Minimum Car Loan Requirements for People With Bad Credit

June 21, 2018

A lot of people email in asking us how to get approved for a car loan, car loan requirements, and how hard is it to get approved if they have bad credit?

When was the last time you requested a copy of your credit report? If you’re in the market for a new vehicle, checking your credit report from one of Canada’s major credit bureaus – Equifax or Transunion– should be the first step you take before starting the car buying process, especially if you plan to apply for auto financing. Your credit score is what lenders will look at before approving you for a car loan. Depending on your credit score and overall credit history, lenders can see how much of a risk factor you may be as a borrower, which will help a lender decide the amount of financing you’re eligible for as well as the interest rates and length of the loan term. A car loan can be attained from a financial institution, car dealership or third-party loan provider, and requesting a copy of your credit report before you begin the research process of buying a vehicle will help you better understand what kind of car and rates that you’re qualified to apply for.

The approval process for a car loan through your bank differs from a car dealership. Often, Canadians with less than perfect credit aren’t as likely to get approved for an auto loan through financial institutions as banks don’t typically work with subprime car buyers – borrowers with a credit score below 670. Thankfully, car dealerships today can work with Canadians facing all types of credit situations. It’s never been easier to get approved for a subprime car loan with great rates and low monthly payments. However, alongside requesting a copy of your credit score, there are some minimum requirements that Canadians should be aware of before entering the financing process as a subprime buyer.

Minimum car loan requirements

Aside from your credit report, and income information, you will need the following:

  • Driver’s License: You must hold a valid driver’s license. In some cases, this can be a “learner’s” license.
  • Minimum Age: The minimum age is either 18 or 19 depending on your province.

What is the minimum income needed for a car loan?

If you’re applying for financing as a subprime customer, your credit history is a crucial factor for lenders who are considering whether you’re eligible or not. If you’re consistent at making your loan payments on time and in full each month and have an income of at least $1,800 per month before any deductions or taxes are taken off, lenders will generally see you as a responsible borrower and will approve you with great rates. However, not all Canadians have a healthy credit history and make under the recommended monthly income amount.

Here’s a quick breakdown of the minimum income requirements for a car loan, depending on how you get paid:

  • Hourly: At least $10.50 per hour for 40 hours per week, or equivalent.
  • Weekly: At least $420 per week (before deductions).
  • Biweekly: At least $845 every two weeks (before deductions).
  • Twice per month: At least $900 twice per month (before deductions).
  • Monthly: At least $1800 per month (before deductions).
Canada Drives can work with people in all types of credit situations, including those that make under the minimum requirement or have defaulted on a loan in the past. Visit Canada Drives right now to fill out our preapproval application for free and to see what type of vehicle and rates you could be approved for.

Credit score requirements

There is no minimum credit score to get a car loan... Banks tend to favour people with good credit scores, but a lender that specializes in subprime finance will look at your income, monthly payments, and credit report overall to determine your creditworthiness.

A subprime lender will depend more on your income if your credit history isn't good.

Canada Drives can pre-approve people in any credit situation by understanding exactly what a buyer can afford to get approved for. (Yes, even if your credit score is in the 300's).

What does you credit score mean

Document Requirements

When you begin the car buying process, it's important that you have all of the documents prepared before you visit the car dealership, including:

  • Proof of income and employment history
  • Driver's License
  • Proof of Insurance
  • Vehicle Information and/or Trade-in Documentation

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 managing your money.

If you do have a credit score and it’s considered to be subprime, ensure that documents like your driver’s license and proof of insurance aren’t expired and you have them readily available – this will also show lenders that you’re organized and prepared for a smooth process.

If you have a history of collections, bankruptcy, or a consumer proposal on your credit file, make sure you’re bringing in all of the paperwork associated with these to show lenders that you’re working on paying down debt and paying back creditors. If you’ve recently defaulted on a loan and you haven’t started rebuilding your credit file, you might want to work on getting your finances back on track before starting the car buying process – this will give you an opportunity to save money, pay back debt, and get better rates for vehicle financing in the future.

Where to start?

Canada Drives works with hundreds of Canadians every day, ensuring they get quality vehicles with ease and simplicity, regardless of their credit score. We also provide Credit Building Loans to help you get back on track. Getting approved for auto financing with bad credit can take several days, and even weeks, but Canada Drives’ dealer partners work hard to get applicants the best vehicle and financing options fast. If you need an affordable vehicle and want to rebuild your credit, apply now with Canada Drives.


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