Minimum Requirements to Get Approved for a Car Loan with Bad Credit

Many Canadian car shoppers don't want to apply for auto finance if they think they might get declined. Maybe they have a low credit score, poor credit history, bad payment history such as having missed payments or even a bankruptcy in the past, or their financial health isn’t as strong as they would like it to be. Whatever the case might be, without the certainty of a car loan approval they don't want to waste their time with tedious paperwork if it's just going to end in disappointment. Fortunately, car finance is more accessible today than it's ever been. Even for those without a strong credit history.

Car loans are generally available from a financial institution (bank, credit union, etc.) or a car dealership. Canadians with less-than-perfect credit (also known as subprime credit) usually don't get approved for an auto loan through a major financial institution like a bank because banks don’t typically work with subprime car buyers (borrowers with a credit score below 650.)

Thankfully, some dealerships and retailers (like Canada Drives) are partnered with specialized lenders to make car loans accessible to all Canadians, regardless of their past credit problems. It’s never been easier to get approved for a car loan (even if you have bad credit).

What do you need to finance a car in Canada:

To finance a car in Canada, you’ll need to meet basic eligibility requirements such as being the age of majority in your province (18 or 19), having a valid Canadian driver’s licence, and being a resident of Canada. Lenders will also require documentation that proves your identity, income, and residency. This typically includes government-issued ID, recent pay stubs or tax documents to show steady income, a utility bill or lease to confirm your address, and sometimes banking details like a void cheque for automatic payments. Proof of insurance is also mandatory before you can drive the vehicle off the lot.

Financially, most lenders assess your credit score, employment history, and overall ability to repay the loan. A good credit score improves your chances of approval and can secure better interest rates and lower monthly payments, though there are financing options available for bad credit car loans. While a down payment isn’t always required, putting 10–20% down can help strengthen your application. 

Having access to more favourable financing options and a good down payment can dramatically increase your vehicle options and influence whether or not you can purchase a new car or a used car. If you have poor credit, a high debt to income ratio, or no down payment, you likely won’t be able to get approved for the newest luxury model; so it’s best to manage your expectations. It’s often best to think of a bad credit car loan as a tool to help you rebuild credit. Once you have a couple years of successfully making your monthly payments you will likely see your credit score rise, and will be able to trade in your “bad credit car” for something you are more excited about. 

Newcomers to Canada can also qualify for auto financing through specialized programs offered by many banks and dealerships, even without an established credit history.

What do I need to finance a car at a dealership?

To finance a car at a dealership you will need all the information and documentation mentioned above. While some dealerships will offer special financing options for bad credit, some will not. For those that do offer bad credit car financing they may require additional steps to get approved such as including a larger down payment, or adding a co-signer to the car loan application. They also may have limited inventory available that is suitable for subprime customers.

Getting pre-approved for financing before visiting a car dealership is the easiest way to avoid the agony of falling in love with a car only to find out you can’t get approved for the loan to purchase it. A pre-approval allows you to shop with confidence, knowing exactly what you can afford.

You can get pre-approved online for free with Canada Drives here. It only takes 3 minutes to fill out a simple application to see what vehicles you qualify for.

Are there bad credit car dealerships in Canada?

Yes, there are many bad credit car dealerships in Canada that specialize in helping people get approved for auto financing even if they have:

• Low credit scores
  
  
• Past bankruptcies or consumer proposals
  
  
• Missed payments or collections
  
  
• No credit history (e.g., students or newcomers)

These dealerships partner with subprime lenders or offer in-house financing ("buy here, pay here") to approve customers with less-than-perfect credit. They typically assess your income stability and ability to make payments more than just your credit score.

The easiest way to find a bad credit dealership near you is to complete a quick pre-approval application with Canada Drives. You can get pre-approved for your financing and get connected to the nearest bad credit dealer in your area. Canada Drives partners with reputable certified dealer partners so you don’t need to stress about whether or not the dealership can be trusted and you won’t get stuck overpaying.

Minimum car loan requirements for a Bad Credit pre-approval

To get pre-approved for a car loan online with a site like Canada Drives you will need to provide the following:

• Income requirement: $1,800 per month. We discuss more on income requirements below.
• Driver’s license: You must hold a valid driver’s license. In some instances, this can be a learner’s license.
• Age requirement: The minimum age is either 18 or 19 depending on your province.
• Current address: You will be matched by a car loan provider in your area.

Apply with Canada Drives today and we'll connect you with the best car deals in your area! 

What is the minimum income needed for a car loan?

In order to approve you for a car loan, some lenders will look at other factors besides your credit score, like your income. Typically, the minimum income for a person to qualify for an auto loan with low credit is $1,800 - $2,000 every month before taxes or deductions (i.e. CPP, EI, etc.).

To put your income requirements into perspective, here’s the breakdown:

Hourly Income:	At least $10.50 per hour for 40 hours per week, or equivalent
Weekly Income:	At least $420 per week (before deductions)
Bi-weekly Income:	At least $845 every two weeks (before deductions)
Twice per month:	At least $900 twice per month (before deductions)
Monthly Income:	At least $1800 per month (before deductions)

Credit Score Requirements

Thanks to the rise of specialized lenders, there is no minimum credit score to get a car loan. Banks may favour customers with good credit scores (670 and above), but a lender that specializes in subprime finance will look at your income and other factors alongside your credit report to determine your loan eligibility and rates.

But while your credit score may not be as important as it used to be for getting approved, the higher your 3-digit score is, the lower the cost of borrowing will be for you. Checking your credit report regularly will give you an idea of what loan products and interest rates are available to you, and is a great way to monitor your financial health. Furthermore, regular monitoring will help you ensure there aren't any costly errors on your file. You can check your credit score for free with Borrowell.

If you meet the income requirements mentioned above, visit Canada Drives to get pre-approved for free and see what great deals you're eligible for!

What if I don't meet the income requirements?

If you're struggling to get approved, don't forget to include government assistance (ODSP, AISH, etc.) in your application as it qualifies as income and can help you meet the minimum income threshold.

Document requirements

When you begin your car-buying journey, it's important that you have all of the documents ready to send to your dealer or bring with you to the dealership, including:

• Proof of income & employment history
• Driver's license
• Proof of insurance
• Vehicle documents for the trade-in (if you plan to trade in your existing vehicle)

If you’re applying for auto financing with no credit history, documents like bank statements, employment history and proof of paid bills such as phone statements or utility bills will show lenders that you’re responsible with your finances.

If you have a history of collections, bankruptcy, or a consumer proposal on your credit file, make sure you offer any paperwork associated with these to show lenders that you’re working on clearing the debt and paying back creditors.