CAR LOAN
Auto or personal loans are not just for new cars.
A quality used car is also worth the investment.
Looking for something that’s safe, fuel-efficient, and that will last you more than a few years? Chances are it’ll have a significant price tag. A car loan proves extremely useful, if not necessary.
The good news is that there are a ton of lenders and dealerships across Canada that can give you an affordable car loan. You just need to know where to look.
Car Loans in Canada: Auto Loan vs. Personal Loan
An auto loan is not the same as a personal loan. However, you can use both to finance your car purchase.
When you secure the loan with a car, you take out an auto loan.
You can only use the money on the car. The car guarantees the money.
A personal loan is not tied to the asset you are buying. This is an unsecured loan. You can use the money for anything.
What Costs Can You Expect When Taking Out Car Loans in Canada?
Essentially, a car loan helps you finance a vehicle over several years using divided installments. This breaks the cost of the car plus any accumilated interest into smaller monthly payments. The car becomes more affordable because you won’t have to shell out tens of thousands of dollars at once.
Nonetheless, there are many different costs and fees to pay after you’ve been approved. These costs can include but aren’t restricted to your:
Down Payment for Car Loans in Canada
A down payment is usually optional, depending on where you apply. However, most experts recommend that you put down at least 10% – 20% of the vehicle’s final asking price.
A down payment is a good move when financing a newer or more expensive model.
A larger down payment reduces the amount and repayment time of your debt. Plus, it can also help you qualify for a lower interest rate. Moreover, it informs your auto dealer know you’re a serious buyer,
so they may offer you a few extra perks.
What Type of Interest Rates are Available for Car Loans in Canada?
Interest is what lenders and dealerships charge in exchange for you borrowing from them. The rate you end up paying can fluctuate depending on the lender,
what kind of vehicle you’re financing, and how strong your finances are. There are also two types of interest rate you may encounter:
A fixed interest rate is be locked in once you’ve been approved and won’t change during your repayment term. While some fixed rates can be higher than variable ones, they make it easier to predict how much you owe every month.
A variable interest rate fluctuates during your payment period due to several factors, mainly because of changes to Canada’s prime rate. Although this makes the cost of your car loan payments less predictable, you can save money when and if the prime rate drops.
Car Loans in Canada Terms & Payments
Your loan term and the size of your payments add up to the total cost of your car. After all, your vehicle’s advertised price won’t actually be its finalcost, once you factor in fees and interest.
For instance, a longer term
and small payments are more affordable at first, you pay more interest and fees overall. Larger payments are harder on your budget, but typically help you pay off the car faster. Either way, you should be careful not to take on a repayment plan that you cannot handle.
How Do I Apply For Car Loans in Canada?
As mentioned, every lender and dealership has its own loan requirements. However, there are a few personal and financial details that you’ll have to provide to qualify for the best car loan. These typically include:
*Name, address, and other personal information (proof of identity)
*Bank account details and other financial information (proof of income)
*Employment status and job title
*Vehicle make, model, and cost (if applying with a bank or other lender)
*Down payment amount
Although your credit score may be less significant for some lenders and dealerships, they can check your credit report. That is why you fill out a credit application. The stronger your credit is, the easier it will be to get approved for a car loan with a decent interest rate and repayment plan.
How Can I Prepare to Apply For A Car Loan in Canada?
Remember, getting approved for the best car loan is all about your financial health. The more chance you have of making payments on time, the better the result. As such, it’s important to prepare yourself by taking the following measures:
*Improve your credit if its bad (a credit score of 660-800 is ideal). While there are subprime auto loans in Canada, improving your credit will lead to better interests rates and terms.
*Have a full-time job for at least 6 months
*Earn as much income that allows you to afford your payments
*Pay off your outstanding debts
*Save up for an appropriate down payment
*Confirm the make, model, and safety rating of vehicle you want
*Make sure your driver’s license is up to date
Finding A Cosigner
What if your finances or credit aren’t good enough? You can strengthen your application by finding a stronger borrower to cosign it. A cosigner gives your lender a way to protect their investment. The cosigner becomes responsible for your payments if you cannot pay.
Just be careful: Your cosigner’s finances and credit could be negatively affected if they become responsible for your car loan but they also can’t make payments.
