Borrowing Money for a Car Could be the Right Move for You

Car loans can be scary prospects for someone that has never been in debt or owned a car. At Auto Approvals Today we do our best to make first time car buyers feel at ease with the process, and our lenders are some of the best in Canada. We can cater the loan terms to fit your situation and help you get into the vehicle that you need for your daily commute or weekend jaunts into the wilderness.

Credit should not be an obstacle when it comes to shopping for the car that you need. Our trained professionals work as a team to provide you with the best experience and the best vehicle possible. Our salesmen will listen to your needs and match you with the right car, while our lenders will help you with a loan that will assuage any doubts you may have with regards to affording the vehicle. Count on us to work with you whether you have bad credit, mediocre credit, or a perfect score.

The loan process is one that has become common place at most dealerships across Canada. It allows one to get into a vehicle that isn’t immediately available to them because of price barriers, but that may be necessary for them to get and keep a job or to enjoy the great outdoors to the utmost. Borrowing money and responsibly paying off the debt is the best way to build one’s credit. We are proud to help people build their credit with car loans and to help people become more mobile in the vehicle and manner that best suits them.

Fear not the uncertainty of debt. Let the lenders and our friendly staff be the solace you need as a new borrower or car owner. Comfort in your financial and vehicular decisions can be assured when working with us as we work with you to build connections between the buyer and the road and the great country of Canada.

Car Loans Myths You May Believe

If you’re about to purchase a vehicle, it can feel like everyone you know has a theory about car buying. Unfortunately, many of these ideas are based on myths that keep people from getting the car they need. We believe in being transparent and honest, so we think it’s high time to bust the most common car loan myths.

Myth: I Can’t Get a Loan with Bad Credit

Have you ever had someone tell you that you may have to lease because of your credit? Have you worried about applying for a car loan because your score is less than perfect? We are happy to tell you that car loans are available for people with bad credit. Once upon a time, this myth was true. A few big banks used to control this market and could tightly control who could own a car. However, recent advancements have made car buying possible for many more people. Don’t let your credit score stop you.

Myth: Loans are Only for New Cars

Many people mistakenly believe that you can only finance a new car. However, we can finance both used and new cars. As a dealer, we can offer several financing options for the vehicles we sell. Don’t get sucked into this myth.

Myth: Your Own Financing is Better Than Any Dealer’s

For people with the DIY spirit, finding your funding and skipping the dealer may seem like a great deal. However, you could miss out on some great options. Even the best credit unions may not be able to match some of our deals. We encourage you to ask questions and see for yourself.

Myth: Car Loans are Expensive

This falsity is another myth that used to be true. Back when there were only a few major lenders, you could pay a lot in fees and interest. However, now that lenders compete for your business, financing can be relatively inexpensive. Purchasing your next vehicle can be confusing, especially with so many myths around. We work hard to dispel these myths and give you the truth you need to make the right decision.

What to Expect With Poor Credit Auto Loans

When you are looking to buy a car, but you have a history of bad credit, it can seem like your dream is over before it has had a chance to begin. Luckily, there are plenty of options available out there for those who are looking to buy a car but do not have the credit that they wish. One way to do this is with poor credit auto loans. Taking out this type of loan can help you get behind the wheel of the car that you wish in practically no time at all. There are a few things to remember when you are considering this type of financing.

Taking Out the Loan

The first thing that you need to keep in mind is the amount of the loan itself. The size of the loan will be determined by several factors. The price of the car itself can make a huge difference, so if you are looking at a car that is not within your reasonable budget you can expect higher payments over the course of time. The duration of the financing plan will also change what you can expect in payments. The shorter the time frame, the higher the payments. Sit down and create a reasonable financial plan in order to make the best decisions for your poor credit auto loans.

Making the Payments

As with any loans, making consistent payments in a timely fashion is a wise idea. How you make the payments is entirely up to you. When you make larger payments each month, you will be done paying off the car in a much quicker fashion. However, if you can only afford a specific amount each month, it is better to stick with whatever payment you can afford that meets the monthly requirement so you can get your credit in better shape. No matter how you choose to pay back the loan, it is important to stay on top of your game throughout the process so that you do not miss payments or harm your credit in any way. 

3 Car Loan Myths

If you have your eye on a new or used car, you may have to consider financing options. The problem that a lot of people face is that they don’t have optimal credit and may not think that they qualify. While many lenders offer bad credit car loans, there are still a lot of myths that circle the choice. You shouldn’t let these turn you away from the financing that could get you your dream car. Here are the three top myths when it comes to car loans.

A Low Credit Score Guarantees Rejection

This isn’t true at all. In fact, there are dealers and lenders that specialize in car loans for people with bad credit. Poor credit will not stop you from financing a car.

You Can’t Refinance if You Had a Poor Credit Score

When you’re approved of a car loan with a low credit score, you are given the opportunity to build your credit over again. After a while, as your score builds you will be given more options. It’s common for people to refinance their loan and come up with a cheaper rate after they have built up their credit score.

Income Doesn’t Matter if You Have Bad Credit

Income absolutely matters! Income and the other debts that you owe play a big role in the size of the loan you can be awarded. While lenders do pay attention to your credit, your income also plays a large role in whether or not you’re approved. This can also affect the rates that you’re given.

Don’t allow myths to turn you away from car loans. Even with bad credit there are many options out there. While it can be a difficult choice for many people to decide whether or not they want to look into financing for a vehicle, it’s important not to be deterred by myths. Only the facts should be an influencing factor on your decision.

Understanding Canadian Car Loans from A-Z

Written by Sean Cooper

Are you planning to purchase a vehicle? Unless you can afford to pay for it in cash, you’ll have to borrow the money. And there are a lot of factors to consider when choosing a car loan: should you finance or lease? What interest rate can you get? How long will you take to pay the loan back?

Everyone’s circumstance is different, and one car loan might be a perfect fit for your neighbour but not for you. Let’s take a look at the car loans Canada offers to see if we can simplify what might otherwise be an overwhelming landscape of info.

Car Loans – The Basics

A car loan is a personal loan in which a lender loans a borrower the funds needed to buy a car. In exchange, the borrower agrees to repay the lender the loan amount with interest, typically in monthly payments, until the loan is fully paid off. There are a few key concepts that are important to understand if you’re considering a car loan.

Principal

Principal is the total sale price of the car, and the amount you borrow. This includes any fees for the lender or dealership and any add-ons or options you may select.

Interest Rate

The interest rate is the percentage the lender charges the borrower on the money loaned. The rate given by a lender can depend on several factors, including: the lender’s prime rate; the borrower’s credit score; and the vehicle’s make and model. If you have an excellent credit score and earn a decent wage, you’ll typically qualify for the best (prime) interest rate on a car loan.

Term

The term is the period of time in which the car loan is to be repaid. Car loan lengths are typically between two and eight years. Longer car loans in Canada have the advantage of lower monthly payments, but can lead to the unfortunate situation where you have negative equity in your vehicle (you still owe money on the vehicle when it’s inoperable). For that reason, you might think twice before taking on a seven or eight-year car loan.

A general rule of thumb is to try to cap it at five years if your cash flow allows. (If you’re confident that you’ll have a steady source of income that you can budget a monthly payment from for the next five years.) If it doesn’t, consider buying a less expensive vehicle, or consider leasing.

Does It Make Sense to Lease, Finance or Buy a Car in Cash?

Why you might lease a car:

  • You prefer to drive a new vehicle: When you lease a vehicle, you’re essentially only renting it. The typical car lease lasts only two to four years. Once the lease is up, you can return the car and start the process all over again by leasing another new vehicle or you can buy out the lease from the dealership if you want to keep the vehicle.
  • Cash (flow) is king: The biggest advantage with leasing is cash flow. When you lease, your monthly payment will be lower than if you take out a car loan to purchase the same vehicle. Unlike a loan, where you borrow the full purchase price of the vehicle, with a lease you’re only borrowing the amount that the car will depreciate in value over the period of time of the lease. A vehicle that costs $600 a month with a car loan may only cost $350 a month with a lease.
  • You enjoy driving nice cars: The lower monthly car payment when you lease versus own means that you can afford a nicer make and model of car than you otherwise would be able to if you financed or bought the car.
  • You don’t drive very often: If you mostly use your vehicle for commuting short distances, leasing may make sense. You don’t have to worry about going over the distance limits on your lease and being forced to pay costly overage penalties. Most standard car leases come with a limit of 24,000 kilometres. As long as you stay within the limit, you should be fine.
  • Peace of mind: Since you’re always driving a newer vehicle, you’re less likely to incur costly car repairs since the vehicle is almost always under full warranted. Although note that if you do need car repairs, you may be required to get them done at the lease’s dealership, which may cost you more than taking your car to the neighbourhood auto mechanic.

Why you might finance (take out a loan) a car:

  • You drive long distances:When you finance (or own) a vehicle, you don’t need to worry how often you drive it. If you’re commuting long distances to work and planning to travel a lot, you won’t have to stress about facing penalties you’d incur when leasing. You’re generally better off financing instead of leasing if you plan to drive over 30,000 kilometres a year.
  • You’re in it for the long haul: Unlike a lease, once you pay off a car loan, the vehicle is yours. There are no more monthly payments to deal with. It’s an asset that can be used to make a stronger financial case, for instance, when applying for a mortgage. You can drive it into the ground or trade it in. It’s completely up to you.
  • Freedom of choice: If you’re a car enthusiast, chances are you’ll want to modify your vehicle. If you want to add a custom tailgate, you’re out of luck if you lease. Not so if you took out a car loan, in which you can customize your vehicle to your heart’s content.
  • Building your credit score: There are five factors that make up your credit score. Payment history is the most important factor, accounting for 35% of the score. By steadily paying your car loan over time, it can have an overall positive impact on your credit score.

Why you might buy a car in cash:

  • No monthly payments: If you have the cash, you might consider buying a vehicle outright. When you do, you don’t have any monthly car payments to worry about, which will reduce the mortgage amount you’ll qualify for if you’re planning to buy a home. You also won’t have to worry about going to a lender for financing.
  • Cash incentives: To entice you to pay in cash, the car dealership may offer you cash incentives (i.e. a discount on the car cost) as a sweetener.

How Does a Car Loan Work?

Applying for a Car Loan

You’ll need to complete the lender’s car loan application form, where you’ll provide your basic personal and financial information. You’ll also typically need to submit other documentation, including notices of assessments for two years, your monthly housing cost, the make and model of the vehicle you’re considering purchasing, and any monthly debt obligations you have. A lending specialist will then review your files and crunch the numbers to see if you qualify for the loan. Pre-qualification can be done to see if you can afford the car you want (this can help avoid dinging your credit score). Pre-qualification is just like applying for a car loan, but without pulling your credit report, and therefore avoiding the potential hit to your credit score.

When applying for car loans, you’ll want to limit the number of lenders you apply with, as applying with too many lenders in a short period of time can negatively impact your credit score.

Receiving a Car Loan

The process of receiving the car loan depends on whether your lender is a bank, online lender, or dealership. With a bank or online lender, a lump sum payment is typically deposited into your bank account. You can then use the funds to purchase the vehicle from the dealership. However, if you’re buying the car directly from the dealership, you won’t typically receive a deposit since you’re borrowing the money from the dealership who owns the vehicle. You’ll simply receive the vehicle and will be required to start making your car payments.

Repaying a Car Loan

Car loans have a set repayment schedule depending on the term of the car loan you choose. If you choose a shorter-term loan, your monthly payments will be higher, and if you stretch it out, your monthly payments will be lower (although you’ll pay more in interest over the life of the loan). To keep your credit in good standing, you’ll want to make your car payments on time.

The payments are typically withdrawn by way of preauthorized payment from your bank account. If you come into extra money (such as a tax refund, pay raise, inheritance or bonus at work), you can typically make extra payments above and beyond your regular/minimum car payments. This reduces the term of your car loan, thereby saving you money you would pay in interest.

Payment Terms

A car loan’s payment is usually fixed (stays the same) during the term of the loan. When you make a car payment, similar to a mortgage, a portion of it goes toward interest and a portion goes toward principal. Car loan payments are front-loaded and paid via amortization. As such, you’ll pay the most interest at the beginning of the loan.

How Interest Is Calculated

There are two types of interest calculations on car loans: simple interest and compound interest. With simple interest, interest is only charged on the original amount that you borrowed (the principal). With compound interest, interest is calculated on both the principal plus the interest accrued since the beginning of the loan.

When you sign up for a car loan, you should receive a financial disclosure, which expresses the interest rate as APR (Annual Percentage Rate). This takes into account the total cost of borrowing and includes compounding interest, fees and anything else you may be required to pay. This represents the true overall cost of the car loan.

Credit Score and Credit Report

It’s beneficial to have a high credit score when seeking out a car loan—the higher your credit score, the more likely you are to qualify for the lowest interest rate possible. So I recommend that you review your credit score and credit report before you apply for a loan.

You’ll want to request them from both the major credit reporting bureaus, Equifax and Transunion, since some lenders only report to one credit bureau. If you find that your credit score is on the low side, try to improve it by paying down your credit card balances and other outstanding debts. Keep an eye out for any inaccuracies on your credit report that negatively affect your score. If you see an error, take steps to correct it before applying for the loan.

Make and Model

Decide on the make and model of the vehicle you’d like to purchase. This will give your lender a purchase price so that they can come up with the terms of your loan.

Personal and Financial Information

Your lender will request personal information, such as your full legal name, date of birth and current address. They’ll also want to know about outstanding debts as well as rent or mortgage payments. If you’re putting money down on the vehicle, the lender may request to see proof of your down payment in the form of recent bank statements.

Driver’s License

Your lender may request that you provide photo ID in the form of a driver’s license. Having a driver’s license can help, since borrowers with a driver’s license are typically more likely to pay back car loans.

Employment History and Income

Lenders typically ask for your employment history for the last three years. To ensure you can afford the car loan, your lender will often ask for proof of income, in the form of notices of assessment for the last two years.

Banking Details

Your lender will request a void cheque and may request that you complete a preauthorized payment form to automatically withdraw the car loan payments from your bank account.

Types of Auto Loans

Banks and Credit Unions

When a Canadian bank or credit union approves an auto loan they typically deposit the loan amount directly into the borrower’s bank account. The borrower can then use the funds to pay the car dealership for the vehicle they’d like to purchase. This is often referred to as “direct lending,” since the car loan comes directly from a bank or credit union.

Dealership Financing

As the name implies, dealership financing is when the loan is administered by the dealership selling the vehicle. The biggest advantage of dealership financing is convenience: You can buy the vehicle and finance it at the same time and location. It doesn’t get any easier than that!

Just make sure you take the time to shop around, and be confident that you’re getting a car loan with a reasonable interest rate and favourable terms.

Online Lenders

Fintech (short for financial technology) has made it easier than ever to obtain a car loan. With an online lender, you can apply for a car loan from the comfort of your home. It’s a convenient approach to getting a car loan, as application forms are completed online. And it’s very easy to shop around for the best loan terms possible, which helps borrowers save more money.

Auto Loan Features You Should Pay Attention To

Before you start your search for the best car loan you can find, remember these key factors to keep an eye on:

  • Interest rate: The lower the interest rate on the loan, the less you’ll pay for the car in the long run.
  • Fixed/variable rates: Fixed-interest car loan rates in Canada remain the same for the term of the car loan, while variable rates can fluctuate with a change in the lender’s prime rate. Variable rates offered are typically lower than fixed rates, but you might nonetheless consider going with a fixed rate if your cash flow is tight or you’re risk averse.
  • Simple/compound interest: Simple interest is based on the principal amount of the car loan, while compound is based on the principal + the interest that accumulates during the compounding period.
  • Repayment schedule: If you’re looking to maximum monthly cash flow, you may go with a longer loan term, although the tradeoff is you’ll pay more interest over the life of your loan.
  • Payment frequency: Lenders often let you choose the payment frequency of car loans. Common payment frequencies include weekly, bi-weekly, semi-monthly or monthly payments. In terms of cash flow, it’s easiest if you choose a payment frequency that matches your pay schedule at work.

What to Expect With Poor Credit Auto Loans

When you are looking to buy a car, but you have a history of bad credit, it can seem like your dream is over before it has had a chance to begin. Luckily, there are plenty of options available out there for those who are looking to buy a car but do not have the credit that they wish. One way to do this is with poor credit auto loans. Taking out this type of loan can help you get behind the wheel of the car that you wish in practically no time at all. There are a few things to remember when you are considering this type of financing.

Taking Out the Loan

The first thing that you need to keep in mind is the amount of the loan itself. The size of the loan will be determined by several factors. The price of the car itself can make a huge difference, so if you are looking at a car that is not within your reasonable budget you can expect higher payments over the course of time. The duration of the financing plan will also change what you can expect in payments. The shorter the time frame, the higher the payments. Sit down and create a reasonable financial plan in order to make the best decisions for your poor credit auto loans.

Making the Payments

As with any loans, making consistent payments in a timely fashion is a wise idea. How you make the payments is entirely up to you. When you make larger payments each month, you will be done paying off the car in a much quicker fashion. However, if you can only afford a specific amount each month, it is better to stick with whatever payment you can afford that meets the monthly requirement so you can get your credit in better shape. No matter how you choose to pay back the loan, it is important to stay on top of your game throughout the process so that you do not miss payments or harm your credit in any way.

Your Slow Credit Shouldn’t Affect Your Ability to Drive

Everyone knows what bad credit is and how much it can affect your ability to get anything, be it a new house, new car or anything else that requires a large sum of money and therefore a loan from the bank.

 

However, one term that many people may be unfamiliar with is “slow credit”.  It means exactly what it sounds like; although you do have a history of paying your bills, you also have a history of habitually paying them late.

 

Although this isn’t quite as damaging as a bad credit, a slow credit can often play a part in hindering your ability to get a loan from a bank or loan company.

 

Luckily, there are ways to get slow credit car loans if you are in need of a new car. Unfortunately, many places offering loans to people who are desperate for a solution will use that to take advantage of people and jack up interest rates. These loan sharks will draw you in, and once they have hooked you they will make it so that you struggle to ever get out of debt with them. It is a situation that nobody wants to get into, and it could ultimately end up destroying your credit.

 

That is why it is so important to do your research into a company offering you a loan if you have bad or slow credit. Do a search of their customer reviews and look on their website for affiliations and accreditations before you agree to take a loan from them. Many companies are just trying to help people and give them a second chance when they knew they really need it, such as getting a car to get from point A to point B. A little bit of research will help you find the right ones.

Loan Terms for the Savvy Car Shopper

If you don’t know what you’re looking for when you head out to buy a car, there’s a good chance you’ll end up with either a bad car or a bad loan. Decent car loans definitely exist, but you have to know how the game is played in order to get the terms you want. Before signing off on a loan, make sure you educate yourself on the process and what you can expect to be offered.

Repayment Period

Sometimes a long repayment sounds like a nice way to casually buy, but this can leave you underwater – indebted more to a lender than what your vehicle is worth. You want to pay down the debt as quickly as possible, so shorter terms with no early-repayment fees are usually the best bet.

Total Amount vs. Monthly Payment

If you focus too much on setting the monthly payment, you lose sight of how much you’ll be paying in total. Keep reminding yourself that the goal is to spend as little as possible; you’ll already be spending a good sum of money to get a new vehicle, so you need to make sure you’re not paying too much extra by way of interest and loan servicing fees.

Interest Rate Variables

Your credit score isn’t the only determining factor when it comes to interest rates on car loans. Lenders have just as much interest in your income, driving history and the type of car you’re buying. If you don’t want to get caught off guard and end up with bad terms, you need to think about all these matters before you apply for a loan.

Good car loans make car buying much easier, while bad loans can turn the process into a nightmare. If you want to avoid the latter scenario, turn yourself into a savvy shopper before you start looking for your next car.

How to Buy a Car If You Have Bad Credit


In the auto industry, “bad credit” typically refers to a score of 600 or lower. If your score is less than ideal, you may think that you can’t get a car loan or that you have to lease. However, this is simply not true anymore.

Bad-credit car loans exist to help people just like you. Before you enter in to such a loan, it’s important to understand how your credit can affect your loan and what you can do to get a deal that makes sense for you.

The Myth

Decades ago, there were only a few big banks that did car loans. Back then, if you had bad credit, it was nearly impossible to get a car loan. While times have changed, many people still believe that their credit history will keep them from auto ownership.

The Truth

In contrast to popular belief, a credit score below 600 doesn’t have to stop your car ownership dreams. We have options available for you. However, lenders may require a larger interest rate to finance these loans.

Know Your History

Before you buy a car, check your credit history, not just your score. There may be something on your report that is not accurate. If a piece of your credit report doesn’t reflect what happened, you could end up paying higher interest for no reason. Contact the credit bureau if you see inconsistencies.

Improve Your Score

If your score is rightfully low and you’re working on it, you can still get a car loan now. In fact, making regular payment could help raise that score. You can buy today and refinance when your credit has improved. This option can get you in a car when you need it and still save you money down the road.

A spot of bad luck can hurt your credit score, but that shouldn’t stop you from getting into a new or used car. Ask about your options, and we can help find the right deal for you.

Smart Shopping for Used Cars

Buying a used car can be daunting if you haven’t purchased one before. There are always concerns about the condition of the vehicle, but if you work closely with a reputable dealer specializing in used cars, you can get a dependable vehicle for a great price. Asking the right questions and doing some research is part of the process.

Find a Dependable Make and Model

Kelley Blue Books and online consumer groups can help you find makes and models that are rated well for reliability and low repair costs. If a car doesn’t have a good resale value, there may be a reason. Don’t forget to check gas mileage and maintenance costs as well.

Test Drive Used Cars

Never purchase any vehicles without taking them out for a test drive. Listen to the engine, pay attention to any knocking or pinging and get a feel for how smooth the ride is. When you test drive, make sure you take the vehicle on local roads as well as the highway. Trying a used vehicle under a variety of condition will help you narrow down your options to cars that you’re truly comfortable driving.

Get a Vehicle History Report

Request a vehicle history report from one of several online services. You’ll need the vehicle identification number (VIN number), which any auto dealership can provide you. You can also see it in the lower corner of the driver’s side window when you’re looking at it from outside. When you check the report, look for accidents, water damage and other issues that could affect the car’s performance.

Consider Other Costs

Insurance, monthly maintenance and fuel economy all figure into the actual cost of a car, not just the sticker price. Get insurance quotes, look into maintenance costs and check the mileage estimates. All of these will impact the car’s actual cost.

Proper research and working with a trusted automobile dealership will guarantee you the best price for your next used car.