Unless you are fortunate enough to already have the cash for a new car, you are most likely looking for ways to ease the financial burden of upgrading your vehicle. Car loans are an easy way to ensure you can get the vehicle you need without having to have the money there and then.
Below, we have looked at some of the basics of car loans to help you get to know how they work and what you need to be able to get one. Read on now to learn more.
So, What Are Car Loans?
A car loan is similar to a personal loan, except you borrow money from a lender to purchase a vehicle and cannot use the money elsewhere. Car loans are particularly useful nowadays as the prices of new and used cars have skyrocketed. Borrowing from a car finance and loan company in Markham can help you to spread the cost so you can more easily afford a new vehicle.
How Can I Get a Car Loan?
You can get car loans from many places including banks, car dealerships, credit unions, and third-party lenders. You can also find lenders who deal specifically in car loans.
As with personal loans, to get a car loan you will have your credit score checked and your financial situation will be assessed to ensure you are able to pay the loan back. With car loans, the condition of the vehicle will also be taken into consideration. You may find that older vehicles, where the resale value will decrease with time, will incur higher interest rates.
How Interest On Car Loans Works
The interest rate of car loans is designed to offset the risk of lending money to the borrower. Your interest rate will be heavily dependent upon your credit score as this tells the lender how you manage your financial situation and how you have made repayments in the past.
Those with good incomes and high credit scores are more likely to get better interest rates on car loans. In addition, longer-term loans tend to incur higher interest rates, which is something to consider when looking at car loans. Currently, car loans can range from 0 to 49.96 years if you go through a dealership.
For car loans, the type of vehicle you are buying may also have an impact on the interest rate you are offered.
Requirements for Receiving a Car Loan
There are some requirements that you must meet to be pre-approved for a car loan.
These are as follows.
- You are aged at least 18 or 19 years old (the legal age is different in some provinces, so your location will be taken into account)
- You are a Canadian citizen or permanent resident
- You have a valid Canadian driver’s license (note: some lenders may accept a learner’s license)
- Proof of insurance
- A minimum monthly income of $1,800 (note: this can be supported by a co-signer)
- Proof of income
- Two years worth of tax returns
It is important to note that being pre-approved doesn’t mean you will definitely get the loan. Instead, you will have to fill out the application for the car loan with the lender and wait for approval.
What Is the Credit Score I Need in Order To Receive a Car Loan?
Generally, you need a credit score of at least 650 to find a car loan with good interest rates, however, you may be able to get a loan with a lower score if you are willing to pay higher interest rates.
What if I Have Bad Credit or No Credit? Can I Still Get a Car Loan?
If you have bad credit, it doesn’t necessarily mean you will never get a car loan. There are lenders who will give loans to those with bad credit and if you shop around you will be able to find a suitable option.
How to End a Car Loan
Whether you’ve decided you want a new car, or you just don’t like the idea of a loan hanging over your head, there are a few ways that you can end a car loan in Canada.
Making a lump sum payment
– This is the easiest option but obviously requires you to have the money available. You will need to contact your lender to request a payoff quote and you usually have a limited time to pay this amount. Don’t request this from your lender until you have the money ready as you may breach protocol if you don’t pay it within their timeframe. Some lenders add penalties for early payoff into their contracts so it is worth checking yours first.
Trade in your car
– If your loan is exceeding your budget, you could trade your car in with a dealership to one that is more affordable. The dealership will likely give you enough for your car to pay off your loan.
– Sometimes, you may wish to keep the car but reduce the monthly payment. If you have improved your credit score since you got your loan, you may be able to get a better interest rate or extend the term of the loan to make it more affordable for you.
Sell your car privately
– This is another way that you can raise enough money to pay off your car loan. You may even be able to transfer the loan to the new buyer if your lender agrees.
Want To Buy a Used or New Car and Need a Loan? Call Car Loan Masters!
Are you looking for a car loan? Whether you have bad credit or you just want a quick approval process, Car Loan Masters is here for you. We can have you approved in under twenty minutes and won’t let bad or no credit stop you from being able to buy your new car.
Get in touch now to find out more about how we can help.