If you are in the market for a new car but you are concerned about your credit history, you are not alone. Tens of thousands of Canadian consumers actively seek auto loans with bad credit. Fortunately, there are several ways to go about getting them.
Consider a Co-Signer
If you have bad credit, getting a loan from a traditional lender for an automobile can seem difficult. However, if you have someone who is willing to co-sign your loan, you may be in luck. Many lenders will consider your credit history too risky alone, but if someone who has good credit is willing to put his or her own credit on the line for you, then you may be able to get your loan. Finding a co-signer might be difficult, though; asking your family members for help is a great option. Remember that they will be responsible for making your payments if you default on your loan. Over time, your timely payments will even improve your credit rating.
Purchase on a Contract
Another option for buying a car with bad credit involves a contract sale. Sometimes people are willing to sell their cars to you with an agreement that you will make monthly payments (with or without interest) until you have paid the entire balance. There is no real standard here; because the seller is essentially the financier, he or she will hold the title in his or her name until you have paid the balance of the car in full. It is possible to draw up legally binding contracts that hold the purchaser and the seller to their word, making the sale final.
Check with Used Car Dealerships
Oftentimes, used car dealerships will cater to individuals who have less than perfect credit. Rather than asking you to pay the entire value of a car up front, they will ask for a moderate down payment of about 10% to 20% of the total value of the car, and then allow you to make weekly or monthly payments on the remaining balance. While some of these dealerships will not charge you traditional interest, they may tack on $1000 or more to the value of the car to help them mitigate their risk. You are legally responsible for paying that balance in full once you sign the contract, regardless of what happens to the car. If it breaks down or is in a wreck, it is still your responsibility.
Improve Your Credit
Finally, the best way to get an auto loan with bad credit is to repair your credit over time. While this option is not right for everyone, especially if you need a car right now, it can help you enjoy the best prices and lowest interest rates available. Debt management services exist, and sometimes improving your credit is as simple as finding and resolving discrepancies on your credit report. Often, if you have outstanding credit, you can purchase a brand new car with 0% financing over a period of three to five years.
To repair your credit, obtain a copy of your credit report and work to negotiate settlements for all of your outstanding debts. Although it may take some time, it is better for you in the long run – and it will undoubtedly save you money while opening up a new world of possibilities.