Applying for a Car Loan

By Caitlin in Loans
Applying for a Car Loan

Almost everybody drives a car. It’s something that every body uses, no matter what demographic they belong to. Students drive, parents, retired individuals, everyone. However, buying a car is expensive – especially if you’re a young student. So exactly how do people find the money to buy them?

Well, the first method of course is saving. The thing is that many individuals require cars to get to and from work. Many can’t save to buy a car, because they need a car to make money in the first place! So what alternatives are these individuals left with?

1. Leasing a car

One of the easiest ways of obtaining a car is leasing. The monthly cost of leasing a car really varies, and depending on your situation you can spend anywhere between $150 to $1000 a month, for differing leasing terms (2-5 years). At the end of your lease you return the car.

The limitations of leasing a vehicle include kilometer limits and the fact that the car doesn’t actually belong to you. Let’s analyze the former first: if you exceed your kilometer allowance, you will be charged a fee for every extra kilometer you drive. This may not be a problem for you if you live and work in the same general area, but if you have to travel far to get to work you’ll find yourself eating up your kilometer allowance faster than you’d like. The other issue comes with the fact that after your lease is over you will have nothing to show for the amount of money you spent. When you finance a car, you get to keep your car at the end of your financing term.

2. Financing a car

If you are in dire need for a car, you can always find financing for one. You can finance either used or new cars, and the financing rate is usually in the single digits. The great thing about car financing is that the loan you are provided with is secured against your car. Lenders like security, and the risk of you defaulting on your loan is offset by the fact that the lender has a title on the car until your loan is repaid.

Qualifying for a car loan isn’t too difficult either. Your credit score is relevant, but really not that important. Most used car lots advertise bad credit car loans, and this is because car loan lenders are really more interested in other financial factors such as your income and ability to pay down your loan. If you have enough income to cover the financing costs of a car, then you are well on your way to getting approved.

3. Obtaining a personal loan

Another method of obtaining a car loan is applying for an unsecured, personal loan. When you obtain a personal loan, you can do whatever you’d like with the money you are provided with. The rate of lending in this case really varies, but again, the most important factor of approval is your ability to pay down the loan.

Many individuals also find it beneficial to finance their vehicles by leveraging their home equity. The fact is that home loans tend to be relatively cheap (they are handed out at very low rates), so using cash from a home equity loan or a second mortgage may often be a strategically advantageous move.


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Loans Canada and its partners will never ask you for an upfront deposit, upfront fees or upfront insurance payments on a loan. To protect yourself, read more on this topic here.