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Bad Credit Car Loans in Airdrie

Bad Credit Car Loans in Airdrie

Getting approved for a car loan with bad credit can seem impossible in Airdrie, AB. With limited public transportation options, having access to a reliable vehicle is crucial for getting to work, school, appointments, and more. However, when you have a low credit score, most lenders see you as “high-risk” and are hesitant to approve an auto loan.


Just because you have bad credit doesn’t mean you should have to go without safe and dependable transportation. While interest rates may be higher, there are still bad credit lending options available to help you get driving again.


In this comprehensive guide, we’ll walk through everything you need to know about obtaining an car loan in Airdrie and the surrounding areas with poor credit. You’ll learn about interest rates, improving your credit, down payments, finding a co-signer, budgeting for a car payment, and much more. With persistence and the right lender, you can get back on the road even with less-than-perfect credit.

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What is Bad Credit?

Bad credit refers to poor creditworthiness due to a low credit score or lack of credit history. Credit scores are three-digit numbers calculated based on your payment histories, amounts owed, length of credit, credit inquiries, and types of credit. The most commonly used credit scores range from 300 to 850.

In general, a credit score below 580 is considered bad credit, though some lenders have tighter requirements. Bad credit makes it more difficult to get approved for loans and credit cards and often results in higher interest rates. Missed payments, bankruptcies, foreclosures, collections accounts, and high debt-to-income ratios can all damage credit scores.

Reasons for bad credit include overuse of credit cards, difficulty managing finances, loss of income, major medical expenses, divorce, or identity theft. However, bad credit can happen to anyone – even those with previously good credit. The good news is there are ways to rebuild your credit over time.

 

Why Bad Credit Happens

There are many reasons why someone may end up with bad credit. Some of the most common causes include:

 

Job Loss

Losing your job can quickly lead to missed payments and mounting debt, especially if you were living paycheck to paycheck beforehand. When you can’t pay your bills, your credit score takes a hit.

 

Medical Bills

A major illness or medical emergency can saddle you with thousands of dollars in medical debt. Even with insurance, you may struggle to keep up with large co-pays and deductibles. Unpaid medical bills get sent to collections, damaging your credit.

 

Divorce

Going through a divorce often means taking on debt and splitting up shared accounts. Removing an authorized user from credit cards or loans can lower your total available credit. Failure to pay joint debts also hurts both your credit scores.

There are many other potential causes as well, like a death in the family, losing a spouse’s income, identity theft, or simply overspending. Whatever the reason may be, bad credit makes getting approved for loans much harder.

 

Challenges of Getting a Car Loan with Bad Credit

Getting approved for an auto loan when you have bad credit can be very challenging. Here are some of the main difficulties people with poor credit face when trying to get a car loan:

 

Higher Interest Rates

The lower your credit score, the higher interest rate you will likely pay on a car loan, sometimes significantly higher. Lenders view bad credit borrowers as riskier, so they charge more in interest to offset that risk. Interest rates on bad credit car loans can be anywhere from 10-25%, sometimes even higher depending on your specific credit situation.

 

Lower Loan Amounts

In addition to higher rates, lenders will often limit the amount you can borrow with bad credit. They may only approve you for a small used car loan instead of the newer or more expensive vehicle you may want. The loan amount they offer depends on factors like your income, existing debt, and credit history.

 

Difficulty Getting Approved

With deep subprime credit below 580, it can be very hard to get approved at all. Many traditional lenders will not work with borrowers below a certain score threshold. You may get turned down by multiple lenders before finding one willing to take a chance. Preparing a strong application and knowing the right lenders to try can help overcome this hurdle.

 

Importance of Transportation with Bad Credit

Having access to reliable transportation is crucial, even if you have bad credit. Here are some of the main reasons having a vehicle is so important:

Getting to work – Having a job is key to paying bills and improving your financial situation. Without a vehicle, it can be extremely challenging to get to work reliably every day, especially if public transit options are limited.

Taking care of family – Being able to drive kids to school, sports practices, doctor appointments and more is essential. You want to be there for your family, and a vehicle makes that possible.

Running errands – Simple tasks like grocery shopping or picking up prescriptions can be very difficult without a car. Trying to carry bags long distances on public transit or paying for cabs gets expensive.

Independence and reliability – With your own vehicle, you have the freedom to go where you need to go on your own schedule. You don’t have to coordinate rides or wait for the bus. You also don’t have to worry about canceled rides or unpredictable circumstances.

Emergencies – Having a reliable vehicle can provide peace of mind that you can handle unexpected emergencies if you need to rush somewhere or transport a family member.

Job opportunities – A larger job search area and access to more employers can open up new income opportunities. Without a vehicle, your job options may be extremely limited.

Financial security – Reliable transportation supports financial security. It helps people keep jobs, access groceries/services for less money, and get out of expensive transportation situations.

 

Bad Credit Car Loan Options in Airdrie, AB

There are a few options for getting a car loan with bad credit in Airdrie. Here are some of the main dealerships and lenders in the area that specialize in working with bad credit borrowers:

 

House of Cars – With several locations in Calgary and the surrounding area, House of Cars claims to have over 400 vehicles available for bad credit financing. They have an online application that provides instant approvals.

 

Davis Chevrolet – This Airdrie dealership specifically advertises bad credit auto loans and has financing specialists to help those with bad credit, no credit or bankruptcy history get approved. They work with several lenders and can find solutions for most situations.

 

Airdrie Truck and Auto Sales – This smaller used car lot says they can approve financing for any credit situation including first-time buyers, bad credit, no credit or past bankruptcies. They work with local lenders and credit unions.

 

Automaxx – With a location in Calgary, this dealership partners with Bad Credit Car Loans, a national network of lenders specializing in approvals for those with bad credit. They offer quick online approvals.

 

Can Drive Financial – This online lending marketplace caters to those with bad credit. They work with dealers across Alberta to match approved customers with inventory. The online application only takes 2 minutes.

 

Car Deal Canada – Another online lender that approves bad credit customers from across Alberta. They advertise easy online approvals and provide access to their network of dealers with vehicles available for bad credit buyers.

 

Getting Pre-Approved

Getting pre-approved for a car loan before you start shopping can be extremely beneficial if you have bad credit. Here are some of the key advantages of getting pre-approved:

 

  • You’ll know your budget – When you get pre-approved, the lender will tell you the maximum loan amount, interest rate, and monthly payments you qualify for. This allows you to narrow your search to vehicles that fit your budget.
  • Strengthens your negotiating position – Walking into a dealership with a pre-approval letter puts you in a much stronger negotiating position. The dealer knows you already have financing secured, so they may be more likely to offer you a better deal.
  • Saves time – The pre-approval process gets the credit check and paperwork done upfront. This streamlines the buying process so you can focus on test drives and negotiating once you are at the dealership.
  • Locks in the interest rate – Interest rates can change at any time. But with a pre-approval, you lock in the rate you qualify for so it won’t go up later.

 

So how do you get pre-approved for a car loan with bad credit? Here are some tips:

 

  • Check your credit – Before applying, check your credit report so you know what your score is. This helps set accurate expectations.
  • Get your paperwork ready – Lenders will want proof of income, ID, and possibly other documentation. Having it ready speeds up the process.
  • Apply with subprime lenders – Specialty lenders that work with bad credit applicants are your best bet for getting approved.
  • Come prepared with a down payment – A larger down payment helps offset credit risk, increasing your chances of getting approved.
  • Avoid applying too much – Each application can ding your credit, so only apply with one or two lenders.

 

Following these tips will help streamline the pre-approval process so you can start your car search off on the right foot despite having bad credit.

 

Improving Your Credit Score

Improving your credit score before applying for an auto loan in Airdrie can help you secure more favourable loan terms. Here are some tips for raising your credit score:

 

Pay bills on time. Payment history makes up a significant portion of your credit score. Set up reminders to pay all bills by their due dates.

 

Lower credit utilization. Keep balances low on credit cards and other revolving credit lines. Experts recommend keeping utilization below 30%.

 

Avoid new credit applications. Each application can cause a small, temporary drop in your score. Limit applications in the months prior to an auto loan application.

 

Pay down balances. Focus on paying down credit card and other revolving loan balances to improve your credit utilization ratio.

 

Dispute errors. If you find errors on your credit report, dispute them with the bureaus to potentially improve your score.

 

Become an authorized user. Ask a friend or family member with good credit to add you as an authorized user on a credit card. This can benefit your credit mix.

With diligence and smart credit habits, you can raise your credit score over time and potentially qualify for a more affordable Airdrie bad credit auto loan.

 

Down Payment Options

When getting approved for a bad credit auto loan, the down payment amount can have a big impact on the interest rate and monthly payments. Lenders view a higher down payment as less risk, so they may offer more favorable loan terms.

Most bad credit car loans require a minimum down payment of 10-20% of the vehicle’s price. Borrowers with very poor credit may need to put down 25-30% or more. While paying a large chunk upfront can be difficult, it lowers the amount financed so you have smaller monthly payments.

If you don’t have savings for a down payment, there are down payment assistance programs to help. Non-profit organizations like United Way offer down payment grants based on income eligibility. There are also dealer and manufacturer rebate offers that can be applied to the down payment.

Consider all down payment assistance options, as minimizing the amount you finance will make the loan more affordable. A larger down payment also shows the lender you’re invested in paying off the vehicle.

 

Co-Signers

Getting a co-signer with good credit is one of the best ways to improve your chances of getting approved for a bad credit car loan in Airdrie, AB. A co-signer agrees to be equally responsible for repaying the loan. Since the co-signer’s credit score and history is factored into the application, having a co-signer with a high credit score can offset issues caused by your bad credit.

Lenders view co-signers as reducing the risk that you’ll default on the loan. As a result, having a co-signer with a strong credit profile can help you get approved when you might not otherwise qualify on your own. It also opens up the possibility of securing much lower interest rates than you could by yourself.

That said, being a co-signer is a big responsibility. The co-signer is equally liable for the debt, meaning if you can’t make payments, the responsibility falls to them. This can potentially damage their credit if payments are missed. So you want to be sure any co-signer understands the obligation they are taking on before agreeing to it.

If you have a family member or friend with very good credit who is willing to co-sign the loan, it can make a huge difference in getting approved for a car loan with bad credit in Airdrie. Just be sure they fully grasp the gravity of co-signing. When used responsibly, a co-signer can be the tipping point to getting affordable auto financing despite bad credit.

 

Interest Rates

Interest rates are one of the key factors when getting approved for a bad credit auto loan in Airdrie. The interest rate will determine how much you end up paying overall for financing your vehicle.

For borrowers with good credit, interest rates on new car loans average around 4-6%. But for those with bad credit, interest rates are much higher, generally averaging between 15-25%.

The exact interest rate offered will depend on the lender and your specific credit situation. Key factors that affect your rate include:

 

  • Credit score – Lower scores lead to higher rates
  • Down payment amount – More down lowers the rate
  • Loan term length – Shorter terms mean lower rates
  • Vehicle make/model – Premium cars mean higher rates

 

It’s important to shop around between lenders and negotiate the best rate possible for your situation. Having a co-signer with good credit can also help secure a much lower interest rate on your bad credit auto loan.

While the interest rate may seem high compared to normal loans, a bad credit car loan can be an important step in rebuilding your credit and getting reliable transportation. Focus on making timely payments so your credit score improves over time to qualify for better rates down the road.

 

Repayment Term Lengths

When taking out a bad credit car loan in Airdrie, you’ll have options for the repayment term length. Term lengths typically range from 24 to 84 months (2 to 7 years).

The average used car loan term length is around 72 months, while the average new car loan term is around 68 months. Shorter terms of 24-36 months tend to have lower interest rates but higher monthly payments, while longer terms of 72-84 months have higher total interest paid but lower monthly payments.

The pros of a shorter 24-36 month term are:

 

  • Lower interest rate, saving money over the life of the loan
  • Faster to pay off the loan and own the car
  • Builds credit faster by showing you can handle larger payments

 

The cons of a shorter term are:

 

  • Higher monthly payment, less affordable month-to-month
  • Pay off the car before warranty expires
  • Less flexibility if finances change

 

The pros of a longer 72-84 month term are:

 

  • Lower monthly payments, more affordable each month
  • Pay off car over most of warranty period
  • More flexibility if finances change

 

The cons of a longer term are:

 

  • Higher interest paid over the life of the loan
  • Slower to pay off and own the vehicle
  • Less impact on credit from monthly payments

 

In Airdrie, working with a lender to choose the ideal repayment term length based on your budget and goals is key to getting an affordable bad credit car loan.

 

Budgeting for a Bad Credit Car Loan

When budgeting for a bad credit car loan, it’s important to accurately estimate what your monthly payments will be. Lenders take on more risk with bad credit borrowers, so interest rates are typically much higher than for those with good credit. Interest rates for bad credit car loans can range from 9% up to over 20%. Your credit score, income, and down payment amount will determine the rate you qualify for.

Use an auto loan calculator to estimate your potential payment at different interest rates. Don’t forget to factor in taxes and fees, which can add several thousand dollars to the total loan amount. It’s better to overestimate your payment than underestimate – you don’t want to end up with a monthly bill you can’t afford.

Here are some budgeting tips when taking on a bad credit auto loan:

 

  • Aim to spend no more than 10-15% of your take home pay on your car payment and associated costs like insurance and gas.
  • Cut back on non-essential expenses to free up more room in your budget for the car payment.
  • Build up an emergency fund to cover at least a few months of payments in case you run into financial hardship.
  • Consider getting a less expensive, older used vehicle to qualify for a lower loan amount and payment.
  • Make payments on time each month to start rebuilding your credit and qualify for refinancing at a lower rate down the road.

 

With some careful budgeting and discipline, you can manage a bad credit auto loan payment despite your credit challenges. The improved access to transportation and ability to rebuild credit over time can make it a worthwhile investment.

 

Maintaining the Vehicle

Once you’ve secured bad credit auto financing and purchased your vehicle, it’s important to properly maintain it. Routine maintenance helps avoid major breakdowns and extends your car’s lifespan. With bad credit, you likely can’t afford an expensive repair bill, so preventative steps are key.

Follow the manufacturer’s recommended maintenance schedule for oil changes, tire rotations, fluid flushes, etc. Replacing parts before they break down prevents bigger issues. Always keep records and save receipts for the work performed.

Create a maintenance fund by budgeting for these routine expenses. Save a little from each paycheck so you have money on hand for repairs when needed. An emergency fund helps cover surprise issues that pop up too. Arrange discounted service rates at certain shops. Ask if they offer coupons or loyalty programs.

Taking excellent care of your vehicle ensures it lasts. That protects your investment and frees up money to pay down debts and improve your credit. Maintaining an automobile properly is essential for those rebuilding credit with a bad credit auto loan.

 

Conclusion

Getting a car loan when you have bad credit can feel overwhelming, but it is possible. With some preparation and diligence, you can improve your chances of being approved for a bad credit auto loan in Airdrie, AB.

The most important things to focus on are improving your credit score, saving up for a down payment, finding a co-signer if possible, and shopping around for lenders that specialize in bad credit loans. Be sure to only apply for what you can comfortably afford based on your budget.

If you’ve defaulted on past loans, it’s crucial to demonstrate you’ve learned from those mistakes and will make your vehicle payments reliably now. Most lenders understand that setbacks happen, they just want to see you are committed to getting your finances back on track.

While interest rates may be higher compared to traditional loans, a bad credit car loan can help you get dependable transportation, rebuild your credit, and get your finances headed in the right direction. With determination and responsible financial habits, your credit score will improve over time, opening up more affordable financing options in the future.

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Questions about Bad Credit Car Loans in Airdrie

Yes, it is possible to get a car loan in Airdrie with bad credit. Many dealerships and lenders work with customers who have poor credit scores below 600. However, expect higher interest rates compared to applicants with good credit. Look for dealers that advertise “bad credit financing” and ensure the loan terms fit your budget. With consistent payments, you can rebuild your credit over time. Shop around to find the best rates.

Most lenders require a minimum credit score between 500-550 for approval on a used car loan in Alberta. Scores below 500 may still qualify but with higher rates or a larger down payment. New car loans typically require higher scores starting around 600. With scores below 550, expect higher interest rates from 15-25% for used cars and 8-15% for new.

Some top options for buying a car with bad credit financing in Calgary include:

 

– House of Cars – Advertises 400+ vehicles accepting bad credit with multiple dealer locations

 

– Automaxx – Partners with specialized Bad Credit Car Loans lenders to get approvals

 

– GT Motor Sports – Trusted used car dealer focusing on bad credit financing

 

– Magma Motors – Used car dealership specializing in “bad credit car loans” and “poor credit car loans”

 

These dealers understand the challenges of bad credit and have financing options to help get you driving, even with low credit scores.

When applying for a bad credit auto loan in Alberta, most lenders require proof of income, residency, auto insurance, driver’s license, and a recent utility bill. Those with bad credit may need to provide additional financial statements showing current income sources and living expenses. References or a co-signer may also strengthen a weak application. Shop prepared with the necessary paperwork to show you can afford the monthly payments.

 

To boost your odds of getting approved, arrive at the dealership prepared with the following:

 

– Down payment of 10-20% to lower the financed amount

– Proof of steady income from employment or other sources

– References from current landlord, utility company, etc.

– Explanation and paperwork for any negative items on your credit report

– Completed credit application form

– List of budget expenses to show you can afford payments

– Co-signer with good credit history, if possible

 

Coming informed, upfront, and with a down payment shows the dealer you are serious about repairing your credit and paying back the loan.

While zero down payment options may be available, providing a 10-20% down payment is recommended to increase your changes of approval and lower interest rates. With very bad credit below 500, expect lenders to require 25-30% down to offset the additional risk posed by your low credit score. The more you put down upfront, the better. Bring proof of your down payment funds when applying.

 

Based on auto finance data, borrowers in Alberta with credit scores around 550 can expect interest rates between 15-25% on used car loans, on average. Rates vary case by case based on the lender, loan length, vehicle type, and other factors. New vehicles may have lower rates near 10%. Shop multiple lenders to aim for a rate under 20%, if possible. Bringing a large down payment also helps secure better rates.

While no lender can guarantee 100% approval, The Auto Providers advertises helping all credit types get car loan approvals in Alberta. Other options known for working with bad credit and offering high approval odds include Canada Drives, Car Deal Canada, and Auto Credit Express. These have relationships with specialized subprime lenders across auto finance companies to extend car loan approvals to applicants with credit challenges.

Yes, getting pre-approved for an auto loan before visiting dealerships is highly recommended when you have bad credit. This shows the dealer you have serious buying capacity and have already been cleared at a certain loan amount and interest rate. Come armed with your pre-approval letter to strengthen your negotiating position, making the process faster and easier when you find the right vehicle.

 

Most major banks and lenders in Alberta require at least 12 months and ideally 24 months of clean credit history after a bankruptcy discharge before considering auto loan approval. This shows you have re-established positive payment behavior. Exceptions may be possible with strong income proof and down payment through specialized subprime lenders. Expect very high interest rates immediately after bankruptcy.

 

According to consumer comparison sites, some of the best options for getting approved for a car loan with bad credit in Alberta include:

 

– myAutoloan – Marketplace to compare personalized loan offers from up to 4 lenders

 

– Carvana – Approval process completely online for used car purchases and financing

 

– Capital One – National lender known for financing deep subprime borrowers

 

– CarMax – Offers financing approval decisions in minutes both online and in stores

 

These companies streamline approvals for borrowers with past credit struggles.

Yes. When you finance a car with an auto loan in Alberta, the lender retains a security interest in the vehicle title until the loan is satisfied. Defaulting on payments gives them the legal right to repossess the vehicle through a repo company and then sell it to cover unpaid balances. This also severely hurts your credit. Avoid repossession at all costs by staying current on monthly payments within your budget.

If denied on your initial auto loan application, don’t panic. First, ask the lender for details on why you were declined so you can address those issues. Getting denied allows you to obtain your credit report and score to review. Then you can implement strategies to boost your score, like paying down balances and disputing errors. Also, try alternative lenders known to finance deeper subprime applicants. Persistence pays off.

The easiest ways to check your current car loan interest rate for free are to log into your lender account online or call your lender’s customer service line. Your monthly billing statements also clearly list the specific annual percentage rate (APR) charged on the auto financing. You can additionally sign up for a free service like Credit Karma to view current rates on all your active accounts. Monitoring this helps assess refinance options.

Yes. As long as you make consistent on-time payments, getting approved for auto loan financing can help rebuild and improve low credit over time in Alberta. Opening a new installment account boosts your mix of accounts and shows positive payment behavior when reported to credit bureaus each month. Just ensure the loan amount fits comfortably within your budget to keep payments on track.

 

Experts typically recommend getting pre-approved directly through your bank or credit union before applying at the dealership, especially if you have bad credit. This allows you to negotiate as a cash buyer with locked-in terms, compared to relying on the dealer to find financing. However, dealership financing has become more competitive and offers convenience of one-stop shopping – so weigh your options.

The most effective ways to get the best interest rate possible on a used car loan when you have bad credit include:

 

– Put at least 20% down payment to get rates under 15%

– Apply with a qualified co-signer who has excellent credit

– Shop rates from online lenders and credit unions

– Limit loan term to 3 years or less

– Provide proof of sufficient recurring income

– Consider an older used vehicle instead of newer

– Enroll in automatic payments from checking account

 

Every little bit helps drive that rate down!

 

On average, dealers make between $800-1,200 in flat commissions upfront per auto loan they arrange, plus additional percentage payments over the loan term. Subprime loans see higher dealer compensation. Low credit scores cost consumers exponentially in interest, allowing dealers to mask big profits in the finance office. Come informed on current incentives and competitive market rates.

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