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Getting Approved for an Auto Loan with Bad Credit


If you have damaged credit, it might be more difficult to get approved for an auto loan. Many banks and credit unions may turn you down for financing if you have blemishes on your credit report. Luckily, there are lenders that are willing to work with less than perfect credit. You just need to know how to find one.

It will also be helpful if you understand what the requirements typically are for getting auto loan approval with a special finance lender. Being prepared will increase your chances for success and make the process go more smoothly.

Auto Loan Requirements for Buyers with Damaged Credit

Special finance lenders look at factors other than an applicant's credit rating when making an approval decision. These factors include your regular, verifiable income, how long you have had your job and your residence stability. A lender will also look at your existing bills in order to determine whether or not you will be able to afford a car payment.

auto loan with bad credit

If you know that you will need to buy a vehicle before you've had a chance to improve your credit, you will need to be able to provide the following:

  • Proof of Income:
    A lender will want to see your most recent paycheck stubs, and these must be electronically produced and not hand-written. Most special finance lenders require a minimum income of $1,800 per month. If you have more than one job, a lender will only look at your primary job to verify whether or not you have a qualifying income. However, other income sources may be considered when the lender looks at your debt to income ratio.
  • Proof of Residency:
    You will have a better chance at auto loan approval if you have lived in the same home for at least six months. In order to verify your residence, you should produce a recent utility bill that is addressed to you. Keep in mind that if you have recently relocated for a job or for another reason, but can prove that you lived at your old address for at least six months, the lender may take this into consideration.
  • List of Personal References:
    A special finance lender will want the names of and contact information for at least six people who have known you for a long time. This list should include a good mix of friends and professional colleagues. Make sure that you have up-to-date email addresses, home addresses and phone numbers for each of your personal references.
  • You will also need a valid driver's license. You should be prepared to provide important personal information. This will include your Social Insurance Number (SIN), date of birth and the amount of your monthly rent or mortgage payment.

    Applying for an Auto Loan with Bad Credit

    Once you know that you have easy access to all of your required documents, you can start the auto loan process. Everything will be easier and faster if you follow these steps:

  • Check your credit.
    There are two primary credit reporting bureaus in Canada. And both of these agencies (Equifax and TransUnion) will allow you to request a complimentary copy of your report every 12 months. Order your reports and look them over carefully for errors. If there are mistakes on either of your credit reports, your rating could be lower than it should be. You can dispute any inaccurate information that you find and possibly raise your credit score. It will also be helpful for you to know exactly where you stand with your credit before applying for your auto loan.
  • Look at your budget.
    You will be accepting another financial responsibility by taking on a car payment, so now is a good time to make sure that you're ready. Add up all of your existing bills and regular expenses and compare the total to your monthly income. If it seems that you will have very little left over for an auto loan payment, you will want to eliminate unnecessary expenses.
  • Find a dealer.
    Special finance lenders usually work through dealerships that are qualified to handle buyers with tarnished credit. These dealers have experience with inventorying vehicles that will fit the budgets and needs of customers who are dealing with credit issues.
    For a car buyer with a low credit rating, finding the right dealer is the most important part of the auto loan approval process, and it may also be the most difficult part. How do you know where to start? You could call around to every dealership in your area or go out to visit them in person.
  • But this will probably be time-consuming and frustrating. An easier option would be to contact Canada Auto Loan. We can quickly and discreetly match you with the right dealership, right from the start.

    Free Assistance with Your Auto Loan Needs

    At Canada Auto Loan, we believe that everyone deserves a fair shot at getting approved for auto financing. This is why our service is free of charge. It will cost you nothing to take advantage of our country-wide dealer network. And wherever you live, from Vancouver to Halifax and everywhere in between, we can find a dealership close to your neighbourhood.

    So, go ahead and fill out our simple, secure and obligation-free online application to get started today.