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A good car loan can be useful to any resident of Prince Edward Island. After all, having a car to make commuting more efficient is a convenience that most Canadians aren’t willing to live without. Getting around isn’t the only way a car loan can be useful. In fact, for PEI drivers, including yourself, a car loan can benefit you by:
- Making normally expensive cars more affordable when you can’t pay in cash, by cheque or by credit card.
- Improving your credit through full payments.
- Making it easier and cheaper to upgrade to a newer or more fuel-efficient model than your current used car.
- Helping you afford a larger, safer vehicle to for you and your family, such as a roomy minivan.
- Helping you buy a new vehicle when your current one has been in an accident or is no longer reliable, ultimately costing you too much money in repairs.
- Giving you the option of taking out a “vehicle title loan” once you’ve paid off your full balance. If approved, you can use your car title as collateral to secure loans, the size of which will be based on the vehicle’s estimated market value.
Note: before you choose a vehicle title loan, know that your lender will retain ownership of your car until you complete all your payments (including interest). This is risky if you can’t afford your payments and default for too long. If this happens, your lender may repossess your car and sell it to regain part of their investment.
Looking for a regular PEI installment loan instead? Try this.
My Credit is Bad. What Does That Mean for My Car Loan?
“Bad credit” likely implies that you’ve had a history of defaulted payments with your other credit products (credit cards, lines of credit, etc.). However, it could also mean:
- You’ve fallen victim to fraud or identity theft at one point or another.
- You’ve been applying for too much new credit. Hard inquiries performed by prospective lenders damage your credit score slightly. For more information about credit inquiries, click here.
- You’re using too much of your available credit with your credit cards or other revolving credit products. The closer you are to your credit limit, the more your credit score will drop.
- You’ve experienced a financial delinquency, such as a consumer proposal or bankruptcy because of your unmanageable debt.
If you’d like to improve your credit for better chances of approval and lower interest rates, you can try these methods:
- Request a copy of your own credit report. This is a free yearly service provided by Canada’s credit bureaus (Equifax and TransUnion). When you check your own credit, it counts as a “soft inquiry” and won’t affect your credit score.
- Inspect your report for errors. An error in your report of any kind can badly damage your profile if you don’t dispute it.
- Heal your credit and payment history. Defaulted payments have a lasting effect on your credit. Wait a few months before applying for your loan, during which you can make timely, full payments on your other active credit accounts. Want to know how your payment history affects your credit score? Read this.
- Keep your credit utilization ratio below 30%. If that’s not possible, request a raise in credit limit to prevent further harm to your credit score.
- Manage your other debts. Unfortunately, some financial delinquencies will remain on your credit report for several years and there is no way to remove them until your credit bureau specifies. However, you can still make your payment history and creditworthiness look better by eliminating your other, more pressing debts before you apply.
Check out these debt management tips for credit users.
If your bad credit isn’t going anywhere soon, you can also get a bad credit car loan and get a slightly lower interest rate by:
- Making a large down payment. While it’s not a requirement, putting more money down upon purchase will make you more creditworthy.
- Offering up collateral. Since bad credit makes you a risky client, your lender will want more reassurance that you’ll pay your loan in full. You can give them that by securing your loan against your assets of value (home, another vehicle, etc.). Be careful! If you default for too many months, your lender might seize your asset!
- Find a co-signer. If you have a trusted friend or family member who does have good credit and financial health, they can co-sign your loan to make you more creditworthy. Again, be careful! If you default again, your co-signer may need to take responsibility for your remaining loan balance!
- Do more research for lenders. While applying all over town is not good for your credit, it never hurts to shop around to find a lender who offers better rates.
Check out this infographic to learn about your car financing options.
I’m Ready. What Vehicles Can I Buy?
Typically, the types of vehicles you can buy will depend on elements such as:
- Your credit and finances
- Your particular lender’s policies
- Your particular lender’s inventory at the time
- The value of the vehicle in question
However, once you’re approved, you can easily get a loan for almost any make or model, including but not restricted to:
You can also get a loan for alternative styles of vehicles, such as:
- Motorcycles and scooters
- RVs and camping trailers
- ATVs, dirt-bikes, and crossovers
- Jet-skis and snowmobiles
I Already Own a Used Vehicle? Can I Trade it For Another?
Trade-ins are a service offered by many lenders and dealerships all over Prince Edward Island. Essentially, your vehicle will be inspected on-site, given an estimated value and a quote for how much your lender will actually pay for it. If you’re comfortable with the quote, your lender may reduce the price of your next vehicle by that amount.
However, just remember:
- Your vehicle must have a decent enough value for your lender to take it. Your current used car might not qualify with dealership standards.
- Your lender/dealer needs to make a profit. They will almost never give you what the car is really worth, so keep your expectations low.
- Your dealer might try to lowball you. Even if you’ll never get top dollar for your trade-in, it’s always good to get a second opinion. Do lots of research and get your car inspected by a mechanic of your choice to get a better idea of its value before you give it away for pennies on the dollar.
How does car loan refinancing work?
I have bad credit. Can I still get a car loan?
Do I get charged a penalty for paying my car loan off early?
Loans Canada, Helping You Drive Your Way to a Better Tomorrow
If you’re reading this and you’re a Prince Edward Islander in search of a good car loan, you’ve come to the right place. Loans Canada is always here to put you in touch with the right lenders and dealerships for all your auto financing needs. Apply today!