At Thomson Auto Financing, we are proud to be able to offer car loans in the Lower Mainland area to all of our customers. Some of our customers come to us with excellent credit and qualify for very low interest rate loans. Other customers come to use with bad credit and qualify for competitive car loans that suit their overall financial needs. However, we are proud of the fact that we do not turn down any of our customers that come to us looking for car loans.
The question that we sometimes get from our customers is “how can you afford to give car loans to all of your customers.”
Here’s our answer: We believe that all of our customers should be able to receive a car loan if they need it. After all, not everyone has loads of money that they can spend to buy a car with cash. Therefore, we have a philosophy that we will partner with our customers in order to ensure that they are able to get a car loan that makes it possible for them to afford to buy a car.
Car loans are possible for everyone. However, the type of car loan that our customers qualify for may vary based on the credit history and their needs. Therefore, the first step that our customers need to take in order to get a car loan in Lower Mainland area is to complete a credit application. From the credit application, we will learn more about their current financial situation and about their credit history.
We use a series of equations and formulas to determine what interest rate and loan amount our customers qualify for based on the information that they provide to us on their credit application. With this information in mind, we will meet with each customer to discuss their practical needs, which may include a real-life budget or other concerns that our customers have about their ability to afford to repay a loan. By speaking with us candidly about their financial situation and concerns, we are able to tailor a loan program that our customers are truly able to afford.
The best part about getting a car loan through us is that we can work with your budget as we determine which cars might be best for you. We not only understand your lifestyle needs, but also your financial needs and will make sure that they are both addressed adequately.
Contact us today to get started getting the best car loan for your needs and lifestyle.
If you have your eye on a new or used car, you may have to consider financing options. The problem that a lot of people face is that they don’t have optimal credit and may not think that they qualify. While many lenders offer bad credit car loans, there are still a lot of myths that circle the choice. You shouldn’t let these turn you away from the financing that could get you your dream car. Here are the three top myths when it comes to car loans.
A Low Credit Score Guarantees Rejection
This isn’t true at all. In fact, there are dealers and lenders that specialize in car loans for people with bad credit. Poor credit will not stop you from financing a car.
You Can’t Refinance if You Had a Poor Credit Score
When you’re approved of a car loan with a low credit score, you are given the opportunity to build your credit over again. After a while, as your score builds you will be given more options. It’s common for people to refinance their loan and come up with a cheaper rate after they have built up their credit score.
Income Doesn’t Matter if You Have Bad Credit
Income absolutely matters! Income and the other debts that you owe play a big role in the size of the loan you can be awarded. While lenders do pay attention to your credit, your income also plays a large role in whether or not you’re approved. This can also affect the rates that you’re given.
Don’t allow myths to turn you away from car loans. Even with bad credit there are many options out there. While it can be a difficult choice for many people to decide whether or not they want to look into financing for a vehicle, it’s important not to be deterred by myths. Only the facts should be an influencing factor on your decision.
When you are buying your next car, you will probably need to be willing to negotiate financing for the vehicle. Several factors affect how good a deal you get during these negotiations, and knowing these factors ahead of time can help you better prepare. For the most part, these factors boil down to the amount of risk the lender is being asked to take.
Make, Model and Year
It is in the lender’s best interest to go into the negotiation with the possibility in mind that you might fail to pay off your car successfully. In such situations, how much lenders lose on defaulted car loans depends mostly on how much the car would be worth after it is repossessed. If the car is likely to sell easily or for more money, the risk for the lender is lower. That is why you are more likely to be offered better interest on a newer, more popular car.
Your down payment lowers the amount you have to borrow. The less money you borrow, the less risky it is to loan money to you. If you can make a sizeable down payment on the car before you ever drive it off the lot, you will probably have more bargaining power.
The biggest risk factor for potential lenders, however, is you. A low credit score is an indication that you have not been very successful in paying off debts before. A high debt-to-income ratio tells them that you have a lot of other payments you are responsible for, increasing the likelihood that this new debt might fall in the cracks. If you are a credit risk, lenders are going to want to negotiate terms that protect them, which means they may not be the best terms for you.
Understanding the risk factors that affect your car loan can help you get a better deal. If you go to the dealership prepared to demonstrate your credit worthiness, you are more likely to walk out satisfied.
Written by Sean Cooper
Are you planning to purchase a vehicle? Unless you can afford to pay for it in cash, you’ll have to borrow the money. And there are a lot of factors to consider when choosing a car loan: should you finance or lease? What interest rate can you get? How long will you take to pay the loan back?
Everyone’s circumstance is different, and one car loan might be a perfect fit for your neighbour but not for you. Let’s take a look at the car loans Canada offers to see if we can simplify what might otherwise be an overwhelming landscape of info.
Car Loans – The Basics
A car loan is a personal loan in which a lender loans a borrower the funds needed to buy a car. In exchange, the borrower agrees to repay the lender the loan amount with interest, typically in monthly payments, until the loan is fully paid off. There are a few key concepts that are important to understand if you’re considering a car loan.
Principal is the total sale price of the car, and the amount you borrow. This includes any fees for the lender or dealership and any add-ons or options you may select.
The interest rate is the percentage the lender charges the borrower on the money loaned. The rate given by a lender can depend on several factors, including: the lender’s prime rate; the borrower’s credit score; and the vehicle’s make and model. If you have an excellent credit score and earn a decent wage, you’ll typically qualify for the best (prime) interest rate on a car loan.
The term is the period of time in which the car loan is to be repaid. Car loan lengths are typically between two and eight years. Longer car loans in Canada have the advantage of lower monthly payments, but can lead to the unfortunate situation where you have negative equity in your vehicle (you still owe money on the vehicle when it’s inoperable). For that reason, you might think twice before taking on a seven or eight-year car loan.
A general rule of thumb is to try to cap it at five years if your cash flow allows. (If you’re confident that you’ll have a steady source of income that you can budget a monthly payment from for the next five years.) If it doesn’t, consider buying a less expensive vehicle, or consider leasing.
Does It Make Sense to Lease, Finance or Buy a Car in Cash?
Why you might lease a car:
- You prefer to drive a new vehicle: When you lease a vehicle, you’re essentially only renting it. The typical car lease lasts only two to four years. Once the lease is up, you can return the car and start the process all over again by leasing another new vehicle or you can buy out the lease from the dealership if you want to keep the vehicle.
- Cash (flow) is king: The biggest advantage with leasing is cash flow. When you lease, your monthly payment will be lower than if you take out a car loan to purchase the same vehicle. Unlike a loan, where you borrow the full purchase price of the vehicle, with a lease you’re only borrowing the amount that the car will depreciate in value over the period of time of the lease. A vehicle that costs $600 a month with a car loan may only cost $350 a month with a lease.
- You enjoy driving nice cars: The lower monthly car payment when you lease versus own means that you can afford a nicer make and model of car than you otherwise would be able to if you financed or bought the car.
- You don’t drive very often: If you mostly use your vehicle for commuting short distances, leasing may make sense. You don’t have to worry about going over the distance limits on your lease and being forced to pay costly overage penalties. Most standard car leases come with a limit of 24,000 kilometres. As long as you stay within the limit, you should be fine.
- Peace of mind: Since you’re always driving a newer vehicle, you’re less likely to incur costly car repairs since the vehicle is almost always under full warranted. Although note that if you do need car repairs, you may be required to get them done at the lease’s dealership, which may cost you more than taking your car to the neighbourhood auto mechanic.
Why you might finance (take out a loan) a car:
- You drive long distances:When you finance (or own) a vehicle, you don’t need to worry how often you drive it. If you’re commuting long distances to work and planning to travel a lot, you won’t have to stress about facing penalties you’d incur when leasing. You’re generally better off financing instead of leasing if you plan to drive over 30,000 kilometres a year.
- You’re in it for the long haul: Unlike a lease, once you pay off a car loan, the vehicle is yours. There are no more monthly payments to deal with. It’s an asset that can be used to make a stronger financial case, for instance, when applying for a mortgage. You can drive it into the ground or trade it in. It’s completely up to you.
- Freedom of choice: If you’re a car enthusiast, chances are you’ll want to modify your vehicle. If you want to add a custom tailgate, you’re out of luck if you lease. Not so if you took out a car loan, in which you can customize your vehicle to your heart’s content.
- Building your credit score: There are five factors that make up your credit score. Payment history is the most important factor, accounting for 35% of the score. By steadily paying your car loan over time, it can have an overall positive impact on your credit score.
Why you might buy a car in cash:
- No monthly payments: If you have the cash, you might consider buying a vehicle outright. When you do, you don’t have any monthly car payments to worry about, which will reduce the mortgage amount you’ll qualify for if you’re planning to buy a home. You also won’t have to worry about going to a lender for financing.
- Cash incentives: To entice you to pay in cash, the car dealership may offer you cash incentives (i.e. a discount on the car cost) as a sweetener.
How Does a Car Loan Work?
Applying for a Car Loan
You’ll need to complete the lender’s car loan application form, where you’ll provide your basic personal and financial information. You’ll also typically need to submit other documentation, including notices of assessments for two years, your monthly housing cost, the make and model of the vehicle you’re considering purchasing, and any monthly debt obligations you have. A lending specialist will then review your files and crunch the numbers to see if you qualify for the loan. Pre-qualification can be done to see if you can afford the car you want (this can help avoid dinging your credit score). Pre-qualification is just like applying for a car loan, but without pulling your credit report, and therefore avoiding the potential hit to your credit score.
When applying for car loans, you’ll want to limit the number of lenders you apply with, as applying with too many lenders in a short period of time can negatively impact your credit score.
Receiving a Car Loan
The process of receiving the car loan depends on whether your lender is a bank, online lender, or dealership. With a bank or online lender, a lump sum payment is typically deposited into your bank account. You can then use the funds to purchase the vehicle from the dealership. However, if you’re buying the car directly from the dealership, you won’t typically receive a deposit since you’re borrowing the money from the dealership who owns the vehicle. You’ll simply receive the vehicle and will be required to start making your car payments.
Repaying a Car Loan
Car loans have a set repayment schedule depending on the term of the car loan you choose. If you choose a shorter-term loan, your monthly payments will be higher, and if you stretch it out, your monthly payments will be lower (although you’ll pay more in interest over the life of the loan). To keep your credit in good standing, you’ll want to make your car payments on time.
The payments are typically withdrawn by way of preauthorized payment from your bank account. If you come into extra money (such as a tax refund, pay raise, inheritance or bonus at work), you can typically make extra payments above and beyond your regular/minimum car payments. This reduces the term of your car loan, thereby saving you money you would pay in interest.
A car loan’s payment is usually fixed (stays the same) during the term of the loan. When you make a car payment, similar to a mortgage, a portion of it goes toward interest and a portion goes toward principal. Car loan payments are front-loaded and paid via amortization. As such, you’ll pay the most interest at the beginning of the loan.
How Interest Is Calculated
There are two types of interest calculations on car loans: simple interest and compound interest. With simple interest, interest is only charged on the original amount that you borrowed (the principal). With compound interest, interest is calculated on both the principal plus the interest accrued since the beginning of the loan.
When you sign up for a car loan, you should receive a financial disclosure, which expresses the interest rate as APR (Annual Percentage Rate). This takes into account the total cost of borrowing and includes compounding interest, fees and anything else you may be required to pay. This represents the true overall cost of the car loan.
Credit Score and Credit Report
It’s beneficial to have a high credit score when seeking out a car loan—the higher your credit score, the more likely you are to qualify for the lowest interest rate possible. So I recommend that you review your credit score and credit report before you apply for a loan.
You’ll want to request them from both the major credit reporting bureaus, Equifax and Transunion, since some lenders only report to one credit bureau. If you find that your credit score is on the low side, try to improve it by paying down your credit card balances and other outstanding debts. Keep an eye out for any inaccuracies on your credit report that negatively affect your score. If you see an error, take steps to correct it before applying for the loan.
Make and Model
Decide on the make and model of the vehicle you’d like to purchase. This will give your lender a purchase price so that they can come up with the terms of your loan.
Personal and Financial Information
Your lender will request personal information, such as your full legal name, date of birth and current address. They’ll also want to know about outstanding debts as well as rent or mortgage payments. If you’re putting money down on the vehicle, the lender may request to see proof of your down payment in the form of recent bank statements.
Your lender may request that you provide photo ID in the form of a driver’s license. Having a driver’s license can help, since borrowers with a driver’s license are typically more likely to pay back car loans.
Employment History and Income
Lenders typically ask for your employment history for the last three years. To ensure you can afford the car loan, your lender will often ask for proof of income, in the form of notices of assessment for the last two years.
Your lender will request a void cheque and may request that you complete a preauthorized payment form to automatically withdraw the car loan payments from your bank account.
Types of Auto Loans
Banks and Credit Unions
When a Canadian bank or credit union approves an auto loan they typically deposit the loan amount directly into the borrower’s bank account. The borrower can then use the funds to pay the car dealership for the vehicle they’d like to purchase. This is often referred to as “direct lending,” since the car loan comes directly from a bank or credit union.
As the name implies, dealership financing is when the loan is administered by the dealership selling the vehicle. The biggest advantage of dealership financing is convenience: You can buy the vehicle and finance it at the same time and location. It doesn’t get any easier than that!
Just make sure you take the time to shop around, and be confident that you’re getting a car loan with a reasonable interest rate and favourable terms.
Fintech (short for financial technology) has made it easier than ever to obtain a car loan. With an online lender, you can apply for a car loan from the comfort of your home. It’s a convenient approach to getting a car loan, as application forms are completed online. And it’s very easy to shop around for the best loan terms possible, which helps borrowers save more money.
Auto Loan Features You Should Pay Attention To
Before you start your search for the best car loan you can find, remember these key factors to keep an eye on:
- Interest rate: The lower the interest rate on the loan, the less you’ll pay for the car in the long run.
- Fixed/variable rates: Fixed-interest car loan rates in Canada remain the same for the term of the car loan, while variable rates can fluctuate with a change in the lender’s prime rate. Variable rates offered are typically lower than fixed rates, but you might nonetheless consider going with a fixed rate if your cash flow is tight or you’re risk averse.
- Simple/compound interest: Simple interest is based on the principal amount of the car loan, while compound is based on the principal + the interest that accumulates during the compounding period.
- Repayment schedule: If you’re looking to maximum monthly cash flow, you may go with a longer loan term, although the tradeoff is you’ll pay more interest over the life of your loan.
- Payment frequency: Lenders often let you choose the payment frequency of car loans. Common payment frequencies include weekly, bi-weekly, semi-monthly or monthly payments. In terms of cash flow, it’s easiest if you choose a payment frequency that matches your pay schedule at work.
Written by Jordann Brown
In the age of super high debt loads, with the average Canadian carrying over $22,000 in debt, bankruptcy remains one of the more misunderstood topics in Canadian personal finance. The confusion and myths surrounding bankruptcy in Canada remain in part because bankruptcy is still relatively rare. But that may be changing, as over 70% of members of the Canadian Association of Insolvency and Restructuring Professionals expect bankruptcy filings to rise over the next five years.
Whether you are going through bankruptcy now or considering it as a future course of action, it’s important to remember that people who experience bankruptcy aren’t consigned to financial ruin for life. Instead, bankruptcy is designed to help someone in financial trouble start fresh. Starting fresh means starting your life over, and for many Canadians, that could involve a post-bankruptcy car loan.
How Long to Wait Before Applying for a Post-Bankruptcy Car Loan
While bankruptcy will stay on your credit report for six years, you don’t have to wait that long before applying for new credit. In fact, during those six years, it’s important that you rebuild your credit by applying for and faithfully paying back credit of some kind (including loans). It’s unlikely that you’ll be approved for a car loan during bankruptcy without a significant asset to secure your loan, but after bankruptcy proceedings conclude, getting approved for a car loan is possible.
Finding Potential Lenders for a Car Loan After Bankruptcy
Finding the best car loan rates after bankruptcy is a little complicated. First, traditional lenders like banks may not be interested in lending you money for a car loan, or they may only do so at exorbitant interest rates. You can apply for a car loan through in-house financing from a dealership, but again, be prepared for higher interest rates.
While many dealerships will work with you to secure financing, especially if you can demonstrate that your income will support the payments, the amount they are willing to lend you may be less. For this reason, you should expect to finance a car valued at closer to $10,000 than, say, $50,000.
An alternative to in-house financing from a car dealership is working with a lending company that specializes in customers who are recovering from bankruptcy. These companies look beyond your credit score and do a deep dive into your financial situation. They weigh your income, recent payment history, credit score, down payment, and reasons for bankruptcy, and then offer you financing based on that information.
How to Increase Your Chances of Car Loan Approval after Bankruptcy
The first step to increase your chances of getting approved for a car loan is to increase your credit score. While your bankruptcy will remain on your credit report for six years, taking steps to build your credit score after bankruptcy does not go unnoticed. Here are some concrete steps you can take:
- Apply for a secured credit card, use it regularly, and diligently pay off the balance every month
- Never miss a payment on your utility bills
- Keep your credit utilization rate to less than 35% of your overall credit limit
- Avoid applying for several new sources of credit at once, which can temporarily decrease your credit score
On top of that, you should work to save up a decent down payment for your car loan. A large down payment demonstrates to your potential lenders that you have extra space in your budget for savings and car payments.
Finally, work to increase your income as much as possible. A good income will demonstrate to lenders that you can afford your monthly payments.
Be Wary of Predatory Loan Terms
Unfortunately, applying for any type of credit after bankruptcy is more complicated, and you may be turned down by several lenders. Due to the difficulty in obtaining credit, Canadians who have been through bankruptcy are a target for predatory lenders, and you need to be on the lookout for these companies that claim to offer good interest rates to those with bad credit, but don’t follow through. When evaluating a company as a potential lender, make sure to do your research and read online reviews and complaints carefully.
If you are offered car loan financing from a company that specializes in lending to Canadians who have been through bankruptcy, make sure to read through the fine print, every last bit of it. In particular, be on the lookout for high interest rates. While someone with stellar credit may qualify for a car loan rate from 0.00% to 6.00%, Loanconnect.ca reports that anyone with bad credit should expect to pay a rate as high as 30% to 60%. That may seem high, but payday lenders routinely lend money to customers with interest rates in the triple digits. Stay far away from loans with rates like these.
Other Factors to Consider When Applying for a Car Loan After Bankruptcy
Reading the Fine Print
Once you know the interest rate you may qualify for, pay special attention to the loan terms, especially payment frequency and whether you can refinance or pay off your loan early. It’s important to evaluate whether you can afford this loan, and the payment frequency will play a big role in determining this. Double check whether the payment for this loan is monthly, not biweekly or weekly, and that you can afford it at that frequency.
Refinancing and Early Payoff
On the same note, make sure that you can refinance this loan or pay it down ahead of schedule, because in a year or two, your credit rating may have improved enough that you can qualify for a much more competitive interest rate.
Finally, make sure that the car loan is reported to at least one of Canada’s credit reporting agencies, Equifax and Transunion. Not all dealerships report their financed loans to these credit agencies, but if you are making faithful payments on your car loan every month, you absolutely want that reported to the agencies so that you can improve your credit score as much as possible.
Finally, keep in mind that applying for a car loan after bankruptcy is difficult, but that difficulty is temporary. While you may have to downgrade your expectations now to afford your monthly payments with their hefty interest charges, if you continue to make your monthly payments faithfully, eventually your credit score will improve, and you’ll be on your way to a better financial situation.
You may have studied hard and practiced for weeks before taking the test to get your driver’s license. Now that you have a license and can drive around to different places, such as work, school and even the grocery store, you may want to make sure you have your own vehicle to get around. It is certainly not fun relying on other people and waiting around for them to drive you to the different places you would like to visit. However, you may think it is impossible to get a car at this moment.
Is your credit score low? When reviewing your credit report, you may have noticed that your score is not so good for a number of different reasons. For example, you may have a lot of debt and inquiries. Even if you are making payments on your credit cards in a timely manner, your score could still be low if you have too many inquiries and way too much debt compared to available credit. Even so, that does not mean you should be denied the opportunity to get a car that you want and need for different reasons.
If you are worried about getting denied, you can visit our car dealership. We offer bad credit car loans for those with less than perfect credit scores. We realize that things happen and not everyone will have the perfect score, but we believe in offering an opportunity to those who are in need of a vehicle. Our dealership offers a large selection of different cars to choose from, too. If you want to stop depending on others for a ride and be able to drive around on your own as often as you would like, consider coming down to our dealership to complete the application process for a loan. The process is simple and fair. Before you know it, you could be driving away in your first car.
Everyone knows what bad credit is and how much it can affect your ability to get anything, be it a new house, new car or anything else that requires a large sum of money and therefore a loan from the bank.
However, one term that many people may be unfamiliar with is “slow credit”. It means exactly what it sounds like; although you do have a history of paying your bills, you also have a history of habitually paying them late.
Although this isn’t quite as damaging as a bad credit, a slow credit can often play a part in hindering your ability to get a loan from a bank or loan company.
Luckily, there are ways to get slow credit car loans if you are in need of a new car. Unfortunately, many places offering loans to people who are desperate for a solution will use that to take advantage of people and jack up interest rates. These loan sharks will draw you in, and once they have hooked you they will make it so that you struggle to ever get out of debt with them. It is a situation that nobody wants to get into, and it could ultimately end up destroying your credit.
That is why it is so important to do your research into a company offering you a loan if you have bad or slow credit. Do a search of their customer reviews and look on their website for affiliations and accreditations before you agree to take a loan from them. Many companies are just trying to help people and give them a second chance when they knew they really need it, such as getting a car to get from point A to point B. A little bit of research will help you find the right ones.
Not everyone has thousands of dollars lying around in order to purchase a car. We understand that at our dealership, and that’s why we offer financing options to our customers, including those with poor credit. However, if you’re looking for bad credit car loans, there are a few things you should do before coming to the lot to shop in order to increase your chances of being approved. In order to get a car loan with low credit, you should ensure you meet the following criteria:
Ideally, your credit score should be above 600 if you’re looking for a loan of any sort. While this isn’t high, having a score above this number dramatically increases your chances of being approved for bad credit car loans. It’s not impossible to get financing with a lower score, but it’s certainly more difficult and time-consuming. If your score is below this number, you may want to try raising it a bit before coming in to shop.
Even for a low-credit loan, you need to have a monthly income of around $1,800 in order to be approved for a loan. This just allows us to ensure you’ll be able to manage your monthly payments, and serves the dual purpose of allowing you to ensure you’ll be able to pay the loan without struggling with your other responsibilities.
Lowering Your Credit
As previously stated, the best way to increase your chances of getting approved for your loan is to raise your credit bit by bit. While this can take years, there are a few quick steps you can take to fix those numbers. First and foremost, work with a credit company like us at Thomson Auto Financing and we will help you to fix any errors that might be on your report. These can include incorrect addresses and false accounts. Next, try closing any old, unused accounts. These might be dragging your score down.
We’re here to help you get into the perfect car for your needs, but by taking care of your credit and income and simply getting prepared before visiting our lot, you can help make the process a smoother, less stressful one for everyone involved.