnoticed, will result only in your possession of a vehicle you cannot afford.

3. Your credit score
Your credit score is a product of your debt-to-income ratio and bill-payment history. Other factors that contribute to it include the average age of your bank accounts and any negative events, such as charge-offs, judgments, or collections. Three credit reporting agencies (Equifax, Experian, and TransUnion) provide your score, which ranges from 300 to 900.

A higher credit score gives you the best chance to receive the lowest offered rates. At one time or another, you’ve probably seen advertisements for low—even zero percent—interest rates. These rates are not mere gimmicks, but they typically are available only to those who have credit scores of at least 700, in addition to other positive factors in their financial assessment.

A credit score in the middle range, around the 600s, usually means you will pay a slightly higher interest rate, while a score of 500 or below could mean significantly higher rates or the inability to get approved. A co-signer for your loan—someone with a stronger credit history to assume responsibility for the loan in the event of a default—can help with approval and interest rates.

Higher interest rates mean higher monthly payments, which should be factored into your calculations for the type of car you can afford. Consumers are entitled to one free credit report each year, which is a good way to monitor your credit and ensure no major blemishes or mistakes exist. At the very least, knowing your credit score—good or bad—helps you plan for your upcoming car purchase.

Other factors that influence your loan approval and interest rate

One of the best ways to increase the odds of loan approval is to bring a down payment of 10 to 20 percent of the purchase price. A down payment reduces the total amount of your loan, which in turn reduces the degree of risk for the lender. Lower risk means a greater chance of approval, as well as smaller monthly payments for you. Further, demonstrating your ability to save money for a down payment reflects positively for approval of your loan.

Getting your loan approved also relates to your specific history with car loans. A successfully repaid car loan in your past can go a long way in the approval process.

Another factor in the process is the planned length of your loan. Generally, any loan duration over 60 months may include an increased interest rate.

If necessary, existing assets may help serve as collateral for your loan. These may include a home or other car; in most cases, however, the car you purchase suffices as collateral against your loan.

Before applying, make sure you have…

1. Proof of identity
Any inquiry into your personal finances, for the purpose of approving your car loan, requires proof of identity. Many financing institutions require multiple forms of photo identity, frequently with your signature, but at the minimum you should have a valid driver’s license.

Other commonly accepted forms of primary and supplementary identification include government-issued passports, existing vehicle or home titles, and bank statements (with a name and address that match your driver’s license and other paperwork).

2. Proof of residence
When applying for a car loan, you’ll need to provide the potential lender with proof of your residence. This is so the lender can get in touch with you via mail, and also so the lender has a physical address on record in the event of a loan default.

Proof of residence is most often verified with a recent utility bill, although a lease agreement or mortgage paperwork may also be used in many circumstances.

3. Trade-in documentation
Your existing vehicle, if you have one, affects your loan application, as its remaining value may lower your overall purchase costs, which, in turn, may affect your loan approval and rate. If you’re planning on trading in a vehicle, make sure you have your vehicle title and registration with you when applying for a loan.

4. Proof of insurance
It’s not absolutely necessary to have proof of insurance when applying for a car loan, but it helps with the process. Taking the time to get a quote for insurance from several insurers will help you better understand the total cost of a new (or used) car and allow you to comparison shop for insurance. Waiting until the moment of purchase will put added pressure to complete the process quickly, lessening your ability to shop for the best plan to meet your needs.

Starting the loan application process

The easiest way to find out if you qualify for a car loan is to give us a call or follow the directions on our secure online credit application. Once we have received your application, we will call to confirm receipt and discuss possible options.

We will do everything we can to approve your application, even if you have imperfect credit history. If we are unable to qualify you now, we will consult with you or your credit bureau to provide ideas on how you may qualify down the road. After all, we’re here to help!

What if I’ve had a repossession?

Many people in Canada have had a previous repossession. And yes this is always a difficult deal to have approved. But it is possible given the credit file since the repossession, and the time that has lapsed since. It is possible that the customer lost a job or had some unforeseen financial problem and is now back to work and back on track. If this is the case a special finance loan might work for you.

Can everyone get approved for a car loan?

Or, what really matters for car loan approval

There’s only one way to provide you with an honest answer, and that starts by filling out our credit application. Why? Because every credit situation is unique, and while almost everyone can get approved for a car loan, not everyone comes to the table with the same credit history and life situation. Successfully navigating the approval process requires a partner that’s committed to understanding your unique circumstances and finding a solution that works for all parties.

There are five key factors that play into the approval process. We’ll walk you through each one to help you better understand your starting point on the path to approval. And, if you’re ready, we’ll work with you to get to the finish line, when you drive away in your next vehicle.

1. Credit history
Your credit history helps a lender learn more about previous loans and bill payments. What many people fail to realize is that it’s not the only factor. Too often, borrowers assume that a few bad marks in their credit past exclude them from any chance of car loan approval. It’s simply not true.

A summary of your credit history is obtained through your credit score, which looks primarily at your debt-to-income ratio and bill payment history. There are other factors, too, like the average age of your bank accounts (longer is better) and any collections or judgments against you in the past.

Three credit reporting agencies (Equifax, Experian, and TransUnion) provide the credit scores that lenders rely on to determine credit worthiness of a borrower. Your credit score may fall anywhere between 300 and 900, with the best auto loan terms available to those with a credit score of 700 or higher. A score in the 600s may mean that you’ll pay slightly higher interest rates, while anything below 500 makes approval more challenging.

Bankruptcy results in the lowest possible credit rating, and the history of your bankruptcy stays on your credit report for up to seven years after your first bankruptcy. Still, it is possible to secure a car loan after bankruptcy. Lenders are most interested in seeing whether—before, during, and after bankruptcy—you’ve been able to keep up with your car payments. Repossession of a vehicle is far more damaging to your chances of approval than a general bankruptcy.

Remember: Your credit history doesn’t typically lead to a yes-or-no answer from a lender. Rather, it places you along a spectrum—a higher score means better interest rates and lower monthly payments, while a lower score may limit the amount a lender will offer or make borrowing money more expensive.

2. Work history and income
As with your credit score, your work history and income don’t immediately determine whether you will be approved, but they do inform the loan terms a lender is able to offer.

For the lender, this is about more than just how much money you make. Lenders prefer to see borrowers who have had the same employer for at least two years. If you just took a new, better, higher-paying job at another company, a lender isn’t going to penalize you. But if you’ve bounced from job to job every few months with gaps between employment, that presents a greater challenge.

Most car loans are for at least three years, which means the lender needs to predict the future of your income, and the most accurate way to estimate future earnings is by looking at your past work history and income.

How much you make influences how much money a lender will offer more than it influences the final yes-or-no on your loan application. If you’re early in your career or working part time, you may need to bring money to the table to finance a high-end ride, or, alternatively, need to wait until your next car to get that dream vehicle and stick with something more practical in the interim. (The best advice from financial experts suggests that your total vehicle expenditure should not exceed 10 percent of gross income.)

Before you head to the dealership, gather recent pay stubs to prove your declared income. Often, a lender will call your employer to verify your current employment, too.

3. Debt and monthly expenses
Your existing debt and monthly expenses are the flip side of a lender’s efforts to understand your income. After all, it’s not just about how much you make but also how much you spend. By pulling your credit scores, the lender will have already learned a bit about your debt-to-income ratio.

All monthly expenses come into play when applying for your loan, including less commonly considered expenses like alimony or child support. While it may seem a bit odd for your lender to ask whether you’ve been divorced, it’s common sense if you put yourself in their shoes: Would you loan someone $20,000 without learning about all their existing financial obligations?

As with income, there’s no set amount of debt that precludes your approval for a car loan, but your expenses may affect how much a lender will offer or the terms on which they’re willing to offer a loan. In general, fewer expenses and less debt put you in a better position to be approved for more money on better terms.

To think of it another way, a lender is interested in learning whether your income exceeds your expenses (including debt) and, if so, by how much. Your lender needs to verify that there’s a sufficient, positive gap between income and expenses to allow you to carry the added debt. So if you know that a promotion or raise isn’t in your near future, lowering your expenses or paying off your prior debts can manufacture that financial breathing room without requiring additional income.

4. Money down
Will you need money down? We’ve already written about this extensively, and the short answer is “No.” However, if we change the question slightly to ask whether it’s better to put money down, the answer is almost always “Yes.”

If you’re unable to get loan approval for the full cost of your vehicle or for the vehicle you want, a down payment can bridge that gap. Additionally, putting money down can ensure you always have equity in your vehicle, from the moment you drive it off the lot to the time you trade it in.

Money down is also a positive sign to a lender, as it demonstrates your ability to save money and your commitment to paying for your vehicle. A borrower who provides a down payment of 20 percent for a new vehicle (or 10 percent for a used vehicle) has backed up their end of the agreement but adding hard-earned money to the signed paperwork. Even if you can’t reach the 20 percent mark, any down payment boosts your likelihood of approval.

So, money down can have a positive impact on approval, but that’s not its only benefit. Beyond protecting you from the dreaded upside-down position, it will help you earn better loan terms, if only because you’ll be borrowing less money. Getting approved for a car loan is good. Getting approved for the right loan that fits your budget and your life is much, much better. And a down payment is a critical part of that process.

5. The vehicle
Approval for a car loan starts in one of two ways. For some, they know the car they want and work toward approval for a specified amount to cover the purchase a particular vehicle. For others, especially those in less-certain credit circumstances, getting approval is the first step. Finding out how much you will be able to borrow informs the type of car you plan to purchase.

Every car lot has its share of temptations, many of which come with soft-tops, grumbly engines, and a glossy, candy-apple-red finish. But there are also abundant choices that can help you work toward your long-term financial goals and solve your immediate transportation needs.

As you work with a lender to gain approval, make sure the lender is just as committed to you are to building a stable financial future. That means getting the right loan for the right vehicle.

Final thoughts
It’s a simple equation: A lender assumes risk when loaning money in the same way that you assume risk if you lend a friend a few bucks. The difference, of course, is that the price of a car means a loan amount far greater than the casual exchange of dollars between friends.

The principles, however, are unchanged. The more a lender learns about your income and past debt management, the better informed the lender becomes. A good lender uses that information to come up with a solution that works for all parties, limiting the risk to the lender while also helping you solve your transportation needs and build (or rebuild) your credit worthiness.

We believe that just about everyone can be approved, but not everyone will be approved on the same terms. And no one can be approved until they begin the application process, so why not start today?

Will inquires on the credit bureau hurt my credit score?

The simple answer is yes but there are some inquires that do more damage than others.

If you go to several dealerships and apply several times for credit you are just applying to the same banks over and over again. The majority of dealerships have access to the same financial sources and once a bank has made a decision on you at one dealership it won’t change because to are at another. The bank will make a decision based on you and your credit not on the person or dealership submitting your application. Many automotive banks get frustrated seeing the same application come in from different sources and might decline you because they are worried that you are trying to get more than one car or are not being honest on the application.

Even though the lending institute will make the decision on terms and rates you need to be dealing with a finance manager that understands the non prime market and has a good relationship with the buyers at these banks. A strong finance manager will work between you and the bank by negotiating and pleading your case..

General Questions about Our Business

Q: Do you help used auto loan applicants?

I do both new and used car auto loans.

Q: Do you cover Dodge, Chrysler, Jeep, Ram and FIAT only?

I cover all brands, especially Dodge, Chrysler, Jeep, Ram, FIAT, Hyundai and Toyota.

Q: On average, how long does it take for you to get a client into their car (from contact to delivery)?

It’s hard to say. Some can be approved and driving in an hour, some take days, some take weeks, depends on the client and the deal. There are many factors that might slow the process.

Q: If someone already has a car (used) looking for a secondary car with low monthly payments, can you help them get into a newer car

If the 1st vehicle is also financed it might be tricky. Lenders prefer one car loan per person. But depending on income and credit, it is possible.

Q: What are some of the lowest interest rates you have been able to get for your clients? Has it ever been 0%?

0% would be a manufacturer rate and we don’t have it on any new products for non prime. But have in the past been able to get it when the program was available. Zero percent is for zero risk loans.

Q: What are your office hours?

I am available during our office hours (you can find this info from my contact page). You can use my website to contact me 24 hours a day, 7 days a week. I will try to get back to you as soon as possible.

Q: What banks & financial institutions do you work with?

I work with many financial institutions, such as TD Canada Trust, Scotiabank, Royal Bank of Canada (RBC), Rifco, BMO, Envision Credit Union, Navigate Capital, Carfinco, General Bank, etc.

I will work between you and the lender just like a mortgage broker to get you the best rates, terms and conditions, and in turn help you reestablish your good credit.

Q: How can I qualify for a car loan?

Everyone is different, so every case is different. You can contact me and we will evaluate your situation step by step.

Will inquires on the credit bureau hurt my credit score?

The simple answer is yes but there are some inquires that do more damage than others.

If you go to several dealerships and apply several times for credit you are just applying to the same banks over and over again. The majority of dealerships have access to the same financial sources and once a bank has made a decision on you at one dealership it won’t change because to are at another. The bank will make a decision based on you and your credit not on the person or dealership submitting your application. Many automotive banks get frustrated seeing the same application come in from different sources and might decline you because they are worried that you are trying to get more than one car or are not being honest on the application.

Even though the lending institute will make the decision on terms and rates you need to be dealing with a finance manager that understands the non prime market and has a good relationship with the buyers at these banks. A strong finance manager will work between you and the bank by negotiating and pleading your case..

Additional Car Loan Questions?

I work with people all over British Columbia, Canada, helping them find the exact type of auto financing they need.

If you have any further auto loan questions, please contact me, and I will be happy to assist you.