Bad Credit Car Loans

Bad Credit Car Loans

Written by Kale Havervold
Fact-checked by Caitlin Wood
Last Updated November 3, 2021

Having a car or any kind of vehicle is a requirement for most people, especially if you have a family or a job that requires you to commute a long distance. While it’s completely possible to save enough money to buy a car outright, most people need to get an auto loan to pay for it. Most people 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.

How to Look For a Car Loan When You Have Bad Credit

Having bad credit can make tasks like finding a car loan seem impossible, but it doesn’t need to be. If you have bad credit and are just starting the financing process, prioritize the following to help make the process as smooth as possible.

Make Sure Your Finances Are in Order

The first thing you should do before you start looking for an auto loan is to check out your own financial situation thoroughly. Are you making enough on a monthly basis to cover the cost of a car loan? Do you have any other debt that might get in your way? Do you have an adequate down payment

In addition to these important factors, make sure that the smaller details are also in order. For example, that you’re up to date with your credit card payments, that your bank account can handle automatic payments and withdrawals, and that you have any documentation ready.

Check Your Credit Score and Report

Having a good understanding of where you stand financially will make negotiation your auto loan much easier. This means you should request a copy of your credit report. If you think you have a low credit score but don’t know exactly what it is, you might end up paying too much for a car because you think it’s the best deal you can get. Don’t let car dealerships take advantage of you.

Once you get your credit report you should look over it and double-check that all of the information is actually correct, don’t simply trust that it’s right. It’s possible that an error on your credit report could be making your credit score lower than it should be. Give yourself at least a month between when you request your credit report and when you want to start looking for a car, that way you’ll have plenty of time to fix any mistakes. 

Find The Right Lender

Unfortunately, if you have bad credit, not all lenders will want to work with you. This is why it’s important for bad credit borrowers to search for a variety of different lenders and loan types to find one that best meets their needs and that they are comfortable working with. 

Auto Financing 101

Options For a Car Loan if You Have Bad Credit

The good news is that when it comes to finding the right car loan, regardless of whether or not you have bad credit, you have multiple options. Below are some of the best sources for bad credit car loans in Canada.


Most of the time, banks may not be able to give you a loan if you have bad credit, but it is worth a try. Try reaching out to the banks and credit unions in your area. Plead your case as to why they should approve your request for a car loan. While the results might not be fruitful, at least you’ll be exercising all your options.

The Dealership

One of the most common places for people with bad credit to look for car loans is the car dealership itself. Dealerships are often willing to work with everyone and there is a good chance they can help get a deal done. However, some dealerships might look to take advantage of you because of your bad credit, so it is important to be mindful of the deal they are giving you and if you can, shop around to make sure you aren’t being ripped off.

Private Lender

If the dealership isn’t willing to work with you or won’t give you an interest rate or deal that you feel is fair, it might be a good idea to go the private lending route. There are hundreds of options for private loans out there, but of course, these can often be riskier than getting a loan from an established company, website, or dealership. It is important to do extensive research on the lender if you decide to get a car loan from them.

So, now that you know some of the options available to you when you have bad credit and need a car loan, let’s look at some tips to help you get the best deal possible and make the process as easy as you can.

Considering purchasing a used rental car? Read this first.

Bad Credit Loan Providers in Canada

AmountInterest Term(Months)
Loans Canada Logo - Bad Credit Loans Canada$500 - $50,000Up to 46.96%12 - 84Learn More
Canada Drives$500 - $35,000$29.99% – 46.96%9 - 60Learn more
SkyCap Financial$500 – $10,00012.99% – 39.99%9 - 36Learn more
Carloans411$5,000 - $40,000Varies12 - 72Learn more
Car Loans Canada$7500 - $59,9953.95% +12 -96Learn 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
SafeLendUp to $50,0008.99% +12 - 72Learn more

Tips for Getting a Car Loan With Bad Credit

Be Positive and Do Your Homework

If someone or some company tells you that your credit is bad, try your best to remain positive and not let that idea get you down. The first thing you should do is check for yourself by getting your credit score and credit report. Plus, every lender has different rules and regulations for what is considered “bad credit”, so do your homework. If things indeed aren’t looking good, that’s okay. As we said earlier, there are still many options out there that you can explore.

Shop Around

This is an important point and is one of the best ways that you can go about getting a good rate. As you saw above, there are many potential options for you, and it couldn’t hurt to look around and consider them all. The more places you look, the better you will understand the type of rate you will be able to get. Also, be aware if something is too good to be true, it usually is.

Don’t Go At It Alone

It is also a good idea to bring a friend or family member with you on your journey to find the best car loan. Not only is this a very stressful time, but the second set of eyes can help when it comes to finding the best deal. One on one chats with the salesman or agent can also be intimidating to some, so there is nothing wrong with bringing someone along to help you feel more confident.

Look at the Terms of the Loan, Not Just the Monthly Payment

When people get a loan, they can have a tendency to just look for the best and most attractive monthly payment. However, this is not always a good idea. Looking for things like overall interest rate and the term length are often a better idea than just looking at the payment. Smaller payments could still end up costing you much more in the long run than larger payments. For example, car loans with shorter terms are often cheaper than longer ones, even though the monthly payments will likely be a little bit higher. While the monthly payment is important, of course, it is not the only thing that you should consider when shopping for the best loan.

Read Through the Loan Contract Before Signing It

As with any contract, you should be sure to read it over before signing or agreeing to anything. However, this goes double with car loans when you have bad credit. Your contract could very well be stuffed with useless extras to lure you into a deal that’s actually too good to be true. Many borrowers experience this issue because they’re so desperate to get their car loan, that they don’t read their contract thoroughly. If your loan is contingent on paying for such add-ons, you should find another option.

Know What You Can Afford

With all of these options available to you, even with your bad credit, it can be tough to hold back and not get crazy with how much you borrow. However, it is always important to keep your budget in mind. Don’t overestimate what you can afford in terms of a car and always be sure to only take on monthly payments that you think you can handle for a long period of time.

New vs. Used Cars

How to Save on Your Bad Credit Car Loan

Unfortunately, if your credit score is low you’ll probably have to pay an above-average interest rate. But, simply because your credit score is low doesn’t mean that you’ll have to bankrupt yourself trying to keep up with your car loan payments. Here are a few tips to help you save some much-needed cash on your auto loan.

Go With a Shorter Term

You might be tempted to choose a 5-year term for your auto loan because you believe that you’ll need more time to pay it off, but what you should do is choose a 3-year term. Most of the time 3-year terms will come with lower interest rates and you’ll be saving on interest because you’ll be paying it off quicker.

Is a 0% car loan ever a good idea? Find out here

Consider a New Vehicle

If you can, choose a new vehicle to buy as they usually come with a less expensive loan. Obviously this is not always an option for some as the interest rates for a new car might be lower but the price will definitely be higher. If you find a great deal on a used vehicle, weigh the pros and cons and don’t hesitate if it’s the best deal for your situation.

Get The Basic Model

Your dealer will most definitely try to get you to buy all kinds of add-ons and extras for your car, explaining that you’ll only have to pay a few extra dollars each month. Don’t be fooled, if you’re trying to save money on your car then stick to your original plan. Those few extra dollars each month will start to add up and your payments might become too expensive.

Consider a Private Loan

Just because you have a low credit score doesn’t mean you need to get financing from a dealership. In fact, you’ll probably be able to get a better deal from a private lender. Private lenders are able to offer personalized offers for the consumers they work with, making it easier for bad credit consumers to get approved.

Bad Credit Auto Loan Traps to Avoid

Because your credit score is low your dealer might try and take advantage of you because they know that you’re more desperate to be approved than someone with a slightly higher credit score. Here are some auto loan traps that you should be aware of so that you can avoid them when shopping for an auto loan.

  • Markups: The most common and probably most obvious of traps, loan markups. Your dealer will definitely 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.
  • Yo-Yo financing: This is when your dealer allows you to take home the vehicle you’ve chosen before you’ve been officially approved for a loan and then calls you back a few days later and explains that your loan application has been rejected. They’ve now trapped you in with a new price and a new interest rate knowing that you’ll most likely pay whatever they ask you to.
  • “Buy here, pay here”: These types of dealers will offer you a loan no matter what your credit history or score is. While this might seem like exactly what you need, there are some cons that can end up costing you. Not all “buy here, pay here” dealerships are bad but you should do your research and know what kind of interest rate you can qualify for ahead of time as they might try and scam you with an incredibly high one.

Getting The Right Bad Credit Car Loan

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 own financial situation and you should be able to get the car you want and need.

In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post,, and Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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