How do I Get a Car Loan in Canada?
Most Canadians drive cars. They are an essential part of our lives. But buying a car is not always easy or financially feasible. A car loan helps you purchase the vehicle of your choice without the need for cash upfront. With bad credit auto finance available, it can be easier to get approved for a loan than you might think.
To get a car loan in Canada, you first have to get approved for it which means that the lending institution must be willing to lend you money on certain terms. Just fill the application, provide all the documents and apply for the auto loan.
There are different types of loans available including; personal loans, credit cards, and auto loans. These are some of the most popular choices when it comes to financing vehicles.
The question on how to get car finance in Canada is one of the most asked questions when it comes to buying a new or used car. The process is not that difficult, but it does vary depending on what type of loan you’re applying for.
In this blog, I will show you how to apply for an auto loan in Canada and will clear some of the doubts in the minds of borrowers.
Let’s Jump in!
Can I finance a car in Canada?
Most Canadians finance their vehicles by borrowing money from banks or different lending institutes.
You can finance a car in Canada. Signing a lease or applying for a loan are the two different financing options available. In lease, you are not responsible for maintenance and repair of the car and you will not become the owner of the car either. In case of auto loan, you are responsible for repairs and maintenance of the vehicle and after clearing the loan amount you will become the owner of the car.
Let’s look at each option one by one so that you decide which option is best for you:-
You can finance a car if you are looking to own a car and keep it for a 3-5 years time period. After paying the loan amount you came into the possession of the car. You can apply for a car loan at a bank or used car dealership.
Car on Lease
Leasing a car is also a good option if you are looking to keep a car for less that a year. You have to decide monthly payment and agree to the terms of the leasing company. After ending the terms you either have to set up the new terms or you can also buy the car at a price listed by the car dealership. After the end of each term you will not become the owner of the car.
Is it easy to get a car loan in Canada?
There are a number of ways to get a car loan in Canada. You can go to a bank, credit union, or ask a family member for help. The application process is usually quick and straightforward.
It is easier to get a car loan in Canada if you have a good credit score. However some used car dealerships provide bad credit car loans also and you can apply for them online at the comfort of your bed.
If you are looking for a simple, quick and hassle-free way to get a car loan in Canada, check out Approved Auto Loans. We specialize in helping people with bad credit or no credit at all.
Our auto loan approval officials will look at your application and find the best offer for you. They will provide all the information like interest charged on the amount, duration of the loan and the monthly payments.
If you think that monthly payments are into your budget then you can sign the documents containing terms and conditions of the loan and you are good to go.
Understanding Monthly Payments
When you have made up your mind about what kind of car you want – SUV, passenger car or truck etc. the next step is to calculate your monthly payments and the factors affecting these installments.
Here are the three things that affects your car loan monthly payments
- Down Payment – The down payment plays a huge role in depicting your monthly payments. Ideally you should pay at least 20% of your down payment while purchasing a car. Higher down payments will lower your monthly installments and it further insure the lender that you will pay the rest of the amount.
- Duration of Loan – There is no standard duration of car loan but it ranges from 36 months to 84 months or 3-7 years. If you apply for shorter term then your monthly payments will be high and if you apply for a longer duration then your monthly installments will be low.
Now to lower the monthly installments some people apply for long term loans but one thing they forgot is depreciation. As your car is a depreciating asset and if you apply for a car loan for a duration say 5 years then your loan amount after 5 years will be larger as compared to the value of your car after 5 years. Ideal duration of car loan will be 3 years and after three years you become the owner of your car.
If you want to calculate your monthly payments as compared to your duration of loan then you can use our car loan calculator.
- Credit Rating – Your credit score depicts your payment history of previous loans and if you have good credit rating then the chances are your interest rate on loan will be low and this further lowers your monthly payments.
However many car financing companies provide bad credit car loans in Surrey BC.
Can a non-resident get a car loan in Canada?
In some parts of Canada, there is very limited public transport services so immigrants or international students need their own car to commute from one place to another.
Since they are immigrants and have no credit history so getting approval for a car loan for non resident is difficult.
The good news is that a non-resident can get an auto loan in Canada if he provides the essential documents and fulfills all legal formalities.
The documents include driver’s license, proof of income, immigration status like permanent residence, international student, sponsored employee, proof of residence etc. Once you provide necessary documents then your application will be sent for pre-approval.