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Access to a car or other motor vehicle can be a great convenience, no matter where you live in Canada. If you’re an Ontario resident, there are plenty of reasons that a car loan can work in your favour, including (but certainly not limited to):
Upgrading to a more reliable model – Whether it’s to reduce your carbon footprint, to save on maintenance costs, or just because you’re tired of your old vehicle, an upgrade could do wonders for your personal and financial life in Ontario.
Buying a truck or SUV – If you’re in the construction business or you work in a rural area of Ontario, a normally expensive pickup truck or SUV can be much more affordable when you use a car loan.
Having no access to public transit or other means of transportation – While you may not always need a car if you’re living a metropolitan area of Ontario, a good car can still mean the difference between you getting to work on time or not.
Making Canada’s weather more bearable – Simply put, Canada can be cold, snowy and rainy at all different times of the year. Your heated car can be a welcome relief from those conditions.
Looking to privately buy a used car in Ontario? Read this first.
What if I Have Bad Credit? Can I Still Get a Car Loan in Ontario?
Unlike smaller loans and less expensive credit products, a large part of your approval chances and the interest rate on your car loan will depend on your credit. Don’t worry, there are tons of dealerships all over Ontario who will approve you for a bad credit car loan (if your credit score is under 620) and here are some ways of gaining that approval. Note: while these tactics should work for bad credit car loans, they are also ways to improve your chances of approval for normal car loans.
Here are just some of the methods you can try:
Find the right lender – Car loans aren’t just available through dealerships in Ontario, you can also access them through banks, credit unions, and alternative lenders in Ontario. Doing some advanced research could help you find better interest rates and payment terms, as well as help you confirm that your lender in Ontario is a legitimate business and not a scam. Click here to learn how to compare lenders in Canada.
Save up for a down payment – Even if it’s not a requirement, making as large a down payment as you can is a good way to be approved for better models and more favourable interest rates. It also helps reduce the car’s overall price tag, because your payment term can end up being shorter.
Pay off any outstanding debts – Since your lender in Ontario will be looking at your finances, it’s better for them to see that you’ve been managing your other debts responsibly. No one will want to approve you if they think you won’t be able to keep up with your car loan payments.
Apply for a “secured” loan – If your credit is bad or you can’t afford a down payment, you can also offer up your assets (home, other vehicles, real estate property, etc.) as collateral to secure a car loan. Be cautious, however, because your lender will have the right to repossess and sell your assets if you don’t honor your loan agreement. For a better understanding secured and unsecured credit, click here.
Get a co-signer – Someone with better credit and finances can boost your approval chances by co-signing your loan. Again, be cautious here. If you default, the co-signer will become responsible for your debt.
Improve your credit health by:
Making timely/full payments for your other active credit products, particularly your credit cards
Reducing the amount of credit you’re using (the closer you are to your credit limit, the further your score will drop)
Not applying for car loans and other new credit all over town (credit inquiries damage your credit score and make future lenders in Ontario think you have a debt problem)
Check out this infographic to learn how your credit score is calculated.
Can I Get a Second Car Loan for a Recreational Vehicle?
Maybe you’re in the process of paying one car loan, but you’re interested in taking out a second to finance a recreational vehicle, such as a:
Motorcycle or scooter
Trailer or motorhome
Dirt-bike or ATV
Ski-doo or jet-ski
Again, your approval here will likely depend on your financial strength. If your credit is decent, your income is solid and you can prove that you’re able to afford both vehicle payments, you should be able to find approval somewhere.
There are numerous dealerships across Ontario that will happily take in your used vehicle in exchange for a reduced cost on the one you’re buying. If you’re interested, you can have your vehicle evaluated at the dealership, where you’ll be given a quote based on the price it would typically go for on the open market (make sure you do your own research and get a second inspection to be certain you’re getting a good deal).
Just be aware, however, that:
Almost all vehicles (unless they’re rare or restored models) lose value over time. The more wear and tear they accumulate, the lower their eventual value will be.
New and lightly used cars depreciate by around 10% the second you drive them off the dealership lot, with an additional 10% within the first year.
Even if your car has a good value, no dealership will give you as much as it’s worth. Dealerships, like all business, need to make a profit.
Trying to compare new cars and used ones? Take a look at this infographic.
What Can I Do With the Car I Own in Ontario?
Let’s say that you already own your vehicle outright, meaning the principal and interest have been paid in full. However, you still need money for another reason. One thing you can do with your vehicle’s title is, use it to access larger loans.
Here’s what happens:
Your vehicle will be inspected to determine its fair market value.
If it’s valuable enough, your lender will grant you a loan and interest rate, the size of which will be based on that value.
Your lender in Ontario then temporarily owns your vehicle’s title.
You’ll pay off your loan through installments and your vehicle’s title will be returned once it’s paid in full.
If you default, your lender has the right to repossess your vehicle, possibly sell it at auction if you continually fail to make payments.
What Makes and Models Can I Buy With My Car Loan in Ontario?
Remember, your approval and interest rate will be based on elements such as your income, employment history and credit. The same idea goes for the types of vehicles you can access. For instance, you’ll have an easier time getting approved for a luxury model if you have a high income and good credit. However, as long as your credit isn’t terrible (credit score of 500 or less), you should be able to get a loan for almost any make or model, including:
BMWs
Toyotas
Acuras
Hondas
Buicks
And many more!
Frequently Asked Questions
Are there prepayment penalties for car loans in Ontario?
Determining if you should pay off your car loan early is based on a few factors. If you have an “open-end” contract, then paying it off early will certainly mean less interest paid and more money saved. However, if you have a “closed-end” or “fixed-term” car loan contract, then it might be a bit trickier to determine if early payments are worth it. If your contract stipulates a precalculated interest, then it is expected that you pay the same amount whether it is paid off early or on time. However, even these types of strict contracts have some flexibility. They may allow you to make an early payment to save interest, but they’ll charge a lesser prepayment penalty to compensate. Most of the time, you’ll still come out ahead having saved a bit on the interest. Better yet, you may have a “prepayment privilege”. This is an extra amount that you can make on top of your regular payments without having to pay any kind of penalty. In this case, you want to take advantage of the prepayment privilege whenever possible.
Can I use my car to get a cash loan?
Yes. Refinancing your car loan can accomplish this and is potentially a good option for other reasons— depending on your needs. You can use “cash-out refinancing” to get yourself a cash loan for an emergency. If your car is relatively newer and already has a substantial amount of it paid off, you can turn that equity into cash. If you find that you can no longer budget for your car’s monthly payments, refinancing can help spread out the loan over a longer-term and lower the payments. You might pay more in the long term, but at least you’ll have peace of mind knowing you can make the payments in time. Lastly, another use for car refinancing is to save money. This can be done if you can refinance at a lower interest rate or if you can shorten the term of your loan.
I have bad credit. Can I still get a car loan in Ontario?
If your credit score is below 650, you may still have some options for car loans in Ontario. With a lower score comes higher rates, which can be between 8.99% up to 29.99% for non-prime car loans. The exact rate you’ll get depends on other factors as well. New cars will have lower rates than used cars but require higher credit scores to qualify. The shorter the length of the loan, the lower your rate will be — but your monthly payments will have to be higher. Lastly, a higher down payment should also help lower your rate. At a bare minimum, you’d be required to have held a job for at least 3 months, have a valid bank account, and earn between $1600 to $2000 per month. Of course, you’ll also need a valid Ontario driver’s license.
Want a Car Loan? Choose Loans Canada!
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