Bad Credit Car Loans

Different establishments offer car financing, including brick-and-mortar banks, dealerships, and subprime lenders. Subprime loans are designed for customers with poor and tarnished credit as an alternative to standard financial products.

Car Loans in Canada

There are two types of financing in Canada – new and used car loans, with a repayment term of about 69 months on average. Interest rates vary between 6 and 10 percent, but some lenders offer higher rates. More and more Canadians opt for longer-term financing which also means more money paid in interest charges. It is a common practice to extend the term with an extra year or two to benefit from lower monthly payments. Finance experts also point out that auto loans grow faster compared to GDP and inflation. There is a shift from leasing to car financing, and more and more drivers opt for vehicle purchases.

Bad Credit Car Loans in Canada

Bad credit car loans are one way to finance the purchase of a light vehicle in Canada. This is a solution for customers who are new to credit and those with major credit issues. Some subprime lenders offer financing of up to $30,000 and advertise 95 – 99 percent approval rate. Thus, customers whose applications are turned down by banks are offered the opportunity to get financing and improve their credit score with time and on-time payments. The interest rate depends on several factors, including loan to income ratio, term or length, condition of the vehicle, amount of the down payment, and credit score and payment history.

Car Loan Types

In addition to new and used car financing, customers can choose from variable and fixed rate loans, depending on how they feel about market rate fluctuations. Fixed rates make it easier to budget and plan because the monthly payments are also fixed. New car loans usually go with lower interest rates but financing a used car is usually cheaper because of the price of the vehicle itself. There are different types of financing to consider, including simple interest and pre-computed loans as well as secured and unsecured bad credit car loans. Vehicle refinance options are also available to borrowers who find it difficult to meet their monthly payments. In this case, financial establishments usually increase the interest rate in exchange for reducing the installment amount. Another option to look into is the lease buyout loan whereby a commercial provider covers the remainder of the outstanding balance on a vehicle lease. Borrowers are still required to make regular monthly payments under this arrangement. There are alternatives to car financing as well, including finance lease, commercial hire purchase, chattel mortgage, operating lease, and others.

Unsecured Bad Credit Car Loan

This option is usually available to customers who can afford to make a larger down payment because unsecured loans are riskier for financial institutions.


• High interest rates
• More difficult to qualify
• Higher risk of repossession
• Tougher eligibility requirements
• Lower loan amounts


• Less risky for borrowers
• No collateral required
• Flexible or adjustable repayment terms
• Quicker approval

Secured Bad Credit Car Loan

This is a second option for car buyers who are willing to pledge their vehicle as a guarantee or collateral. Secured loans are often offered for newer vehicles because the car itself is more valuable.


• Riskier for borrowers
• Collateral required
• Fees such as early prepayment, monthly, and discharge processing fees


• Lower interest rates
• Available to borrowers with poor credit
• Higher loan amounts

Find Bad Credit Car Loan in Canada

There are different options to consider, depending on the amount required, type of vehicle, age, condition, amount of down payment, and other factors. Car loans for people with bad credit are offered by online lending services and providers with local branches and offices across Canada. Auto loans for people with poor credit are also offered by lenders that specialize in subprime products. They feature instant or guaranteed approval, quick application and processing, and financial solutions for borrowers with different credit profiles. Some lenders even offer loans to customers after bankruptcy as well as borrowers with a history of delinquencies, foreclosures, major credit problems, and maxed out credit cards. There are also lenders that advertise car loans with zero or low down payment which makes it easier to qualify for a loan.

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