Aside from buying a home, buying a car is often next in line in terms of the largest purchase and potential investment you can make. All-in-all, 9 out of 10 times – give or take, people will not have enough money on hand to make a purchase of this size. For this reason, plenty of Canadians turn to a variety of vehicle financing options to help secure the car that they require. Whether you’re trying to get a car loan in Calgary, Toronto or Vancouver – there are options for you.
Getting a loan should be the next logical step that helps this wonderful plan of yours all fall into place. However, what if it isn’t? What if you attempt to get a loan and you are denied? What then??
The reasons for being turned away for a car loan – even on multiple attempts, can vary. Whether you have gone through bankruptcy or other financial set-backs you are likely to have one thing in common – a bad credit score or no credit score. Typically this means that Banks will not be willing to grant you a loan. Taking out financing through a car dealership can also be difficult with bad credit and even if you are approved, it may come with steep interest charges and overall expenses that you can’t afford.
If you find yourself in this major predicament – you need a car, need a loan – but can’t find a lender that will approve you, then it is likely that you won’t know where to turn next. Fortunately, there are more and more alternative lenders that are cropping about across Canada that specialize in offering loans, such as car loan to individuals with ‘bad’ credit.
Here are some non-traditional financing options to pursue, that may work out in your favour and help you get that car loan as soon as possible.
1) Credit Union Loans
If you are already a member of a credit union or are able to join one, you may be able to benefit from the special rates and conditions that are offered through this lending format. To join a credit union you need to meet a certain set of requirements that can include, location or form of employment, etc. Overall, individuals with bad credit may have a better chance of being approved. Additionally, the main benefits of taking out a personal loan through a credit union can include, lower and more flexible interest rates, a range of terms, and payment schedules that meet your needs. On the whole, for those with bad credit, these features can be even more favourable.
2) Online Car Loans
Online lenders may be more open to approving individuals who do not have perfect credit. The application process can be quick and you can be approved based on some personal financial information that can prove you can pay back the loan. In some cases, your car loan repayment capabilities can outweigh your current credit score. On the downside however, the amount you receive may sometimes be lower, as well as carrying a higher interest rate. With that being said, there are many online lenders and you can shop around for the best rates and features that may be more suitable for you and your financial needs.
3) Bad Credit Auto Loans
This third option also represents a growing business that is focusing its attention solely on individuals with sensitive credit issues. There are a variety of companies that help individuals with bad credit obtain the financing they require to purchase a car as well as find a manageable loan. Through these services, the company can facilitate a loan for drivers through a network of lenders who offer loans regardless of credit score or bankruptcy, etc. For most of these loans, borrowers need to prove they can afford the payments and therefore there are several key documents that need to be provided. These often include: bank statements, proof of employment/pay stubs, driver’s licence, home ownership or rental history, and references.
Hopefully one or more of these loan options can meet your needs. However, if your finances still need some improvement, for example, you need to save more money for a down payment or need to boost your credit score a bit, perhaps waiting a little while longer to buy a car can be better. If so, there are some alternatives that can temporarily replace the need for a car and can in the meantime, help you get around town just as well.
Alternatives to Cars
Public Transportation: if you live in a city or nearby and can take advantage of the transit system, this can be a fairly inexpensive way to get to work, school, etc. Trains and buses, even streetcars can get you where you need to go without the hassle of navigating the roads yourself.
Carpooling: if you know someone who is driving in the same direction of your work or school and better yet, if you are both going to the same place – perhaps carpooling could be a temporary solution. You can help pitch in money for gas, morning coffee, etc. and save some extra money for your own car. When you finally have your own car, you can return the favour and offer rides back to that same helpful individual.
Car Sharing: in various cities across Canada, the U.S. and the U.K., Zipcar, is an example of a car sharing company that allows you access to a car. You can ‘rent’ a variety of vehicle types, by the hour or the day. Memberships start as low as $6/month and this can also help you save money on a car, while growing your personal car ownership fund.
As your ultimate goal is still to purchase a car of your own, these options can give you the time to put aside some more money for you car payments, to increase your credit score, and also to shop around for the best loan rates and features. Also don’t forget walking and riding your bike, if that is also an option for you depending on where you life. If the weather is decent and you have a safe and easy biking/walking route, then this method can enable you to improve your health and your finances all in one false swoop!
Overall, bad credit does not mean you can’t buy a car. It also does not mean all lenders will deny you a loan. Keep your spirits up and your eyes open and sooner or later you will find the right group who can offer you the loan you require. Additional these companies and organizations also can offer tips to improve your credit and in turn help you improve your chances of securing better financing options in the future.