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Getting a Car Loan Without a Cosigner in Canada

Getting approved for a car loan in Canada with bad credit and no cosigner isn’t easy, but it isn’t impossible either. Reviewing your credit report, saving money for a down payment and exploring different lenders could help you get approved for a car loan with low interest rates and affordable payments.

Applying for a car loan with no or low credit isn’t the easiest of processes, especially if you’re requested to apply with a cosigner. A cosigner is a person who is obligated to pay back your loan if you fail to make payments. The myth is that unless your credit score is good, and you make a solid income, lenders won’t typically approve your application unless it’s signed with a cosigner. A cosigned application is confirmation to lenders that the loan will be paid off whether it be by the actual borrower, the person using the vehicle, or the cosigner who pledges to pay if anything happens. Cosigners on car loan applications are almost always good friends of or family members with the borrower. However, not all borrowers with no or low credit can apply with a cosigner, and often borrowers don’t want to – they don’t want to put their financial responsibility on the back of someone else, especially because a cosigner’s credit is at risk.

Although cosigners can strengthen an application, it’s not an option for everyone. The good news is that there are options available for Canadians with no or low credit who need vehicle financing but don’t want to apply with a cosigner. When you apply for an auto loan and are told you don’t qualify because of less-than-perfect credit, it’s the lender who says you need a cosigner. Thankfully, there are tons of lenders in Canada who work with credit-challenged Canadians. You just need to know where to find them.

Canada Drives is an online auto financing company that is partnered with hundreds of lenders who specialize in working with no or low credit profiles. If you need an auto loan but don’t have or want to use a cosigner, do some research on financing institutions like Canada Drives, and take these three pieces of advice to increase the chances of approval:

  • Review your credit report – Do You Even Need a Cosigner?
  • Consider increasing your down payment
  • Make sure you have a steady income 

1. Review Your Credit Report – Do You Even Need a Cosigner?

Lenders review an applicant’s credit history to see how much of a risk factor they are. Typically, if an applicant has a credit score less than 500, lenders won’t approve the application unless a cosigner with great credit standing and a steady income pledges to be held liable if any faults are made. Knowing what your credit score is and becoming familiar with your credit history will help you better understand what you can qualify for. It will also help you navigate what lenders you should be shopping. If a lender isn’t confident in your credit score and unwilling to lend, having an archive of lenders who work with bad credit customers on the back-burner will help you find the best rate possible, cosigner free.

If you see that your credit score is suffering, it’s worth working on improving it. Although credit rebuilding takes time, regardless of the situation that you’re in, it’s possible to do. An option for Canadians who want to rebuild their credit score is to take out a secured loan. These types of loans can help build credit fast. If you see any errors on your credit report, make sure to report them to Canada’s major credit bureaus, Equifax and Transunion. The quicker you get errors removed, the faster your credit score will boost. Copious amounts of debt could also turn away a lender. Minimizing the amount of money that you owe before applying for a car loan will show lenders that you’re in good financial standing and it could also boost your credit score.

2. The Larger the Down Payment, the Better

A down payment isn’t an option for everyone, but if you’re applying for a car loan with bad credit and without a cosigner, it makes the world of a difference. The bigger the down payment the better, but even $500 can lower your interest rates and increase your chances of getting approved. It doesn’t hurt to calculate the difference between loan amounts and monthly payments to figure out the amount of down payment you should make. Attaining a car loan without a cosigner and bad credit isn’t attractive to lenders, but with a decent down payment and the right lender, it’s possible to get approved with great rates. The more cash you have, the more likely you’ll be approved. Pick up an extra side job or do some freelance work to save for as big of a down payment as possible – this will show lenders that you’re committed to paying back the loan and it will also reduce your risk as a borrower.

3. Your Current Employment Could Make it or Break it

Typically, auto loan programs that don’t require a cosigner, request to see proof of income before approving an applicant. Lenders need to see how much money applicants earn each month to decide if they can afford an auto loan. More money in the bank and a bigger paycheque makes a stronger case for you to handle car loan payments each month. Minimum requirements for car loan applications are that you make $10.50 an hour working full-time or equivalent. This works out to roughly $1,800 a month (before all the taxes and deductions are taken off). As a salary, this minimum is roughly $21,600 annually. Although you can get approved with less income, meeting these income requirements will give you the best chance of being approved on your own. The less your income will be eaten up by loan payments, the more likely you’ll get approved for an auto loan without a cosigner.

The best thing to do when you’re applying for a car loan in Canada with bad credit and no cosigner is to be 100% HONEST when working with a high-risk lender. When you’re filling out your credit application, input the information truthfully and answer each question thoroughly. Chances are lenders see you as a risk already and lying on your application will make the situation worse. Remember – there are millions of Canadians in your exact situation! Not everyone has established credit or family and friends who are willing to cosign. Review your personal credit report, save your cash and find the best lender before agreeing to any terms. Click here to apply with Canada Drives for free right now to see what you could be approved for!


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