A car is a significant investment; it requires consideration, planning, and of course, saving!
It’s no surprise that something as valuable as a car costs a lot, even if it’s used. In today’s economy, taking out a car loan is not uncommon. However, a car loan has some prerequisites that you need to meet to qualify for the loan. Like most loans, the primary concern is your credit score.
A low credit score is often a point of concern for lenders with a minimum credit score set for people to qualify. If you don’t qualify, you fall into the categories of nonprime, subprime, or deep subprime borrower. These borrowers pose higher risks to lenders, and they’re typically less likely to give them a car loan.
Still, there are ways you can qualify for a car loan even if your credit score is less than ideal. Your credit score is not the only factor that comes into consideration, and there are ways you can go around it. We’ve got all the advice you need right here.
If you’re looking for used car financing in Calgary, here are six pro-tips to getting a car loan with a low credit score.
Tips to Get a Car Loan with a Low Credit
The first thing you need to do is check your credit score and figure out how you can make impactful improvements to it. This includes paying off your bills as soon as you get them, if possible. If that’s not possible, try to do it within the deadline. Another great way to improve your credit score is to pay off any debts you may have.
These both work in favour of your payment history and credit utilization ratio. Paying off debts also improves your financial standing, leaving you with money to spend on a car without feeling guilty for not paying back your loans.
Know Your Budget
After you’ve laid the groundwork for a car loan, such as doing the math with your credit and making any improvements, you can move on your budget. Set a budget for yourself that is reasonable and within your financial limitations. When determining a budget, consider the sum you need to put down as a down payment on your car.
Also, consider whether you can afford a brand new car or a used car in Calgary. Used cars are much more affordable and much easier to pay off. Additionally, you can look closely at your car’s monthly and annual expenses and pick a vehicle accordingly.
When buying a car through a car loan, you will typically have to pay a down payment on your vehicle. The bigger the down payment amount, the smaller your loan will be, and therefore the easier it will be to pay off. A large down payment also gives the car loan lender a better impression, making them more likely to grant you the loan.
A loan pre-approval is when a lender examines your financial records and credit score and tells you how much of a loan you qualify for. The loan you are eligible for is the budget you can set for your car, making it easier to pay off in the long run. Trust us, you don’t want to have a low credit score that goes even lower as you struggle to pay off your car down the line.
There are numerous used car dealers in Calgary; some may grant you a loan, some may not. They all have different benchmarks and standards for loans, so you need to do your research beforehand. After all the finances are figured out, you can look around for lenders to help you qualify. There are lenders out there that specifically work with people with low credit, so it’s smooth sailing if you can find one.