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Bad Credit Car Loans in Alberta

Photo of the government building for Alberta who offers bad credit car loans

Finding reliable transportation is crucial for most Albertans to get to work, run errands, and take care of their families. But for the estimated 30% of Canadians with bad credit, getting approved for an auto loan can seem next to impossible.

Lenders view borrowers with low credit scores as “high-risk,” making them hesitant to approve loans. While this can create major obstacles for Alberta drivers with poor credit, there are ways to get financing and find bad credit car loans if you know where to look.

This guide will walk through everything you need to know about overcoming credit challenges and finding bad credit auto financing in Alberta. You’ll learn how credit scores work, tips for improving yours, and how to find lenders willing to work with bad credit borrowers.

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What is Considered Bad Credit?

In Canada, credit scores generally range from 300 to 900 points. The score is calculated based on your credit history, including payment history, amounts owed, length of credit history, new credit, and credit mix. The higher your score, the better your credit rating. Anything below 660 is usually considered bad credit by most lenders. Here’s a quick overview of the credit score ranges:

800-900 (Exceptional) – You have an exceptional credit history and lenders consider you very low risk. You’ll have access to the best interest rates and loan terms.

740-799 (Very Good) – Your credit history is excellent and you are seen as a very reliable borrower. You’ll qualify for great rates from most lenders.

670-739 (Good) – You have a good credit rating that shows responsibility. You may get approved for most loans and credit cards with good rates.

580-669 (Fair) – Your credit score is below average and indicates some past issues or lack of credit history. You may face higher rates or difficulty getting approved.

300-579 (Poor) – This is considered bad credit and will make it very challenging to get approved for new financing. You’ll likely pay much higher interest rates if approved.

So if your credit score falls in the poor or fair ranges, you are generally considered as having “bad credit” when it comes to applying for loans, mortgages, credit cards, and other financing. The lower your score, the harder it will be to get approved or find favourable rates.

 

Why Bad Credit Happens

There are many potential reasons why someone may end up with a low credit score or bad credit history. Some common causes of bad credit include:

 

Job Loss

Losing your job can quickly lead to missed payments and mounting debt, especially if you are unable to find new work right away. The loss of income makes it difficult to keep up with bills and loan payments, which can cause accounts to become delinquent and hurt your credit score.

 

Medical Bills

A major illness or medical emergency can result in large medical bills that may be difficult to pay off all at once. Unpaid medical bills can go into collections and show up on your credit report, dragging down your credit score.

 

Divorce

A divorce can wreak havoc on finances, especially if assets, debts and bills are not properly divided. Accounts shared with an ex-spouse may end up with late payments or go into collections, damaging credit.

 

Poor Money Management

Lack of budgeting, overspending and taking on more debt than can reasonably be repaid can lead to missed payments, maxed out cards and other credit score reductions over time.

 

Lack of Credit History

If you have no credit history, it can be just as damaging as having bad credit. Lenders want to see you have managed credit responsibly in the past before approving new credit.

Having bad credit can happen to anyone. But being aware of the common causes and taking steps to improve your credit can get you back on track.

 

Challenges of Getting a Car Loan with Bad Credit

Getting approved for an auto loan with bad credit can be very challenging compared to someone with good credit. Here are some of the main difficulties you may face:

Higher interest rates – Lenders see those with poor credit as riskier borrowers, so they will charge significantly higher interest rates to offset that risk. Expect to pay interest rates from 15-30%, compared to around 5% for good credit.

Lower loan amounts – Since lenders view bad credit applicants as riskier, they will also limit the amount of money they’re willing to loan. So you may only get approved for $5,000 – $10,000 versus over $20,000 for good credit.

Difficulty getting approved – With a subprime credit score, many lenders won’t even consider your application. You’ll have a much smaller pool of lenders willing to work with bad credit at all. And of those, approval is never guaranteed.

 

How to Improve Your Credit Score

Improving your credit score takes time and discipline, but it can be done. Here are some tips to help raise your score over time:

 

Pay All Bills on Time

Payment history makes up a significant portion of your credit score. Set up reminders for bill due dates, automate payments, and avoid late fees whenever possible. Even a 30-day late payment can drop your score dramatically.

 

Lower Your Credit Utilization

This measures how much of your total available credit you are using. Try to keep it below 30%, as higher percentages hurt your score. Pay down balances and consider requesting credit limit increases.

 

Avoid Applying for New Credit

Each application results in a hard inquiry on your report that can lower your score temporarily. Only apply for credit when absolutely necessary while trying to improve your score.

 

Correct Errors on Your Credit Report

Dispute any inaccurate or unverified information with the credit bureaus to maximize your score. Stay on top of your reports and address issues promptly.

 

Consider Becoming an Authorized User

You can benefit from another person’s strong payment history if they add you as an authorized user on their credit card account. Just make sure they use the card responsibly.

With diligence and patience, you can rebuild and improve your credit over time. A higher score will open up better loan options in the future.

 

Getting an Alberta Bad Credit Car Loan

If you have bad credit, getting approved for an auto loan in Alberta can be challenging but is certainly possible. Here’s what lenders look for when approving bad credit car loans in Alberta:

 

  • Income – Lenders want to see that you have a reliable source of income to make the monthly payments. Bring recent pay stubs.
  • Down payment – The more money you can put down, the better. Ideally 20% or more of the vehicle’s value.
  • Co-signer – Having a co-signer with good credit will improve your chances of getting approved.
  • Trade-in – Using an existing paid-off vehicle as a trade-in can lower the amount you need to finance.

 

When applying for a bad credit auto loan, make sure to have these documents ready:

 

  • Valid driver’s license
  • Proof of income – Pay stubs, tax returns, etc.
  • Proof of residence – Utility bill, bank statement, etc.
  • List of references – Friends or family who can vouch for you
  • Down payment in cash, certified check, or debit card

 

Tips to improve your chances of getting approved:

 

  • Improve your credit score – Pay down debts, dispute errors on your credit report
  • Lower the amount financed – Put more money down, choose a less expensive vehicle
  • Add a co-signer – Find someone with good credit to co-sign the loan
  • Provide proof of income – Lenders want to see you can afford the monthly payments
  • Offer collateral – Pledge property or assets to secure the loan

 

With the right preparation and documentation, you can get approved for a bad credit auto loan in Alberta despite past credit challenges.

 

Types of Bad Credit Car Loans in Alberta

There are a few different types of auto loans available for those with bad credit in Alberta. The main types include:

 

New vs. Used

New car loans typically require better credit than used cars. That’s because new vehicles depreciate quickly, so lenders want to mitigate their risk. Used cars tend to hold value better, so lenders may be more flexible with credit requirements. However, interest rates are usually higher for used cars.

 

Secured vs. Unsecured

A secured loan requires collateral, like the car itself, to secure the loan. The lender can seize the collateral if you default. An unsecured loan doesn’t require collateral. Secured loans are easier to get with bad credit, but unsecured loans don’t put your assets at risk if you default.

 

Lease vs. Financing

With a lease, you only pay for the vehicle’s depreciation during the lease term. Financing means you’re loaned the full purchase price. Leases usually have lower monthly payments but require better credit. Financing may be the only option with very poor credit.

When you have bad credit, it’s important to weigh the pros and cons of each type of auto loan to find the best option for your situation.

 

Finding the Right Bad Credit Lender

When looking for a bad credit auto lender, it’s important to find one that will work with your unique financial situation. The right lender for bad credit borrowers will offer reasonable interest rates, flexible loan terms, and low fees. Here are some tips for finding the best lender:

Check interest rates – Lenders that specialize in bad credit loans may charge higher interest rates to offset the risk of lending to borrowers with poor credit. However, interest rates can vary significantly among subprime lenders. Shop around and compare rates to find the most competitive interest rate for which you qualify. Just a few percentage points can make a big difference over the life of the loan.

Look for low fees – In addition to interest, lenders may charge origination fees or administrative fees. Ask about all costs associated with the loan. Avoid lenders that nickel and dime you with lots of extra fees.

Seek flexible terms – Since your finances may be tight, look for a lender that offers flexible loan terms to fit your budget. This may include options for longer loan repayment terms or stepped increases in payments over time.

Read reviews – Check online reviews and the Better Business Bureau to evaluate customer satisfaction and complaints about potential lenders. This can help identify reputable lenders who will work constructively with borrowers having credit troubles.

Taking the time to find the right bad credit auto lender can make it more likely you will get approved and set up with a loan you can realistically manage. Compare multiple lenders to find one that offers the best loan terms and payment options for your situation.

 

Dealerships That Work with Bad Credit

Several dealerships across Alberta have programs designed specifically to help those with bad credit get approved for a car loan. Here are some of the top options:

 

Northside Mitsubishi

Located in Edmonton, Northside Mitsubishi states that they are willing to work with all types of credit situations. Their bad credit financing team will work to find a solution for those with poor or no credit history.

 

Wheaton Honda

Wheaton Honda in Edmonton, AB has an automotive credit rebuilding program. They partner with lending institutions to help people with bad credit or no credit rebuild and establish credit with an auto loan.

 

Crosstown Auto Centre

This Edmonton dealership says bad credit is nothing to be ashamed of. Their financing team works hard to get approvals for bad credit customers.

 

Royal Oak Nissan

Royal Oak Nissan in Calgary believes everyone deserves a chance at an auto loan. They have special financing options for those with poor credit.

 

Ez Car Credit

Ez Car Credit is located in Calgary and approves bad credit customers every day. They understand the challenges faced by those with poor credit histories.

 

Davis Chevrolet

For residents in the Calgary area, Davis Chevrolet in Airdrie approves bad credit car loans. Their financing team helps people get the vehicles they need.

 

Alternatives to Dealerships

While dealerships are a good option for Alberta bad credit car loans, those with poor credit have alternatives as well. Dealerships aren’t always willing to approve those with damaged credit, but other lenders may be more flexible.

Some options besides traditional dealerships include:

 

Credit Unions

Credit unions are member-owned financial cooperatives. They often offer more flexibility than banks or other lenders when it comes to bad credit. Since credit unions are focused on serving their members, they may look at more than just your credit score when approving a loan.

Credit unions want to help their members get vehicles, even if they are rebuilding their credit. Be sure to check local credit unions to see if they offer auto loans for those with poor credit.

 

Online Lenders

In recent years, more online lenders have started offering bad credit auto loans. Online lenders use algorithms and technology to assess risk, rather than relying solely on credit scores. This can help those with poor credit get approved.

Do your research to find reputable online lenders with experience in bad credit auto lending. They may offer more competitive rates and flexible terms compared to traditional lenders.

 

Buy Here Pay Here Lots

Buy here pay here (BHPH) dealers are used car lots that offer in-house financing to buyers with poor credit. BHPH dealers focus on flexible down payments and weekly or bi-weekly payment plans.

The downside is BHPH lots often charge higher interest rates and may have strict payment policies, like requiring payments in person. But for some with truly bad credit, BHPH can be an option when no one else will approve them.

 

Bad Credit Car Loan Terms

When taking out a bad credit auto loan, there are several key terms you need to understand that will impact your loan offer.

 

Interest Rates and APR

The interest rate is the amount you pay to borrow money, charged as a percentage of the principal loan amount. The higher your credit risk, the higher the interest rate you will typically pay. Bad credit borrowers often pay 10-20% interest or higher.

APR stands for Annual Percentage Rate. This factors in the interest rate plus any additional fees associated with the loan. So the APR gives you a better picture of the true cost of borrowing.

 

Down Payment

The down payment is the upfront amount you pay towards the total vehicle price. Lenders see a down payment as an indication you are committed to repaying the loan. With bad credit, expect to put down 10-30% or more of the vehicle’s value.

 

Loan Term

The loan term refers to the length of the loan contract – typically 24, 36, 48, 60 or 72 months. Shorter terms often have lower rates but higher monthly payments. Longer terms make payments more affordable but increase interest costs over time.

Bad credit borrowers tend to get shorter loan terms of 24-36 months. This helps reduce the lender’s risk.

 

Budgeting for a Bad Credit Car Loan

When financing a car with bad credit, budgeting properly for all the costs involved is crucial. Some key things to factor into your budget include:

Estimating Total Costs

With a bad credit auto loan, you’ll likely face higher interest rates, which means your total cost will be more than financing with good credit. Carefully calculate the total amount you’ll end up paying over the full loan term with interest. Avoid loans with extremely high rates.

Saving for a Down Payment

A higher down payment reduces the amount you have to finance, lowering your monthly payments. Save as much as you can for a down payment of 10-20% or more. The higher the down payment, the better.

Factoring in Higher Interest

Bad credit loans have higher interest rates, often over 10% compared to 3-5% for good credit. Make sure your budget accounts for the higher interest costs each month over the loan repayment term.

 

Improving Your Chances

Even with bad credit, there are steps you can take to improve your chances of getting approved for an auto loan in Alberta:

 

Get a Co-Signer

Having a co-signer with good credit can give lenders confidence to approve your loan. The co-signer signs the loan agreement with you and becomes equally responsible for making payments. Make sure any co-signer understands the risk they are taking on.

 

Provide Proof of Income

Lenders want reassurance you can afford the monthly payments. Provide documents like recent pay stubs, bank statements, tax returns or other evidence of steady income.

 

Make a Large Down Payment

A bigger down payment signals to the lender you are committed. Put down as much as you can afford, ideally 20% or more of the vehicle price. This also lowers the amount you have to finance.

 

Consider a Secured Loan

With a secured loan, you provide collateral like a cash deposit or household items to lower the lender’s risk. This makes approval more likely, but risks losing the collateral if you default.

 

Apply with Specialty Lenders

Many “subprime” lenders specialize in loans for those with credit challenges. They are accustomed to working with bad credit borrowers, but this often comes with higher interest rates.

 

Repay Any Past Due Debts

If possible, paying off overdue bills or collections accounts can show lenders you are addressing financial issues. Even incremental progress can help.

 

Maintaining the Vehicle

One of the keys to success when financing a vehicle with bad credit is properly maintaining the vehicle. Follow these tips:

 

Follow the Maintenance Schedule

When you purchase or lease a vehicle, the manufacturer provides a maintenance schedule that outlines the recommended service intervals for things like oil changes, tire rotations, fluid flushes, etc. It’s important to follow this schedule closely to keep your vehicle running smoothly and prevent costly repairs down the road.

 

Keep Detailed Maintenance Records

Keep a log of all maintenance and repairs performed on your vehicle, including oil changes, tire replacements, battery replacements, tune-ups, etc. Detail the date of service, mileage at service, what service was done, and where it was done. This documentation can help you stay on top of maintenance needs. It can also help prove to a future buyer that you took good care of the vehicle.

 

Protect the Vehicle’s Resale Value

Follow the manufacturer’s maintenance schedule, keep the exterior and interior clean, and try not to rack up excessive mileage. The better shape your vehicle is in if you go to sell or trade it one day, the more value it will retain. This puts you in a better position when you eventually want to get out of your loan and purchase a different vehicle.

 

Conclusion

Bad credit can make getting an auto loan more difficult, but it is still possible with some preparation and perseverance. The most important steps are reviewing your credit report for errors, improving your score, saving for a down payment, finding the right lender, and negotiating the best loan terms. With time and dedication to rebuilding credit, those with poor scores can still obtain affordable financing.

The key takeaways for getting an Alberta bad credit car loan are:

 

  • Check credit reports and dispute any errors to raise your score
  • Save up as much as possible for a down payment of 10-20%
  • Shop around for lenders willing to work with bad credit
  • Compare loan terms carefully and negotiate where possible
  • Make payments on time and keep up vehicle maintenance
  • Continue monitoring credit and taking steps to improve it

 

With the right preparation and discipline, those with less-than-perfect credit can get back on the road. Do your homework, set a realistic budget, find a trustworthy lender, and remain committed to rebuilding credit. With time and diligence, you can obtain an Alberta bad credit auto loan.

Questions About Getting a Bad Credit Car Loan in Alberta?

In Alberta, a bad credit score is generally considered to be anything below 600 on the standard 300-900 credit score range. This means you have either missed payments, defaulted on loans, have collections or bankruptcies, or have limited credit history. A score below 600 signals to lenders that you are a high risk for future missed or late payments.

Most lenders in Alberta require a minimum credit score of 600-650 for bad credit auto loans. Some specialized subprime lenders may approve loans with scores as low as 500, but interest rates are much higher. For the best rates, you typically need a score of 680+ when applying for an auto loan. The higher your credit score, the lower your interest rate will be.

Yes, there are many options to get bad credit auto loans in Alberta even if you have bad credit or no credit history. Specialized subprime lenders provide auto financing to applicants with low credit scores. Interest rates may be higher with bad credit, so focus on rebuilding your credit to qualify for lower rates.

To rebuild your credit for an auto loan: Pay all bills on time, keep credit card balances low, fix any errors on your credit report, and consider getting a secured credit card to demonstrate responsible credit behaviour. It takes time, but consistently making on-time payments will raise your score.

When applying for bad credit auto financing in Alberta, most lenders require a valid driver’s license, proof of income, proof of residence, references, vehicle details, and possibly past utility bills or bank statements. Having all documentation ready speeds up the application and approval process.

Down payment requirements for bad credit auto loans really depend on the lender, but generally range from $500-$2,500. Some subprime lenders offer $0 down car loans in Alberta but charge higher interest rates. Putting down as much as you can upfront reduces the amount you finance & saves on interest.

With bad credit, expect much higher interest rates for auto financing in Alberta, typically ranging from 9-25% depending on credit factors. The lower your credit score, the higher your interest rate. Having a co-signer with better credit or putting down a larger down payment can help lower rates.

Yes, Alberta has specialized subprime lenders and Buy Here Pay Here dealerships that offer specific auto loan programs for those with bad credit or no credit history. These programs cater to higher-risk applicants and make owning a reliable vehicle more accessible.

Pros are easier approval, lower down payments, no credit needed. Cons are limited selection of older vehicles, higher interest rates, GPS tracking devices, and vehicles can be repossessed quickly for missed payments. Weigh the pros and cons vs other bad credit financing options.

Yes, getting pre-approved for an auto loan even with bad credit locks in an interest rate and loan terms ahead of visiting dealers. Pre-approval gives you negotiating leverage, shows the dealer you are serious buyer, saves time at the dealership, and prevents disappointment if the loan is denied.

The easiest way to get pre-approved for bad credit auto financing in Alberta is by applying with a subprime online auto lender like Canada Drives or Car Deal Canada before visiting dealerships. Dealers may also have subprime lending partners to pre-approve special financing.

To boost chances for car loan approval in Alberta, work on improving your credit score, save for a down payment of 10-20% of the vehicle price, provide proof of steady income from employment, and have references available. Getting pre-approved before dealership visits also helps secure bad credit auto financing.

Most subprime lenders in Alberta need recent pay stubs, bank statements, tax returns, or employer contact details to verify your income when applying for bad credit car financing. Proof of income is required to ensure you can afford the monthly payments. Self-employed applicants may provide different income documentation.

Adding a co-signer with good credit significantly improves the chances of getting approved and secures better interest rates for bad credit auto loans in Alberta. The co-signer agrees to be responsible for making payments if the primary borrower defaults, so assess this carefully before applying with a co-applicant.

Yes, most dealers will check your credit score before negotiating a vehicle price in Alberta. They do this to see what kind of financing and rates they can offer you. Dealers may be less flexible on price if you need special subprime financing since such loans have more risk.

As a general rule, try to keep hard credit inquiries to fewer than five before applying for an auto loan in Alberta. Too many inquiries can negatively impact your credit score temporarily. Limit applications only to lenders you are serious about getting financing from rather than applying randomly.

To check what auto loan rates you qualify for without hurting your credit score, first check your score for free through services like Borrowell and CreditKarma which don’t require hard inquiries. Then apply for online pre-approvals which only require a soft credit pull. This won’t affect your score.

It generally takes at least 6 months to significantly improve your credit score once you start implementing positive credit habits like making on-time payments, keeping balances low, fixing report errors etc. It takes patience and consistency, but it is worthwhile to access better auto loan rates.

Defaulting on an auto loan has severe consequences including: damage to your credit making future borrowing difficult, getting calls from collection agencies, facing legal action from lenders, seizure of your vehicle or other assets, garnishing of wages, and greater difficulty qualifying for financing in the future.

In Alberta, subprime lenders generally require you to wait 12-24 months after a car repossession before they may consider approving you for auto financing again. Some may still decline so focus on rebuilding credit in the meantime. Private sellers may be another option for sourcing a vehicle.

 

What is Considered Bad Credit?

In Canada, credit scores generally range from 300 to 900 points. The score is calculated based on your credit history, including payment history, amounts owed, length of credit history, new credit, and credit mix. The higher your score, the better your credit rating. Anything below 660 is usually considered bad credit by most lenders. Here’s a quick overview of the credit score ranges:

800-900 (Exceptional) – You have an exceptional credit history and lenders consider you very low risk. You’ll have access to the best interest rates and loan terms.

740-799 (Very Good) – Your credit history is excellent and you are seen as a very reliable borrower. You’ll qualify for great rates from most lenders.

670-739 (Good) – You have a good credit rating that shows responsibility. You may get approved for most loans and credit cards with good rates.

580-669 (Fair) – Your credit score is below average and indicates some past issues or lack of credit history. You may face higher rates or difficulty getting approved.

300-579 (Poor) – This is considered bad credit and will make it very challenging to get approved for new financing. You’ll likely pay much higher interest rates if approved.

So if your credit score falls in the poor or fair ranges, you are generally considered as having “bad credit” when it comes to applying for loans, mortgages, credit cards, and other financing. The lower your score, the harder it will be to get approved or find favourable rates.

 

Why Bad Credit Happens

There are many potential reasons why someone may end up with a low credit score or bad credit history. Some common causes of bad credit include:

 

Job Loss

Losing your job can quickly lead to missed payments and mounting debt, especially if you are unable to find new work right away. The loss of income makes it difficult to keep up with bills and loan payments, which can cause accounts to become delinquent and hurt your credit score.

 

Medical Bills

A major illness or medical emergency can result in large medical bills that may be difficult to pay off all at once. Unpaid medical bills can go into collections and show up on your credit report, dragging down your credit score.

 

Divorce

A divorce can wreak havoc on finances, especially if assets, debts and bills are not properly divided. Accounts shared with an ex-spouse may end up with late payments or go into collections, damaging credit.

 

Poor Money Management

Lack of budgeting, overspending and taking on more debt than can reasonably be repaid can lead to missed payments, maxed out cards and other credit score reductions over time.

 

Lack of Credit History

If you have no credit history, it can be just as damaging as having bad credit. Lenders want to see you have managed credit responsibly in the past before approving new credit.

Having bad credit can happen to anyone. But being aware of the common causes and taking steps to improve your credit can get you back on track.

 

Challenges of Getting a Car Loan with Bad Credit

Getting approved for an auto loan with bad credit can be very challenging compared to someone with good credit. Here are some of the main difficulties you may face:

Higher interest rates – Lenders see those with poor credit as riskier borrowers, so they will charge significantly higher interest rates to offset that risk. Expect to pay interest rates from 15-30%, compared to around 5% for good credit.

Lower loan amounts – Since lenders view bad credit applicants as riskier, they will also limit the amount of money they’re willing to loan. So you may only get approved for $5,000 – $10,000 versus over $20,000 for good credit.

Difficulty getting approved – With a subprime credit score, many lenders won’t even consider your application. You’ll have a much smaller pool of lenders willing to work with bad credit at all. And of those, approval is never guaranteed.

 

How to Improve Your Credit Score

Improving your credit score takes time and discipline, but it can be done. Here are some tips to help raise your score over time:

 

Pay All Bills on Time

Payment history makes up a significant portion of your credit score. Set up reminders for bill due dates, automate payments, and avoid late fees whenever possible. Even a 30-day late payment can drop your score dramatically.

 

Lower Your Credit Utilization

This measures how much of your total available credit you are using. Try to keep it below 30%, as higher percentages hurt your score. Pay down balances and consider requesting credit limit increases.

 

Avoid Applying for New Credit

Each application results in a hard inquiry on your report that can lower your score temporarily. Only apply for credit when absolutely necessary while trying to improve your score.

 

Correct Errors on Your Credit Report

Dispute any inaccurate or unverified information with the credit bureaus to maximize your score. Stay on top of your reports and address issues promptly.

 

Consider Becoming an Authorized User

You can benefit from another person’s strong payment history if they add you as an authorized user on their credit card account. Just make sure they use the card responsibly.

With diligence and patience, you can rebuild and improve your credit over time. A higher score will open up better loan options in the future.

 

Getting an Alberta Bad Credit Car Loan

If you have bad credit, getting approved for an auto loan in Alberta can be challenging but is certainly possible. Here’s what lenders look for when approving bad credit car loans in Alberta:

 

  • Income – Lenders want to see that you have a reliable source of income to make the monthly payments. Bring recent pay stubs.
  • Down payment – The more money you can put down, the better. Ideally 20% or more of the vehicle’s value.
  • Co-signer – Having a co-signer with good credit will improve your chances of getting approved.
  • Trade-in – Using an existing paid-off vehicle as a trade-in can lower the amount you need to finance.

 

When applying for a bad credit auto loan, make sure to have these documents ready:

 

  • Valid driver’s license
  • Proof of income – Pay stubs, tax returns, etc.
  • Proof of residence – Utility bill, bank statement, etc.
  • List of references – Friends or family who can vouch for you
  • Down payment in cash, certified check, or debit card

 

Tips to improve your chances of getting approved:

 

  • Improve your credit score – Pay down debts, dispute errors on your credit report
  • Lower the amount financed – Put more money down, choose a less expensive vehicle
  • Add a co-signer – Find someone with good credit to co-sign the loan
  • Provide proof of income – Lenders want to see you can afford the monthly payments
  • Offer collateral – Pledge property or assets to secure the loan

 

With the right preparation and documentation, you can get approved for a bad credit auto loan in Alberta despite past credit challenges.

 

Types of Bad Credit Car Loans in Alberta

There are a few different types of auto loans available for those with bad credit in Alberta. The main types include:

 

New vs. Used

New car loans typically require better credit than used cars. That’s because new vehicles depreciate quickly, so lenders want to mitigate their risk. Used cars tend to hold value better, so lenders may be more flexible with credit requirements. However, interest rates are usually higher for used cars.

 

Secured vs. Unsecured

A secured loan requires collateral, like the car itself, to secure the loan. The lender can seize the collateral if you default. An unsecured loan doesn’t require collateral. Secured loans are easier to get with bad credit, but unsecured loans don’t put your assets at risk if you default.

 

Lease vs. Financing

With a lease, you only pay for the vehicle’s depreciation during the lease term. Financing means you’re loaned the full purchase price. Leases usually have lower monthly payments but require better credit. Financing may be the only option with very poor credit.

When you have bad credit, it’s important to weigh the pros and cons of each type of auto loan to find the best option for your situation.

 

Finding the Right Bad Credit Lender

When looking for a bad credit auto lender, it’s important to find one that will work with your unique financial situation. The right lender for bad credit borrowers will offer reasonable interest rates, flexible loan terms, and low fees. Here are some tips for finding the best lender:

Check interest rates – Lenders that specialize in bad credit loans may charge higher interest rates to offset the risk of lending to borrowers with poor credit. However, interest rates can vary significantly among subprime lenders. Shop around and compare rates to find the most competitive interest rate for which you qualify. Just a few percentage points can make a big difference over the life of the loan.

Look for low fees – In addition to interest, lenders may charge origination fees or administrative fees. Ask about all costs associated with the loan. Avoid lenders that nickel and dime you with lots of extra fees.

Seek flexible terms – Since your finances may be tight, look for a lender that offers flexible loan terms to fit your budget. This may include options for longer loan repayment terms or stepped increases in payments over time.

Read reviews – Check online reviews and the Better Business Bureau to evaluate customer satisfaction and complaints about potential lenders. This can help identify reputable lenders who will work constructively with borrowers having credit troubles.

Taking the time to find the right bad credit auto lender can make it more likely you will get approved and set up with a loan you can realistically manage. Compare multiple lenders to find one that offers the best loan terms and payment options for your situation.

 

Dealerships That Work with Bad Credit

Several dealerships across Alberta have programs designed specifically to help those with bad credit get approved for a car loan. Here are some of the top options:

 

Northside Mitsubishi

Located in Edmonton, Northside Mitsubishi states that they are willing to work with all types of credit situations. Their bad credit financing team will work to find a solution for those with poor or no credit history.

 

Wheaton Honda

Wheaton Honda in Edmonton, AB has an automotive credit rebuilding program. They partner with lending institutions to help people with bad credit or no credit rebuild and establish credit with an auto loan.

 

Crosstown Auto Centre

This Edmonton dealership says bad credit is nothing to be ashamed of. Their financing team works hard to get approvals for bad credit customers.

 

Royal Oak Nissan

Royal Oak Nissan in Calgary believes everyone deserves a chance at an auto loan. They have special financing options for those with poor credit.

 

Ez Car Credit

Ez Car Credit is located in Calgary and approves bad credit customers every day. They understand the challenges faced by those with poor credit histories.

 

Davis Chevrolet

For residents in the Calgary area, Davis Chevrolet in Airdrie approves bad credit car loans. Their financing team helps people get the vehicles they need.

 

Alternatives to Dealerships

While dealerships are a good option for Alberta bad credit car loans, those with poor credit have alternatives as well. Dealerships aren’t always willing to approve those with damaged credit, but other lenders may be more flexible.

Some options besides traditional dealerships include:

 

Credit Unions

Credit unions are member-owned financial cooperatives. They often offer more flexibility than banks or other lenders when it comes to bad credit. Since credit unions are focused on serving their members, they may look at more than just your credit score when approving a loan.

Credit unions want to help their members get vehicles, even if they are rebuilding their credit. Be sure to check local credit unions to see if they offer auto loans for those with poor credit.

 

Online Lenders

In recent years, more online lenders have started offering bad credit auto loans. Online lenders use algorithms and technology to assess risk, rather than relying solely on credit scores. This can help those with poor credit get approved.

Do your research to find reputable online lenders with experience in bad credit auto lending. They may offer more competitive rates and flexible terms compared to traditional lenders.

 

Buy Here Pay Here Lots

Buy here pay here (BHPH) dealers are used car lots that offer in-house financing to buyers with poor credit. BHPH dealers focus on flexible down payments and weekly or bi-weekly payment plans.

The downside is BHPH lots often charge higher interest rates and may have strict payment policies, like requiring payments in person. But for some with truly bad credit, BHPH can be an option when no one else will approve them.

 

Bad Credit Car Loan Terms

When taking out a bad credit auto loan, there are several key terms you need to understand that will impact your loan offer.

 

Interest Rates and APR

The interest rate is the amount you pay to borrow money, charged as a percentage of the principal loan amount. The higher your credit risk, the higher the interest rate you will typically pay. Bad credit borrowers often pay 10-20% interest or higher.

APR stands for Annual Percentage Rate. This factors in the interest rate plus any additional fees associated with the loan. So the APR gives you a better picture of the true cost of borrowing.

 

Down Payment

The down payment is the upfront amount you pay towards the total vehicle price. Lenders see a down payment as an indication you are committed to repaying the loan. With bad credit, expect to put down 10-30% or more of the vehicle’s value.

 

Loan Term

The loan term refers to the length of the loan contract – typically 24, 36, 48, 60 or 72 months. Shorter terms often have lower rates but higher monthly payments. Longer terms make payments more affordable but increase interest costs over time.

Bad credit borrowers tend to get shorter loan terms of 24-36 months. This helps reduce the lender’s risk.

 

Budgeting for a Bad Credit Car Loan

When financing a car with bad credit, budgeting properly for all the costs involved is crucial. Some key things to factor into your budget include:

Estimating Total Costs

With a bad credit auto loan, you’ll likely face higher interest rates, which means your total cost will be more than financing with good credit. Carefully calculate the total amount you’ll end up paying over the full loan term with interest. Avoid loans with extremely high rates.

Saving for a Down Payment

A higher down payment reduces the amount you have to finance, lowering your monthly payments. Save as much as you can for a down payment of 10-20% or more. The higher the down payment, the better.

Factoring in Higher Interest

Bad credit loans have higher interest rates, often over 10% compared to 3-5% for good credit. Make sure your budget accounts for the higher interest costs each month over the loan repayment term.

 

Improving Your Chances

Even with bad credit, there are steps you can take to improve your chances of getting approved for an auto loan in Alberta:

 

Get a Co-Signer

Having a co-signer with good credit can give lenders confidence to approve your loan. The co-signer signs the loan agreement with you and becomes equally responsible for making payments. Make sure any co-signer understands the risk they are taking on.

 

Provide Proof of Income

Lenders want reassurance you can afford the monthly payments. Provide documents like recent pay stubs, bank statements, tax returns or other evidence of steady income.

 

Make a Large Down Payment

A bigger down payment signals to the lender you are committed. Put down as much as you can afford, ideally 20% or more of the vehicle price. This also lowers the amount you have to finance.

 

Consider a Secured Loan

With a secured loan, you provide collateral like a cash deposit or household items to lower the lender’s risk. This makes approval more likely, but risks losing the collateral if you default.

 

Apply with Specialty Lenders

Many “subprime” lenders specialize in loans for those with credit challenges. They are accustomed to working with bad credit borrowers, but this often comes with higher interest rates.

 

Repay Any Past Due Debts

If possible, paying off overdue bills or collections accounts can show lenders you are addressing financial issues. Even incremental progress can help.

 

Maintaining the Vehicle

One of the keys to success when financing a vehicle with bad credit is properly maintaining the vehicle. Follow these tips:

 

Follow the Maintenance Schedule

When you purchase or lease a vehicle, the manufacturer provides a maintenance schedule that outlines the recommended service intervals for things like oil changes, tire rotations, fluid flushes, etc. It’s important to follow this schedule closely to keep your vehicle running smoothly and prevent costly repairs down the road.

 

Keep Detailed Maintenance Records

Keep a log of all maintenance and repairs performed on your vehicle, including oil changes, tire replacements, battery replacements, tune-ups, etc. Detail the date of service, mileage at service, what service was done, and where it was done. This documentation can help you stay on top of maintenance needs. It can also help prove to a future buyer that you took good care of the vehicle.

 

Protect the Vehicle’s Resale Value

Follow the manufacturer’s maintenance schedule, keep the exterior and interior clean, and try not to rack up excessive mileage. The better shape your vehicle is in if you go to sell or trade it one day, the more value it will retain. This puts you in a better position when you eventually want to get out of your loan and purchase a different vehicle.

 

Conclusion

Bad credit can make getting an auto loan more difficult, but it is still possible with some preparation and perseverance. The most important steps are reviewing your credit report for errors, improving your score, saving for a down payment, finding the right lender, and negotiating the best loan terms. With time and dedication to rebuilding credit, those with poor scores can still obtain affordable financing.

The key takeaways for getting an Alberta bad credit car loan are:

 

  • Check credit reports and dispute any errors to raise your score
  • Save up as much as possible for a down payment of 10-20%
  • Shop around for lenders willing to work with bad credit
  • Compare loan terms carefully and negotiate where possible
  • Make payments on time and keep up vehicle maintenance
  • Continue monitoring credit and taking steps to improve it

 

With the right preparation and discipline, those with less-than-perfect credit can get back on the road. Do your homework, set a realistic budget, find a trustworthy lender, and remain committed to rebuilding credit. With time and diligence, you can obtain an Alberta bad credit auto loan.

Questions About Getting a Bad Credit Car Loan in Alberta?

In Alberta, a bad credit score is generally considered to be anything below 600 on the standard 300-900 credit score range. This means you have either missed payments, defaulted on loans, have collections or bankruptcies, or have limited credit history. A score below 600 signals to lenders that you are a high risk for future missed or late payments.

Most lenders in Alberta require a minimum credit score of 600-650 for bad credit auto loans. Some specialized subprime lenders may approve loans with scores as low as 500, but interest rates are much higher. For the best rates, you typically need a score of 680+ when applying for an auto loan. The higher your credit score, the lower your interest rate will be.

Yes, there are many options to get bad credit auto loans in Alberta even if you have bad credit or no credit history. Specialized subprime lenders provide auto financing to applicants with low credit scores. Interest rates may be higher with bad credit, so focus on rebuilding your credit to qualify for lower rates.

To rebuild your credit for an auto loan: Pay all bills on time, keep credit card balances low, fix any errors on your credit report, and consider getting a secured credit card to demonstrate responsible credit behaviour. It takes time, but consistently making on-time payments will raise your score.

When applying for bad credit auto financing in Alberta, most lenders require a valid driver’s license, proof of income, proof of residence, references, vehicle details, and possibly past utility bills or bank statements. Having all documentation ready speeds up the application and approval process.

Down payment requirements for bad credit auto loans really depend on the lender, but generally range from $500-$2,500. Some subprime lenders offer $0 down car loans in Alberta but charge higher interest rates. Putting down as much as you can upfront reduces the amount you finance & saves on interest.

With bad credit, expect much higher interest rates for auto financing in Alberta, typically ranging from 9-25% depending on credit factors. The lower your credit score, the higher your interest rate. Having a co-signer with better credit or putting down a larger down payment can help lower rates.

Yes, Alberta has specialized subprime lenders and Buy Here Pay Here dealerships that offer specific auto loan programs for those with bad credit or no credit history. These programs cater to higher-risk applicants and make owning a reliable vehicle more accessible.

Pros are easier approval, lower down payments, no credit needed. Cons are limited selection of older vehicles, higher interest rates, GPS tracking devices, and vehicles can be repossessed quickly for missed payments. Weigh the pros and cons vs other bad credit financing options.

Yes, getting pre-approved for an auto loan even with bad credit locks in an interest rate and loan terms ahead of visiting dealers. Pre-approval gives you negotiating leverage, shows the dealer you are serious buyer, saves time at the dealership, and prevents disappointment if the loan is denied.

The easiest way to get pre-approved for bad credit auto financing in Alberta is by applying with a subprime online auto lender like Canada Drives or Car Deal Canada before visiting dealerships. Dealers may also have subprime lending partners to pre-approve special financing.

To boost chances for car loan approval in Alberta, work on improving your credit score, save for a down payment of 10-20% of the vehicle price, provide proof of steady income from employment, and have references available. Getting pre-approved before dealership visits also helps secure bad credit auto financing.

Most subprime lenders in Alberta need recent pay stubs, bank statements, tax returns, or employer contact details to verify your income when applying for bad credit car financing. Proof of income is required to ensure you can afford the monthly payments. Self-employed applicants may provide different income documentation.

Adding a co-signer with good credit significantly improves the chances of getting approved and secures better interest rates for bad credit auto loans in Alberta. The co-signer agrees to be responsible for making payments if the primary borrower defaults, so assess this carefully before applying with a co-applicant.

Yes, most dealers will check your credit score before negotiating a vehicle price in Alberta. They do this to see what kind of financing and rates they can offer you. Dealers may be less flexible on price if you need special subprime financing since such loans have more risk.

As a general rule, try to keep hard credit inquiries to fewer than five before applying for an auto loan in Alberta. Too many inquiries can negatively impact your credit score temporarily. Limit applications only to lenders you are serious about getting financing from rather than applying randomly.

To check what auto loan rates you qualify for without hurting your credit score, first check your score for free through services like Borrowell and CreditKarma which don’t require hard inquiries. Then apply for online pre-approvals which only require a soft credit pull. This won’t affect your score.

It generally takes at least 6 months to significantly improve your credit score once you start implementing positive credit habits like making on-time payments, keeping balances low, fixing report errors etc. It takes patience and consistency, but it is worthwhile to access better auto loan rates.

Defaulting on an auto loan has severe consequences including: damage to your credit making future borrowing difficult, getting calls from collection agencies, facing legal action from lenders, seizure of your vehicle or other assets, garnishing of wages, and greater difficulty qualifying for financing in the future.

In Alberta, subprime lenders generally require you to wait 12-24 months after a car repossession before they may consider approving you for auto financing again. Some may still decline so focus on rebuilding credit in the meantime. Private sellers may be another option for sourcing a vehicle.

 

What is Considered Bad Credit?

In Canada, credit scores generally range from 300 to 900 points. The score is calculated based on your credit history, including payment history, amounts owed, length of credit history, new credit, and credit mix. The higher your score, the better your credit rating. Anything below 660 is usually considered bad credit by most lenders. Here’s a quick overview of the credit score ranges:

800-900 (Exceptional) – You have an exceptional credit history and lenders consider you very low risk. You’ll have access to the best interest rates and loan terms.

740-799 (Very Good) – Your credit history is excellent and you are seen as a very reliable borrower. You’ll qualify for great rates from most lenders.

670-739 (Good) – You have a good credit rating that shows responsibility. You may get approved for most loans and credit cards with good rates.

580-669 (Fair) – Your credit score is below average and indicates some past issues or lack of credit history. You may face higher rates or difficulty getting approved.

300-579 (Poor) – This is considered bad credit and will make it very challenging to get approved for new financing. You’ll likely pay much higher interest rates if approved.

So if your credit score falls in the poor or fair ranges, you are generally considered as having “bad credit” when it comes to applying for loans, mortgages, credit cards, and other financing. The lower your score, the harder it will be to get approved or find favourable rates.

 

Why Bad Credit Happens

There are many potential reasons why someone may end up with a low credit score or bad credit history. Some common causes of bad credit include:

 

Job Loss

Losing your job can quickly lead to missed payments and mounting debt, especially if you are unable to find new work right away. The loss of income makes it difficult to keep up with bills and loan payments, which can cause accounts to become delinquent and hurt your credit score.

 

Medical Bills

A major illness or medical emergency can result in large medical bills that may be difficult to pay off all at once. Unpaid medical bills can go into collections and show up on your credit report, dragging down your credit score.

 

Divorce

A divorce can wreak havoc on finances, especially if assets, debts and bills are not properly divided. Accounts shared with an ex-spouse may end up with late payments or go into collections, damaging credit.

 

Poor Money Management

Lack of budgeting, overspending and taking on more debt than can reasonably be repaid can lead to missed payments, maxed out cards and other credit score reductions over time.

 

Lack of Credit History

If you have no credit history, it can be just as damaging as having bad credit. Lenders want to see you have managed credit responsibly in the past before approving new credit.

Having bad credit can happen to anyone. But being aware of the common causes and taking steps to improve your credit can get you back on track.

 

Challenges of Getting a Car Loan with Bad Credit

Getting approved for an auto loan with bad credit can be very challenging compared to someone with good credit. Here are some of the main difficulties you may face:

Higher interest rates – Lenders see those with poor credit as riskier borrowers, so they will charge significantly higher interest rates to offset that risk. Expect to pay interest rates from 15-30%, compared to around 5% for good credit.

Lower loan amounts – Since lenders view bad credit applicants as riskier, they will also limit the amount of money they’re willing to loan. So you may only get approved for $5,000 – $10,000 versus over $20,000 for good credit.

Difficulty getting approved – With a subprime credit score, many lenders won’t even consider your application. You’ll have a much smaller pool of lenders willing to work with bad credit at all. And of those, approval is never guaranteed.

 

How to Improve Your Credit Score

Improving your credit score takes time and discipline, but it can be done. Here are some tips to help raise your score over time:

 

Pay All Bills on Time

Payment history makes up a significant portion of your credit score. Set up reminders for bill due dates, automate payments, and avoid late fees whenever possible. Even a 30-day late payment can drop your score dramatically.

 

Lower Your Credit Utilization

This measures how much of your total available credit you are using. Try to keep it below 30%, as higher percentages hurt your score. Pay down balances and consider requesting credit limit increases.

 

Avoid Applying for New Credit

Each application results in a hard inquiry on your report that can lower your score temporarily. Only apply for credit when absolutely necessary while trying to improve your score.

 

Correct Errors on Your Credit Report

Dispute any inaccurate or unverified information with the credit bureaus to maximize your score. Stay on top of your reports and address issues promptly.

 

Consider Becoming an Authorized User

You can benefit from another person’s strong payment history if they add you as an authorized user on their credit card account. Just make sure they use the card responsibly.

With diligence and patience, you can rebuild and improve your credit over time. A higher score will open up better loan options in the future.

 

Getting an Alberta Bad Credit Car Loan

If you have bad credit, getting approved for an auto loan in Alberta can be challenging but is certainly possible. Here’s what lenders look for when approving bad credit car loans in Alberta:

 

  • Income – Lenders want to see that you have a reliable source of income to make the monthly payments. Bring recent pay stubs.
  • Down payment – The more money you can put down, the better. Ideally 20% or more of the vehicle’s value.
  • Co-signer – Having a co-signer with good credit will improve your chances of getting approved.
  • Trade-in – Using an existing paid-off vehicle as a trade-in can lower the amount you need to finance.

 

When applying for a bad credit auto loan, make sure to have these documents ready:

 

  • Valid driver’s license
  • Proof of income – Pay stubs, tax returns, etc.
  • Proof of residence – Utility bill, bank statement, etc.
  • List of references – Friends or family who can vouch for you
  • Down payment in cash, certified check, or debit card

 

Tips to improve your chances of getting approved:

 

  • Improve your credit score – Pay down debts, dispute errors on your credit report
  • Lower the amount financed – Put more money down, choose a less expensive vehicle
  • Add a co-signer – Find someone with good credit to co-sign the loan
  • Provide proof of income – Lenders want to see you can afford the monthly payments
  • Offer collateral – Pledge property or assets to secure the loan

 

With the right preparation and documentation, you can get approved for a bad credit auto loan in Alberta despite past credit challenges.

 

Types of Bad Credit Car Loans in Alberta

There are a few different types of auto loans available for those with bad credit in Alberta. The main types include:

 

New vs. Used

New car loans typically require better credit than used cars. That’s because new vehicles depreciate quickly, so lenders want to mitigate their risk. Used cars tend to hold value better, so lenders may be more flexible with credit requirements. However, interest rates are usually higher for used cars.

 

Secured vs. Unsecured

A secured loan requires collateral, like the car itself, to secure the loan. The lender can seize the collateral if you default. An unsecured loan doesn’t require collateral. Secured loans are easier to get with bad credit, but unsecured loans don’t put your assets at risk if you default.

 

Lease vs. Financing

With a lease, you only pay for the vehicle’s depreciation during the lease term. Financing means you’re loaned the full purchase price. Leases usually have lower monthly payments but require better credit. Financing may be the only option with very poor credit.

When you have bad credit, it’s important to weigh the pros and cons of each type of auto loan to find the best option for your situation.

 

Finding the Right Bad Credit Lender

When looking for a bad credit auto lender, it’s important to find one that will work with your unique financial situation. The right lender for bad credit borrowers will offer reasonable interest rates, flexible loan terms, and low fees. Here are some tips for finding the best lender:

Check interest rates – Lenders that specialize in bad credit loans may charge higher interest rates to offset the risk of lending to borrowers with poor credit. However, interest rates can vary significantly among subprime lenders. Shop around and compare rates to find the most competitive interest rate for which you qualify. Just a few percentage points can make a big difference over the life of the loan.

Look for low fees – In addition to interest, lenders may charge origination fees or administrative fees. Ask about all costs associated with the loan. Avoid lenders that nickel and dime you with lots of extra fees.

Seek flexible terms – Since your finances may be tight, look for a lender that offers flexible loan terms to fit your budget. This may include options for longer loan repayment terms or stepped increases in payments over time.

Read reviews – Check online reviews and the Better Business Bureau to evaluate customer satisfaction and complaints about potential lenders. This can help identify reputable lenders who will work constructively with borrowers having credit troubles.

Taking the time to find the right bad credit auto lender can make it more likely you will get approved and set up with a loan you can realistically manage. Compare multiple lenders to find one that offers the best loan terms and payment options for your situation.

 

Dealerships That Work with Bad Credit

Several dealerships across Alberta have programs designed specifically to help those with bad credit get approved for a car loan. Here are some of the top options:

 

Northside Mitsubishi

Located in Edmonton, Northside Mitsubishi states that they are willing to work with all types of credit situations. Their bad credit financing team will work to find a solution for those with poor or no credit history.

 

Wheaton Honda

Wheaton Honda in Edmonton, AB has an automotive credit rebuilding program. They partner with lending institutions to help people with bad credit or no credit rebuild and establish credit with an auto loan.

 

Crosstown Auto Centre

This Edmonton dealership says bad credit is nothing to be ashamed of. Their financing team works hard to get approvals for bad credit customers.

 

Royal Oak Nissan

Royal Oak Nissan in Calgary believes everyone deserves a chance at an auto loan. They have special financing options for those with poor credit.

 

Ez Car Credit

Ez Car Credit is located in Calgary and approves bad credit customers every day. They understand the challenges faced by those with poor credit histories.

 

Davis Chevrolet

For residents in the Calgary area, Davis Chevrolet in Airdrie approves bad credit car loans. Their financing team helps people get the vehicles they need.

 

Alternatives to Dealerships

While dealerships are a good option for Alberta bad credit car loans, those with poor credit have alternatives as well. Dealerships aren’t always willing to approve those with damaged credit, but other lenders may be more flexible.

Some options besides traditional dealerships include:

 

Credit Unions

Credit unions are member-owned financial cooperatives. They often offer more flexibility than banks or other lenders when it comes to bad credit. Since credit unions are focused on serving their members, they may look at more than just your credit score when approving a loan.

Credit unions want to help their members get vehicles, even if they are rebuilding their credit. Be sure to check local credit unions to see if they offer auto loans for those with poor credit.

 

Online Lenders

In recent years, more online lenders have started offering bad credit auto loans. Online lenders use algorithms and technology to assess risk, rather than relying solely on credit scores. This can help those with poor credit get approved.

Do your research to find reputable online lenders with experience in bad credit auto lending. They may offer more competitive rates and flexible terms compared to traditional lenders.

 

Buy Here Pay Here Lots

Buy here pay here (BHPH) dealers are used car lots that offer in-house financing to buyers with poor credit. BHPH dealers focus on flexible down payments and weekly or bi-weekly payment plans.

The downside is BHPH lots often charge higher interest rates and may have strict payment policies, like requiring payments in person. But for some with truly bad credit, BHPH can be an option when no one else will approve them.

 

Bad Credit Car Loan Terms

When taking out a bad credit auto loan, there are several key terms you need to understand that will impact your loan offer.

 

Interest Rates and APR

The interest rate is the amount you pay to borrow money, charged as a percentage of the principal loan amount. The higher your credit risk, the higher the interest rate you will typically pay. Bad credit borrowers often pay 10-20% interest or higher.

APR stands for Annual Percentage Rate. This factors in the interest rate plus any additional fees associated with the loan. So the APR gives you a better picture of the true cost of borrowing.

 

Down Payment

The down payment is the upfront amount you pay towards the total vehicle price. Lenders see a down payment as an indication you are committed to repaying the loan. With bad credit, expect to put down 10-30% or more of the vehicle’s value.

 

Loan Term

The loan term refers to the length of the loan contract – typically 24, 36, 48, 60 or 72 months. Shorter terms often have lower rates but higher monthly payments. Longer terms make payments more affordable but increase interest costs over time.

Bad credit borrowers tend to get shorter loan terms of 24-36 months. This helps reduce the lender’s risk.

 

Budgeting for a Bad Credit Car Loan

When financing a car with bad credit, budgeting properly for all the costs involved is crucial. Some key things to factor into your budget include:

Estimating Total Costs

With a bad credit auto loan, you’ll likely face higher interest rates, which means your total cost will be more than financing with good credit. Carefully calculate the total amount you’ll end up paying over the full loan term with interest. Avoid loans with extremely high rates.

Saving for a Down Payment

A higher down payment reduces the amount you have to finance, lowering your monthly payments. Save as much as you can for a down payment of 10-20% or more. The higher the down payment, the better.

Factoring in Higher Interest

Bad credit loans have higher interest rates, often over 10% compared to 3-5% for good credit. Make sure your budget accounts for the higher interest costs each month over the loan repayment term.

 

Improving Your Chances

Even with bad credit, there are steps you can take to improve your chances of getting approved for an auto loan in Alberta:

 

Get a Co-Signer

Having a co-signer with good credit can give lenders confidence to approve your loan. The co-signer signs the loan agreement with you and becomes equally responsible for making payments. Make sure any co-signer understands the risk they are taking on.

 

Provide Proof of Income

Lenders want reassurance you can afford the monthly payments. Provide documents like recent pay stubs, bank statements, tax returns or other evidence of steady income.

 

Make a Large Down Payment

A bigger down payment signals to the lender you are committed. Put down as much as you can afford, ideally 20% or more of the vehicle price. This also lowers the amount you have to finance.

 

Consider a Secured Loan

With a secured loan, you provide collateral like a cash deposit or household items to lower the lender’s risk. This makes approval more likely, but risks losing the collateral if you default.

 

Apply with Specialty Lenders

Many “subprime” lenders specialize in loans for those with credit challenges. They are accustomed to working with bad credit borrowers, but this often comes with higher interest rates.

 

Repay Any Past Due Debts

If possible, paying off overdue bills or collections accounts can show lenders you are addressing financial issues. Even incremental progress can help.

 

Maintaining the Vehicle

One of the keys to success when financing a vehicle with bad credit is properly maintaining the vehicle. Follow these tips:

 

Follow the Maintenance Schedule

When you purchase or lease a vehicle, the manufacturer provides a maintenance schedule that outlines the recommended service intervals for things like oil changes, tire rotations, fluid flushes, etc. It’s important to follow this schedule closely to keep your vehicle running smoothly and prevent costly repairs down the road.

 

Keep Detailed Maintenance Records

Keep a log of all maintenance and repairs performed on your vehicle, including oil changes, tire replacements, battery replacements, tune-ups, etc. Detail the date of service, mileage at service, what service was done, and where it was done. This documentation can help you stay on top of maintenance needs. It can also help prove to a future buyer that you took good care of the vehicle.

 

Protect the Vehicle’s Resale Value

Follow the manufacturer’s maintenance schedule, keep the exterior and interior clean, and try not to rack up excessive mileage. The better shape your vehicle is in if you go to sell or trade it one day, the more value it will retain. This puts you in a better position when you eventually want to get out of your loan and purchase a different vehicle.

 

Conclusion

Bad credit can make getting an auto loan more difficult, but it is still possible with some preparation and perseverance. The most important steps are reviewing your credit report for errors, improving your score, saving for a down payment, finding the right lender, and negotiating the best loan terms. With time and dedication to rebuilding credit, those with poor scores can still obtain affordable financing.

The key takeaways for getting an Alberta bad credit car loan are:

 

  • Check credit reports and dispute any errors to raise your score
  • Save up as much as possible for a down payment of 10-20%
  • Shop around for lenders willing to work with bad credit
  • Compare loan terms carefully and negotiate where possible
  • Make payments on time and keep up vehicle maintenance
  • Continue monitoring credit and taking steps to improve it

 

With the right preparation and discipline, those with less-than-perfect credit can get back on the road. Do your homework, set a realistic budget, find a trustworthy lender, and remain committed to rebuilding credit. With time and diligence, you can obtain an Alberta bad credit auto loan.

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Questions About Getting a Bad Credit Car Loan in Alberta?

In Alberta, a bad credit score is generally considered to be anything below 600 on the standard 300-900 credit score range. This means you have either missed payments, defaulted on loans, have collections or bankruptcies, or have limited credit history. A score below 600 signals to lenders that you are a high risk for future missed or late payments.

Most lenders in Alberta require a minimum credit score of 600-650 for bad credit auto loans. Some specialized subprime lenders may approve loans with scores as low as 500, but interest rates are much higher. For the best rates, you typically need a score of 680+ when applying for an auto loan. The higher your credit score, the lower your interest rate will be.

Yes, there are many options to get bad credit auto loans in Alberta even if you have bad credit or no credit history. Specialized subprime lenders provide auto financing to applicants with low credit scores. Interest rates may be higher with bad credit, so focus on rebuilding your credit to qualify for lower rates.

To rebuild your credit for an auto loan: Pay all bills on time, keep credit card balances low, fix any errors on your credit report, and consider getting a secured credit card to demonstrate responsible credit behaviour. It takes time, but consistently making on-time payments will raise your score.

When applying for bad credit auto financing in Alberta, most lenders require a valid driver’s license, proof of income, proof of residence, references, vehicle details, and possibly past utility bills or bank statements. Having all documentation ready speeds up the application and approval process.

Down payment requirements for bad credit auto loans really depend on the lender, but generally range from $500-$2,500. Some subprime lenders offer $0 down car loans in Alberta but charge higher interest rates. Putting down as much as you can upfront reduces the amount you finance & saves on interest.

With bad credit, expect much higher interest rates for auto financing in Alberta, typically ranging from 9-25% depending on credit factors. The lower your credit score, the higher your interest rate. Having a co-signer with better credit or putting down a larger down payment can help lower rates.

Yes, Alberta has specialized subprime lenders and Buy Here Pay Here dealerships that offer specific auto loan programs for those with bad credit or no credit history. These programs cater to higher-risk applicants and make owning a reliable vehicle more accessible.

Pros are easier approval, lower down payments, no credit needed. Cons are limited selection of older vehicles, higher interest rates, GPS tracking devices, and vehicles can be repossessed quickly for missed payments. Weigh the pros and cons vs other bad credit financing options.

Yes, getting pre-approved for an auto loan even with bad credit locks in an interest rate and loan terms ahead of visiting dealers. Pre-approval gives you negotiating leverage, shows the dealer you are serious buyer, saves time at the dealership, and prevents disappointment if the loan is denied.

The easiest way to get pre-approved for bad credit auto financing in Alberta is by applying with a subprime online auto lender like Canada Drives or Car Deal Canada before visiting dealerships. Dealers may also have subprime lending partners to pre-approve special financing.

To boost chances for car loan approval in Alberta, work on improving your credit score, save for a down payment of 10-20% of the vehicle price, provide proof of steady income from employment, and have references available. Getting pre-approved before dealership visits also helps secure bad credit auto financing.

Most subprime lenders in Alberta need recent pay stubs, bank statements, tax returns, or employer contact details to verify your income when applying for bad credit car financing. Proof of income is required to ensure you can afford the monthly payments. Self-employed applicants may provide different income documentation.

Adding a co-signer with good credit significantly improves the chances of getting approved and secures better interest rates for bad credit auto loans in Alberta. The co-signer agrees to be responsible for making payments if the primary borrower defaults, so assess this carefully before applying with a co-applicant.

Yes, most dealers will check your credit score before negotiating a vehicle price in Alberta. They do this to see what kind of financing and rates they can offer you. Dealers may be less flexible on price if you need special subprime financing since such loans have more risk.

As a general rule, try to keep hard credit inquiries to fewer than five before applying for an auto loan in Alberta. Too many inquiries can negatively impact your credit score temporarily. Limit applications only to lenders you are serious about getting financing from rather than applying randomly.

To check what auto loan rates you qualify for without hurting your credit score, first check your score for free through services like Borrowell and CreditKarma which don’t require hard inquiries. Then apply for online pre-approvals which only require a soft credit pull. This won’t affect your score.

It generally takes at least 6 months to significantly improve your credit score once you start implementing positive credit habits like making on-time payments, keeping balances low, fixing report errors etc. It takes patience and consistency, but it is worthwhile to access better auto loan rates.

Defaulting on an auto loan has severe consequences including: damage to your credit making future borrowing difficult, getting calls from collection agencies, facing legal action from lenders, seizure of your vehicle or other assets, garnishing of wages, and greater difficulty qualifying for financing in the future.

In Alberta, subprime lenders generally require you to wait 12-24 months after a car repossession before they may consider approving you for auto financing again. Some may still decline so focus on rebuilding credit in the meantime. Private sellers may be another option for sourcing a vehicle.

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