Car loans allow buyers to spread the cost of a car into monthly installments, making it more financially viable for people to upgrade and replace their old cars. You can get car loans from many places, including banks and car dealerships, and they cover both private and commercial auto sales. But how do you go about getting a car loan in the first place?
Below, we’ve looked at how to get approved for a car loan, including the requirements for approval and what to do if you are not approved. Read on now to learn the facts.
What Are the Minimum Car Loan Requirements in Ontario?
Any type of loan that you take out will come with some requirements and it is the same for car loans. The minimum requirements include a minimum income, a good credit score, and a number of documents that prove you’re old enough and insured to drive.
We’ve broken down each of the requirements below to make it easier for you to understand.
Car loans have a minimum income requirement to ensure that you have enough money coming in each month to make your repayments. Some lenders may require a higher or lower income, but the typical figure is $1,800 per month before taxes or deductions.
This translates to:
- $10.50 per hour for at least 40 hours a week
- $420 per week
- Or, a bi-weekly income of at least $845
It is important to note that government assistance also counts as income and should be included in your application for a car loan.
Credit Score Requirements
The lender you choose will impact the degree to which your credit score affects your approval chances. Banks and more traditional lenders usually require prospective borrowers to have a good credit score of more than 670. However, there are many specialized car loan lenders around these days that will allow borrowers to take out a car loan even with a bad credit score.
Be aware that if you have a low or no credit score, you may end up paying higher interest rates so that lenders can offset the risk of the loan.
Documents You Will Require
Along with income and credit score requirements, you will also need a few documents to be able to get approved for a car loan. These include
- Proof of income as well as employment history
- A driver’s license (note: some lenders will accept learner’s licenses too)
- Proof of insurance
- Documents pertaining to the trade-in of a vehicle if you are trading in your old car at a dealership
You will also need to be at least 18 or 19 years old to get approved for a car loan. Different provinces have different age requirements so it is best to check with your local government website to be sure.
What If I Don’t Get Approved For a Car Loan
There are many reasons you may have been rejected for a car loan, including bad credit, sporadic income, or an incomplete application. Don’t be perturbed if you get rejected as there are many different options to try.
To begin with, you should find out why you were rejected. If it is a case of an incomplete application, make sure you are fully prepared and have met all of the document requirements the next time you apply.
If you were rejected for bad credit, you could opt for a less traditional lender. You could also ask a trusted friend or family member with a good credit score to be your co-signer for a car loan. This helps boost your chances of approval.
If you can’t find someone who is willing to do this though, it may be a case of waiting until your financial situation has improved before trying again.
Are You Looking to Get a Car Loan in Ontario? Get in Touch with Car Loan MAsters Today!
Have you been struggling to get approved for a car loan in Ontario? Why not check out Car Loan Masters today? We offer car loans even for those with no or low credit and we can have you approved in as few as 20 minutes. Reach out to our specialists today to find out more.