Almost everyone dreams of having their own expensive car. Are you also looking to buy a new car? Well, a few people can afford to buy a car with their savings. Others take a installment loan to make such a big purchase. You must be having several questions in your mind like:
- What type of loan should I take to buy a car?
- What credit score is required for a car loan?
- Where should I get a car loan?
And so on. In this guide, you will get to know all the answers to your questions. You must have a good or excellent credit score to get a loan from traditional lenders or credit unions. And if you have a poor financial history, you cannot get approval from these sources.
This does not mean that there are no ways to take a car loan with bad credit. Several lenders like Canadian cash solutions approve loan applications of people having poor credit scores. You can use your existing vehicle as collateral to get a loan. It is known as car collateral loans. If you do not have a vehicle, you can apply for car loans to buy the car of your dreams.
How Credit Scores Affect Car Loans in Canada?
The credit score is a precious part of anyone’s financial status. It is crucial to know what your credit score is and how it influences car loans. Whenever you apply for a loan, the first thing that lenders look for is your financial history.
They need to know whether you are capable of making regular payments within a defined timeline. And if you are responsible to manage and pay your bills on time.
Having a good credit score indicates that you are a responsible borrower and will pay back the loan amount timely. This directly influences the chances of getting approval for a car loan application.
It also affects what you’ll get such as interest rate, terms, and conditions, and other offers you are eligible for. The higher your score, the better will be your chances of getting a loan at low-interest rates and more offers. Usually, the credit score is categorized into the following categories such as:
- Excellent credit scores fall between 741 to 900
- Good credit score lies between 713 to 740
- The fair credit score is between 660 to 712
- Below Average score is a number between 575 to 659
- A bad credit score lies between300 to 574
Remember if you have a fair credit score, you will get approval for many car loans at good offers. People with a good or excellent credit score will get the best deals in the market.
And the ones who have a credit score that is below average or bad may find it difficult to get approved for a loan. They have to find lenders who work with persons having poor debt history.
Remember your credit score directly impacts the interest rate that you’ll pay for a car loan. Clients with good and excellent credit scores can get approved for loans with lower interest rates. But the ones having credit scores lower than the good level may have to pay high interest rates.
How To Boost The Chances Of Getting Approval For A Car Loan?
To improve your credit score for getting qualified for a car loan with a genuine interest rate, you need to research the car industry in detail. It is not an easy task to do so. Thus, the best part is to find lenders operating in your nearest locations and then know about their terms and conditions.
We recommend the following options to ones having a bad credit score and poor financial history:
- Ask a friend to co-sign for a loan: A co-signer is the one who has a good credit score and agrees to pay debts if you default on a loan.
- You can make a large down payment: By paying a large amount initially can increase your possibilities of getting approval. It also lowers the interest amount and monthly payments.
- You can look around and shop for the best deals: You can find the right lender working in the industry that best suits your needs.
- You can improve your credit score: This is a difficult option and may take a lot of time. But improving your credit score can increase your chances of quick approval at lower interest rates. You can choose different ways to improve your credit score.
Do you know you can refinance your loan after improving your credit score? Yes, it is possible to refinance your car loan at your favorable terms. This can help you save your money by paying lower interest rates. This will also reduce the number of monthly payments and thus you can easily get out of the loan.
Now you know what is required to get a car loan and where you can get it at any condition. So, hurry up and get your dream car home.