How to Get Low Interest Rates with Bad Credit
Approval rates for bad or no credit Canadians will depend on a number of factors, however saving your money, doing the correct research and getting organized can help you attain affordable rates.
Having bad or no credit doesn’t mean you can’t get approved for affordable auto financing with reasonable rates. One of the most frequent questions people have regarding auto financing is what kind of interest rates they can expect. The interest rate a person will be approved for will depend on multiple factors related to the applicant’s financial situation. If you’re in the market for a new vehicle and have bad or no credit, don’t assume you’ll be paying high interest rates, as lenders look at criteria like job stability, monthly income and credit history before approving someone. Canadian car dealerships across the country have designed their finance departments to specialize in bad or no credit auto loans, which means that for bad or no credit individuals, getting approved for low interest rates has never been easier.
Interest rate is the amount you pay lenders to borrow money. Auto loans in Canada have fixed rates, which means monthly payments don’t increase if interest rates rise. With fixed-rate financing, loan payments stay the same throughout the entire term. However, if a fixed-rate loan is renewed or renegotiated, monthly payments could increase if interest rates change. A fixed-rate auto loan will not increase unless you choose to pay more than the minimum each month. If you’re unable to pay the minimum, your lender can increase the amount of interest that you pay by as much as 5 percent.
READ MORE: Leasing vs. Buying: What’s Best for You?
There was a time when a small blemish on your credit report meant your interest rates would skyrocket, but new programs are being introduced for subprime customers. Canadians with a history of bankruptcy, a consumer proposal or any other debt relief programs on their credit file will generally be approved for higher interest rates. However, refinancing your vehicle after 12 to 18 months if you’ve made on-time payments throughout the duration of the loan can help lower your monthly payments and interest rates. Here are four tips on how to get a low-interest loan with bad credit.
1. Save Your Pennies
Increasing your chances of getting approved for a low-interest rate with bad or no credit starts with having additional money saved. Lenders want to see that you’re able to pay off the entire lifespan of the loan without spiralling into deep debt and running the risk of defaulting. With past payment success and money in the bank, you can improve your odds of a low-interest approval. If the lender sees you have money in your account and your balances are not close to zero it will work in favour of your approval rates.
On top of having some additional savings, it will also look good if you are prepared to make a down payment. Loan providers can often help you secure a car loan with more favourable terms if you make a decent down payment on the vehicle. Down payments, which will go off the top of the loan balance itself, can help lower the overall amount you will be required to pay back. With smaller monthly payments and/or a shorter loan term, chances are lenders will approve your auto loan with smaller monthly payments and interest rates.
2. Research
The first step when entering the car buying process is to do as much online research possible about the different types of lenders available for you and your financial situation. Searching for a legitimate lender who specializes in helping bad or no credit individuals can help you save money on monthly fees and payments. Unfortunately, not all lenders will grant a car loan to someone who has bad credit, however, there are a lot of lenders that work specifically with people who have less than perfect credit. Shop around for a lender that fits your budget and can work with you to get the best rates possible for your financial situation. The internet has made it possible for people with all types of credit scores to get approved for auto loans with damaged credit.
At Canada Drives, we specialize in assisting individuals find affordable auto financing regardless of their credit score. Visit Canada Drives today to learn more about our programs or to apply with us for free right now.
3. Get Organized
In order to prove yourself to be creditworthy and deserving of low interest rates, it is important to have some vital documents pulled together before you seek out your loan. There is a list of items you will likely be required to show to the loan provider before being approved. Some of these will include pay stubs that show you have consistent income coming in and sometimes bank statements will also be required. Further employment history is often also requested as lending parties want to identify your past employment patterns. Other pieces of information you’ll be required to have on hand are your driver’s license as well as address and contact details. By showing up with this paperwork, you also demonstrate to loan providers that you take your loan commitments very seriously and are prepared to manage them in a responsible manner.
4. Make Monthly Payments
If you’re entering an auto loan agreement and your interest rates are higher than you presumed, the best way to bounce back from high rates is to ensure you’re making monthly payments on time and in full each month. Doing so with a high level of consistency will increase your credit score while also making you the perfect candidate for refinancing your auto loan. Refinancing is an option for people who want to enter a new loan agreement with lower rates. If you’re ever in a situation where you might default on a loan, contact your lender immediately. Lenders are usually always willing to help negotiate new payment options to help avoid any credit damage. Taking steps to improve your credit while making payments on an auto loan could introduce you to better loan opportunities in the future while also helping you stay in a stable repayment position.
Our goal at Canada Drives is to make the car buying process for Canadians as simple as possible. By linking you to a lender that can set you up with a manageable loan, you can rebuild your credit and get your finances back on track fast! Visit Canada Drives right now to learn more! Happy driving folks!
