If you have bad credit in Canada and need a car, you’re not alone – it’s estimated that around 20% of Canadians have bad credit. However, purchasing a car with bad credit can be a daunting prospect. You may face sky-high interest rates, loan denial, and even repossession if you fail to pay.
But if you take the proper steps to buy a car with bad credit – and ask yourself the right questions – you can decide if buying a used car is the right course of action for you. Here are 5 things you should do before you buy a used car with bad credit in Canada.
1. Check Your Credit Score
Yep, even if you know it’s going to be bad. You need to know your credit score to understand the types of auto loans and interest rates you’ll qualify for – this is critical for determining your overall budget for buying a used car.
Request your yearly FICO scores from Equifax and TransUnion – you’re entitled to one free report per year from each credit bureau, so there’s no reason not to check your score. By doing so, you can understand your financial situation more clearly.
2. Ask Yourself If This Is The Right Time
If you have gone through a bankruptcy or recently paid off some outstanding loans, your credit score will likely be pretty low. However, rebuilding your credit is not impossible. By regularly paying your bills on time and applying for a secured credit card, you may be able to raise your credit score quite a bit – even within a few months.
With this in mind, ask yourself if now is the right time to buy a used car. You may need one right away – but if you don’t, waiting for a few months may help bolster your credit score, and allow you to get a better deal on your loan.
3. Create A Comprehensive Budget
Even if you are in serious need of a car, it’s still important to take the time to create a comprehensive budget to determine what quality of used car you can buy.
Auto loan calculators such as this one from Bankrate are a great tool for budgeting. You can plug in details like term length, interest rates, and more to determine the total overall cost of your car loan, as well as monthly payments.
It’s critical to buy a car that’s within your price range – and one you can afford to pay off every month. If you don’t, your used car could be repossessed, and you’ll lose your investment, and take a major hit to your credit score.
4. Get Pre-Approved For A Loan
When you have bad credit, getting a loan is not easy. That’s why loan pre-approval can be very helpful for Canadians with bad credit. Visit your local credit unions and banks, and inquire about getting pre-approved for an auto loan.
If you come armed with bank statements and pay stubs proving you can afford it, you may be surprised at how many banks are willing to work with you, even if you have bad credit.
5. Find A Reputable Dealer
For most folks with bad credit, buying used cars from a private seller is not a viable way to purchase a vehicle, because you must pay the purchase price up-front and cannot get a loan.
“Buy Here, Pay Here” dealerships should also be avoided. These dealerships finance their own cars – and they profit from loans with exorbitant interest rates, and frequent repossessions.
Take the time to find a reputable, honest used car dealer near you who is willing to work with you – even if you have bad credit.
Need A Car With Bad Credit In Canada? Ride Time Is The Place For You!
Having bad credit doesn’t make you a bad person – and we understand that at Ride Time. That’s why we have a unique network of 15+ lenders who specialize in working with Canadians who have sub-par credit.
If you can give us proof of $1,500/month income before deductions, pay stubs proving 3 months of employment, and a valid Canadian license, we can work with our lenders to get you a great deal on a fantastic used car.
So browse our vehicles online now! Whether you have bad credit, great credit, or no credit, we’ll work with you to get the car that’s right for you – guaranteed!