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📅 Last Updated: April 10, 2025
✏️ Written By Bryan Daly
🕵️ Fact-Checked by Caitlin Wood, BA

Living with bad credit can be a challenge, especially when you’re trying to get approved for a car loan. Most consumers believe that they need to have an excellent credit score to get an auto loan, when in fact there are lots of auto loans available for those with lower credit scores. Looking for and being approved for an auto loan when you have a low credit score can be a bit difficult, but not impossible, so don’t be discouraged from even trying.

Here are a few things you need to know if you’re looking for an auto loan and have a low credit score. 


Key Points

  • You can get a car loan with bad credit from private lenders and dealerships that work with borrowers with bad credit.
  • To improve your odds of approval, ensure you have consistent income, a low debt-to-income ratio and a decent sized down payment.

Can You Get A Bad Credit Car Loan?

Yes, you can get a car loan with bad credit in Canada. That said, your options for a car loan may be limited, and the interest rate of the loan may be more expensive. 

While bank financing may be more challenging to get without good credit, you can generally still qualify for a car loan with bad credit through an alternative lender and certain dealerships that specialize in bad credit.

Average Car Loan Interest Rate
The average interest rate for a regular car loan is 6.94%. Given that bad credit auto loans generally come with higher rates, you can expect a rate higher than this average. However, do note that legally lenders cannot charge borrowers an APR of more than 35%.

Features Of A Bad Credit Car Loan

Car Loan SourceYou can usually get a car loan through an alternative lender and certain dealerships that work with borrowers with bad credit.
Interest RateInterest rate will usually be higher than getting financing from a bank.
TermsTerms will usually range between 12 and 84 months.
Loan AmountLower loan amounts may be offered to reduce lender risk.
Down PaymentLenders may require higher down payments to lower their risk.

Where Can You Get A Bad Credit Car Loan In Canada?

The good news is that when it comes to finding the right car loan, you have multiple options, even with bad credit. Below are some of the best sources for bad credit car loans in Canada.

Best Bad Credit Auto Loan Lenders

AmountInterestTerm (Months)
Loans Canada Logo - Bad Credit Loans Canada$500 - $50,000Up to 35%12 - 84Learn more
Clutch$7,500+Varies24 - 96Learn more
Canada Drives$500 - $35,000Starting at 29.99%9 - 60Learn more
SkyCap Financial$500 - $10,00012.99% - 34.99%9 - 60Learn more
Carloans411$5,000 - $40,000Varies12 - 72Learn more
Canada Auto Finance$5,000 - $45,0004.90 % - 29.95%36 - 72Learn more
Eden ParkVaries11.9% +12 - 84Learn more
Splash Auto Finance by RifcoUp to $50,000Varies12 - 84Learn more

What Credit Score Do You Need To Get A Car Loan In Canada?

In Canada, credit scores range from 300 to 900. Credit scores of 660 and above will give you the best odds of securing a car loan with the most competitive interest rate. On the other hand, credit scores below 559 can make getting a car loan more challenging and expensive. 

That said, it’s important to note that lenders will generally consider many other aspects of your financial situation, including your income, debt and job stability, which can impact your car loan approval.

Learn more: What Credit Score Do You Need For A Car Loan?


How To Apply For A Car Loan With Bad Credit

Depending on whether you apply with a dealership or a private lender, the process of getting a car loan may vary. 

  • Dealerships. Generally, with dealerships, you choose a car and then you apply for financing. The car dealers will usually show you a car based on your car budget.
  • Private Lender. With a private lender, you generally apply for a loan or a loan pre-approval first. Then you pick a car based on the loan offer.

Tip. To secure the best offer for your financial situation, shop around with different lenders and dealers. With a few basic pieces of information, you can get a free quote or pre-approved offer from most providers, which lets you know how much you can qualify for based on the details you provided. 

Note: Keep in mind that this quote is an estimate and can vary based on your income, employment stability and debt-to-income level.

Documents Needed To Get A Bad Credit Car Loan

Although bad-credit-friendly lenders and auto dealers have easier requirements, you will need to provide proof of identity, income, employment and bank account. While some lenders may accept documents such as pay stubs, employment letters and bank statements, others may verify information using instant bank verification (IBV)

Instant bank verification involves you giving your financial institution permission to share a temporary read-only copy of your bank statement to the lender. This process allows a lender to verify your identity, income and overall financial picture.


Should You Get A Car Loan From A Dealership Or Private Lender?

  • Dealerships. Dealerships are often willing to work with everyone, including people with bad credit, and there is a good chance they can help you get a deal. 
  • Private Lenders – There are hundreds of options for private loans out there, but of course, these can often be more expensive. It’s best practice to get a quote to compare offers.

Can You Get A Car Loan With Bad Credit And No Down Payment?

Saving up for a down payment before you purchase a new or used car is always good practice. It could even help increase your chances of getting approved. That said, there are no down payment car loan options offered by certain lenders.

Learn more: 0 Down Car Financing In Canada


Bad Credit Car Loan Costs To Consider

Before you finance any sort of vehicle with a bad credit car loan, it’s essential to find a payment plan that fits your budget. Here are some of the largest costs to factor in. 

Length Of Car Loan Term

A longer loan term involves lower monthly payments, which can be appealing. That said, a longer term means more interest paid over time. Sometimes a shorter loan term is the best option to save you money and pay off your loan faster.

Interest Rate

Bad credit car loans can have high rates. So, the best way to get your rate reduced is to apply with a solid income, a down payment and/or a cosigner. Financing a cheaper vehicle can allow you to pay less principal and interest.    

Additional Fees

Bad credit car loans can come with many high service and administrative fees as well. This is especially true if you finance your car through a dealership, where fees like vehicle preparation and documentation may also apply.


How To Calculate Your Car Loan Costs?

Use this car loan calculator to calculate your car loan payments and the total cost of your loan.

Car Loan Calculator

CALCULATOR

Credit Score 1
Your Interest Rate: 35 %
Loan Options 2
$
$
Result 3

Bad Credit Car Loan Tips

Here are some other ways to get approved for an affordable bad credit car loan:

Get A Cosigner

Asking someone to cosign your car loan is another way to get approved for better conditions if you have bad credit or no down payment. This person will need to have fair to good credit and will be responsible for making your payments if you do not.

Trade-In Your Car

If your current car has resale value, an auto dealer may allow you to trade it in for a lower price on the car you’re financing. However, you may not get as much as you could selling it privately. Generally, when you trade in a car at a dealership, you’ll get a slightly lower value for the convenience. 

Meet The Lender’s Minimum Requirements

Since you have bad credit, the right dealer/lender will focus on other aspects, like your income. Before applying with a lender, be sure you meet the lender’s minimum income requirements.

Set Your Budget

Car loans can vary greatly in price depending on where you apply, what kind of vehicle you’re financing and how strong your financial health is, including your credit score. So, the first thing you should do is find a loan option that works for your monthly budget. 

Along with your loan payments, be sure to consider these other common car costs: 

  • Gas/electricity
  • Repairs
  • Maintenance
  • Tires
  • Car insurance
  • Registration

Learn more: How To Budget For A Car


Avoid These Bad Credit Auto Loan Traps

When looking for a bad credit car loan, watch out for these traps.

  • Loan Markups – Your dealer will profit from trying to get you to go for a more expensive loan, stick to your plan and don’t accept any offer that you can’t afford.
  • 84-Month Loan Terms – While a longer term makes for affordable monthly car payments, it also leads to more interest. Lenders and dealers may make a car loan more affordable by extending the loan term, but in truth, it ends up costing more.

Bottom Line

Car loans are not reserved for those who have high credit scores. Your low credit score shouldn’t discourage you from looking for a new car and a loan to pay for it. Make sure you follow our steps and keep yourself informed about your financial situation and you should be able to get the car you want and need.


Bad Credit Car Loans FAQs

How can i improve my chances of getting a car loan with bad credit?

There are several other ways to improve your chances of qualifying for a bad credit car loan, such as making a large down payment, finding a cosigner, lowering your debt-to-income ratio, and waiting till you’re discharged from debt settlements, consumer proposals or bankruptcies.

Do bad credit car loans help build credit?

Yes, if your lender reports your payments to one or both of the Canadian credit bureaus, your credit may improve over time. Just keep in mind that everyone’s credit scores react differently so it’s hard to predict exactly how and when your score will improve.

Can I get a car loan with no credit score in Canada?

It’s possible that certain lenders won’t care that you don’t have a credit score. But they will charge significantly higher interest rates because of this. It’s always in your best interest to wait and work toward building a healthy credit score. That said, if you’re a newcomer who hasn’t had a chance to build their credit, some banks have specialized car loan programs for newcomers.

Will I have to make a down payment to get a car loan if I have bad credit?

While some lenders and auto dealers don’t require down payments, putting at least 20% of the car’s sales price down can help your approval odds greatly. 

What is the lowest credit score to buy a car?

There is no exact credit score cut off when buying a car. However, some lenders, particularly banks may be hesitant to lend to borrowers with bad credit scores (559 and under). That said, there are private lenders and dealerships that still approve borrowers with bad credit for car loans.
Caitlin Wood Priyanka Correia Lisa Rennie Bryan Daly Cris Ravazzano Margaret Johnson Kale Havervold Liz Enriquez Sean Cooper Veronica Ott Corrina Murdoch Chrissy Kapralos

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