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Bad Credit Car Loans in Burlington

Bad Credit Car Loans in Burlington

Owning a reliable car is essential for most people living in Burlington, Ontario. With a population of over 170,000, this mid-sized city has limited public transit options. Driving provides flexibility and convenience to get to work, school, appointments, and run errands. However, when you have bad credit, getting approved for an auto loan can be challenging.


In this comprehensive guide, we’ll provide an overview of bad credit car loans in Burlington, Ontario. We’ll cover the benefits of getting a car with bad credit, tips for getting approved, the top local dealerships that work with bad credit, and much more. With the right information and preparation, those with poor credit can still finance a quality used vehicle to meet their transportation needs.

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What is Considered Bad Credit?

Bad credit means you have a low or poor credit score. Most lenders consider having a credit score under 580 to be bad or poor credit. A credit score between 580 to 669 is considered fair credit. If your credit score is 670 or above, you generally have good credit.

There are a few key factors that can lead to a bad credit score:

 

  • Missed payments – If you frequently miss credit card, loan, or bill payments, it will hurt your credit score.
  • High credit utilization – Using more than 30% of your available credit limits will lower your score.
  • Short credit history – Having a limited credit history can make it hard to get approved.
  • Bankruptcies or collections – Bankruptcies and accounts in collections will dramatically impact your score.
  • Applying for lots of new credit – Each credit application causes a hard inquiry on your report.

 

So in summary, bad credit is usually a score under 580 and is caused by missed payments, high utilization, short history, bankruptcies, collections, and too many credit inquiries.

 

Why Bad Credit Happens

There are many reasons 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, damaging your credit score. With less income coming in, it can be very difficult to keep up with bills and loans.

 

Medical Bills

A major illness or medical emergency can result in large, unexpected bills that may be difficult to pay off. Unpaid medical bills can get sent to collections agencies and show up on your credit report, bringing down your score.

 

Divorce

Going through a divorce can wreak havoc on finances. Credit card debt and other joint accounts may end up delinquent. Dividing up assets and liabilities can leave you responsible for debt you can’t afford.

 

Poor Money Management

Lack of budgeting, overspending, and racking up credit card balances can all lead to missed or late payments, defaults, and collections. Failing to borrow and manage debt responsibly will damage your credit over time.

 

Challenges of Getting a Car with Bad Credit

Getting approved for bad credit car financing in Burlington, ON can be challenging compared to buyers with good credit. Here are some of the common difficulties you may face:

 

Higher Interest Rates

Lenders view applicants with poor credit as riskier borrowers. To compensate for this increased risk, lenders will charge higher interest rates on bad credit auto loans. The national average interest rate for used car loans is around 8%. With bad credit, expect to pay 10-20% or more in interest.

 

Lower Loan Amounts

Since lenders see bad credit applicants as riskier, they will also limit the loan amounts. Instead of financing 100% of the vehicle’s value, lenders may only approve 50-80% loan-to-value ratios. This means you’ll need to make a larger down payment.

 

Down Payment Requirements

Speaking of down payments, bad credit borrowers can expect steeper down payment requirements too. While buyers with good credit may put 0-10% down, you may need to put down 10-30% or more with poor credit. This helps offset the risk for the lender.

 

Benefits of Getting a Car with Bad Credit

Despite the challenges, there are some key benefits to getting a car loan when you have bad credit:

 

Improve your credit score – Making regular on-time payments on your car loan can help rebuild your credit score over time. This will make it easier to get approved for loans and other credit products in the future.

 

Open up job opportunities – Having reliable transportation expands the jobs you can apply for and get to every day. This is especially important if public transit options are limited in your area.

 

Meet daily transportation needs – A car allows you to conveniently go to the grocery store, doctor appointments, school, and anywhere else you need to go on a regular basis.

 

Types of Bad Credit Car Loans

There are several options for getting financing in Burlington when you have bad credit. Understanding the main types can help you find the right car loan.

 

In-House Financing

Many dealerships offer their own in-house financing programs for bad credit. This allows them to approve borrowers that banks would normally decline. Interest rates are often higher with in-house financing to compensate for the risk.

 

Buy Here Pay Here

Buy here pay here (BHPH) dealers cater specifically to buyers with poor credit. You make payments directly to the dealership instead of a bank. BHPH loans typically charge very high interest rates but may be an option if you can’t get approved elsewhere.

 

Subprime Financing

Subprime lenders provide loans to borrowers with credit scores below 620. Rates are higher than prime loans but lower than BHPH. Large subprime lenders like Credit Acceptance work with auto dealers to finance people with poor credit.

 

Co-Signer Loans

Adding a co-signer with good credit can help you qualify and get a lower interest rate. The co-signer agrees to be responsible for repaying the loan if you can’t make the payments. Having a co-applicant makes the lender see you as less risky.

 

Getting Pre-Approved for a Bad Credit Car Loan in Burlington

Getting pre-approved for a bad credit auto loan in Burlington can help streamline the buying process and put you in a stronger negotiating position with dealers. Here are the key steps to getting pre-approved:

 

Check Your Credit Reports

Before applying for a car loan in Burlington, check your credit reports from Equifax and TransUnion to understand where your credit stands. This will help you have realistic expectations when applying. Look for any errors that may be lowering your score and dispute them if found.

 

Gather Necessary Documentation

Lenders will require proof of income, identification, and residence. Have pay stubs, tax documents, driver’s license, SIN card, utility bills, and bank statements ready. The more complete your application, the faster it can be processed.

 

Research Lenders

Look for lenders that specialize in bad credit loans. Dealerships, banks, and online lenders are all options. Compare interest rates and loan terms to find the best fit for your situation.

 

Complete the Loan Application

Submit a complete application with your personal details, income documents, desired loan amount, and vehicle details if you have one selected. Double check all information for accuracy. Then await pre-approval from the lender.

Getting pre-approved positions you to buy confidently once at the dealership. Make sure to get pre-approved offers from multiple lenders for the strongest bargaining position.

 

Tips for Getting Approved in Burlington

Getting approved for a bad credit car loan can seem daunting, but being prepared and taking some steps can increase your chances. Here are some tips to help get your loan application accepted:

 

Large down payment

Lenders view a large down payment as a sign that you are invested in repaying the loan. Putting down 20% or more on the vehicle shows you are financially committed. With more money down, the loan amount is lower, which reduces risk for the lender.

 

Proof of steady income

You’ll need to provide proof of income, such as recent pay stubs, tax returns, or bank statements. Having a reliable source of income helps assure the lender that you can manage the monthly payments. Solid employment history at the same job looks best.

 

Shorter loan term

Opting for a shorter 36 or 48 month loan term means you’ll pay less interest over the life of the loan. Your monthly payments will be higher than a longer term, but lenders prefer a faster repayment schedule for bad credit borrowers.

 

Secured loan or co-signer

Secured loans or having a creditworthy co-signer are options if you’re having trouble getting approved. A secured loan uses the vehicle as collateral, while a co-signer agrees to be responsible for payments if you can’t pay. These show the lender they can recover their investment if needed.

 

Burlington ON’s Top Bad Credit Car Dealerships

If you have bad credit but need a reliable vehicle, there are some excellent dealerships in the Burlington, Ontario area that can help. Here are the top options for buying a car with bad credit in Burlington ON:

 

Burlington Kia

 

Location: 5506 Harvester Rd, Burlington, ON

Burlington Kia understands that credit challenges happen to good people. Their finance experts will work to get you approved for a competitive interest rate, even if you have bad credit or no established credit history. They have a wide selection of new and used Kia models to choose from.

 

Turner Volkswagen

 

Location: 4663 Mainway Dr, Burlington, ON

The finance team at Turner Volkswagen specializes in helping those with poor credit get behind the wheel of a reliable used Volkswagen. They’ll take the time to understand your situation and match you with a car and payment plan that fits your budget.

 

Burlington Nissan

 

Location: 740 Guelph Line, Burlington, ON

Even if you’ve been turned down elsewhere, the experts at Burlington Nissan can help you get approved for auto financing. Their compassionate staff won’t judge you and will work hard to get you into the Nissan you want and deserve.

 

Buying from a Private Seller with Bad Credit in Burlington

If you have bad credit but find a good deal on a used car from a private seller, there are a few options for purchasing the vehicle without having to go through a traditional dealer financing:

 

Getting a Personal Loan

One option is taking out a personal loan from your bank or credit union, or through an online lender. Personal loans typically have lower interest rates than bad credit car loans. You’ll get approved for a lump sum and can use that to pay the seller directly. Just make sure to get the title signed over to you.

 

Paying Cash

If you have enough cash available, you can pay the private seller directly. This avoids having to get approved for financing. Just be sure to only pay once the title is signed over to you.

 

Having the Seller Finance

Some private sellers may be willing to finance the sale themselves, where you make payments directly to them each month. You’ll sign a contract with all the terms. This requires a lot of trust, as the seller could repossess the car if you default on payments.

Buying from a private seller gives you more options when you have bad credit. Just make sure you get everything in writing before handing over any money.

 

Alternatives to Getting a Car

If getting approved for an auto loan with bad credit seems unlikely or unaffordable, there are a few alternative transportation options to consider:

 

Public Transportation

Burlington has a public transit system called Burlington Transit that serves the city and surrounding region. This includes buses and para-transit services. Public transportation like buses and trains can be an affordable and convenient way to get around if you live and work near transit routes.

 

Ride Sharing

Ridesharing services like Uber and Lyft operate in Burlington. While not as cheap as public transit, ridesharing can provide door-to-door service and may cost less than owning a car. There are also carpooling apps like Kangaride where you can offset costs by sharing rides.

 

Biking/Walking

For shorter trips, biking or walking can be an option. Burlington has an extensive network of bike lanes and paths to make cycling around town easier and safer. Walking is free and can easily get you around neighbourhoods and downtown. Consider an electric bike if you don’t want to arrive sweaty or live further from your destinations.

While not as convenient as having your own car, exploring these alternatives to car ownership can save you money in the short-term while you work on improving your credit to qualify for a car loan down the road.

 

Improving Your Credit Score

If you have bad credit but want to improve your credit score so you can get approved for a car loan with better terms, there are several strategies you can use:

 

Pay bills on time

One of the biggest factors in your credit score is your payment history. Always pay your bills on time, including credit cards, utilities, rent, etc. Setting up automatic payments can help ensure you never miss a due date.

 

Lower credit utilization

Don’t max out your credit cards. Experts recommend keeping your balances below 30% of your credit limit on each card. The lower the better.

 

Don’t close old accounts

Keep your old credit card accounts open, even if you don’t use them often. The length of your credit history is also a significant factor in your score. Closing accounts lowers your total credit limit and raises your credit utilization.

 

Conclusion

Getting approved for a car loan in Burlington when you have bad credit can seem daunting, but it is possible with the right preparation and knowledge. In this guide, we covered the key things to know, from understanding credit scores to finding the best bad credit car dealerships in Burlington ON.

The main points to remember are:

 

  • Check your credit score and report for errors before applying
  • Get pre-approved to show dealers you’re serious
  • Bring all required documents to streamline the process
  • Consider getting a co-signer if your credit is very poor
  • Shop around for the best rates and flexible terms
  • Make a higher down payment if you can
  • Stick to an affordable monthly payment you can manage

 

By following the advice in this guide, being patient, and staying determined, you can successfully get a car loan even with less-than-perfect credit. With reliable transportation, you can get to work, take care of your family, and continue improving your financial situation over time.

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Burlington Bad Credit Car Loan Questions

The minimum credit score to qualify for an auto loan from most lenders in Burlington is around 600. However, borrowers with scores in the 650-700 range will get better rates. Those with scores of 720+ will qualify for the lowest rates. When shopping for a car loan with bad credit, focus on the interest rate and loan terms rather than just monthly payments. A higher rate over a longer term can mean paying much more overall.

Some of the best options for bad credit auto loans from dealerships in Burlington include:

– CarNation Direct – Specializes in bad credit loans with flexible terms

– SRQ Auto – Offers financing to borrowers with credit scores as low as 500

– Canada Drives – An online loan marketplace connecting borrowers with lenders specializing in bad credit

– Fairway Auto Credit – Works with over 25 lenders to help subprime borrowers

These dealers make it simple to apply and often provide customized loan terms to fit different budgets and credit situations.

If your credit score is below 600, here are some tips that can help get approved:

 

– Apply for financing at a dealership that specializes in bad credit auto loans

– Have a stable income and down payment of at least $1,500

– Bring proof of income, government ID, and proof of auto insurance

– Consider a co-signer with better credit to improve your chances

– Be flexible on the vehicle – older used cars are easier to finance

– Expect a higher interest rate due to the increased risk

 

With preparation and choosing the right lender, those with poor credit can still finance vehicles to get around.

Besides dealerships, here are some other common options for car loans available in Burlington:

– Banks and credit unions – Many large banks offer auto financing including TD, Scotiabank, RBC, and more

– Online lenders – Finance companies like Canada Drives and loanDepot.ca provide online loan applications

– Borrowell – An online lending marketplace matching borrowers with lenders and loan offers

– National auto finance companies – UApply and CarFinco specialize in auto lending across Canada

These alternative lenders often offer competitive rates and more flexible qualification terms compared to dealers.

The easiest vehicles to finance for those with bad credit tend to be older, high mileage used cars. Specifically, sedans and simple economy cars 10+ years old with over 150k kms are easier to finance as they pose less risk for lenders. Trucks, SUVs, performance cars and newer vehicles tend to require higher credit scores to qualify for financing.

 

Yes, auto equity loans allow those with poor credit to borrow against the existing equity they have in their paid off vehicle. The vehicle’s value compared to what is still owed determines the amount available to borrow. Auto equity loans typically have lower credit requirements vs standard auto financing. However, interest rates are often quite high, putting the vehicle at risk if unable to repay the loan.

Most auto lenders in Burlington require a minimum individual annual income of around $20,000 – $25,000 or a household income of $35,000 – $40,000 for approval. However, each lender sets their own requirements. Those earning less than roughly $20k individually will struggle getting approved without an eligible co-signer. Income verification is required in most cases when applying for any auto loan.

When applying for auto financing in Burlington, most lenders will require proof of:

– Income – Recent pay stubs or tax documents

– Residency – Government ID with current address

– Auto insurance – Proof of valid insurance in your name

– Down payment – Bank statements showing available funds

Having these documents ready along with details of the vehicle you want will help accelerate the application and approval process.

The average interest rate on a used car loan from a dealership in Burlington is currently 8-15% for buyers with good credit (scores above 700). For those with poor credit below 650, rates are typically between 15-25% at most dealerships. However, specialty subprime lenders may offer loans to borrowers with credit scores below 500, with rates ranging from 25-35%.

The three primary factors that influence auto loan interest rates in Burlington are:

  1. Credit score – Borrowers with higher scores qualify for lower rates
  2. Down payment – Larger down payments reduce rates
  3. Loan term – Shorter terms (e.g. 36 months) have lower rates than longer ones

Additionally, the overall cost, age and type of vehicle can impact rates available from lenders when financing your car purchase.

The most common used auto loan terms offered by dealerships in Burlington are 36, 48, 60, 72 and 84 month payment plans. 36-60 month terms are more readily available for newer used vehicles with lower mileage, while 72-84 month loans may be required for financing older or high mileage trade-ins. Auto loans from dealers exceeding 84 months are rare due to increased lending risks over longer terms.

**Pros of longer loans (72-84 months):**

– Lower monthly payments

– Can finance more expensive vehicles

– Easier to qualify with bad credit

 

**Cons of longer loans:**

– Pay significantly more interest over loan term

– Increased risk of negative equity if trading in before paid off

 

**Pros of shorter loans (36-60 months):**

– Pay far less interest charges overall

– Less risk of owing more than car is worth

– Faster road to ownership by paying off loan sooner

 

**Cons of shorter loans:**

– Higher monthly payments

– May not be able to finance more expensive vehicles

Be on the lookout for these concerning clauses when examining a auto loan contract:

 

– Mandatory add-ons like extended warranties baked into loan

– Penalties for paying off loan early

– Lender ability to repossess car or change terms even if payments are on time

– Interest rate increases triggered by unrelated events like job loss

– Fees for paying more than allotted per month to principal

 

Avoid lenders imposing unfair conditions and fees not clearly justified based on borrowing risk level.

The best bad credit car loan rates are currently available from specialist online lenders like Canada Drives, Car Deal Canada and Carfinco. By using proprietary algorithms assessing risk, these fintech lending companies can offer loans to subprime borrowers with rates as low as 7%. Traditional banks and dealerships seldom offer rates under 15% for those with low credit scores.

Yes, the federal government provides Canada Learning Bond grants to lower income families which can be used to finance a car purchase in cases when reliable transportation is needed to maintain employment. Additionally, some provinces have programs that provide affordable vehicle loans paired with credit counseling to qualifying applicants challenged by bad credit or no credit.

If your auto loan application is denied, take these steps right away:

 

  1. Contact the lender to ask for the specific reasons behind the denial
  2. Review your credit reports for accuracy at Equifax and TransUnion
  3. If reports are accurate, begin improving your credit right away
  4. Consider options like a co-signer to meet minimum requirements
  5. Research alternative subprime lenders that may offer you a loan

 

Learning why you were denied allows you to address issues and improve your chances going forward.

Most dealerships in Canada require a minimum down payment between $1,000 – $1,500 on a used car purchase to approve dealer financing, assuming you have average credit. For those with poor credit below 600, the minimum is usually between $1,500 – $2,000 down. Higher down payments allow dealers to mitigate lending risks on buyers with weaker credit profiles.

**Pros of Paying Cash**

 

– Own vehicle outright with no monthly payments

– Avoid interest charges and loan fees

– Can initially negotiate better price

– No credit check or income verification

 

**Cons of Paying Cash**

 

– Need to have large lump sum saved up

– Ties up capital unable to be invested elsewhere

 

**Pros of Financing**

 

– Pay over 12-84 month term manageable even on lower income

– Take advantage of historically low interest rates

– Frees up cash for other priorities like debt repayment

 

**Cons of Financing**

 

– Pay more overall with interest charges

– Loan terms set minimum monthly payments

– Late payments damage credit standing

Tips to boost your auto loan approval odds with poor credit:

 

– Shop for older, lower-cost used vehicles as lenders perceive less risk

– Put down at least 20% as a down payment if possible

– Enroll in credit counseling to start improving your credit score

– Clean up errors on your credit report and resolve collection issues

– Apply with subprime lenders specializing in higher-risk loans

– Bring proof you can afford payments by verifying income and budget

 

Implementing two or more of these tips can help those with credit challenges access necessary auto financing.

Those unable to qualify for a traditional car loan have options like:

 

– Bank loan or line of credit – Higher rates but may approve based on income

– Dealership in-house financing – Some provide financing to customers they otherwise would have to turn away

– Private sale purchase – Pay cash buying from a private party rather than dealer

– Co-borrower loan – Share loan responsibility with someone allowing both names on vehicle

– Company vehicle – Ask about car allowance or leased company car as part of job offer

 

Depending on individual circumstances, these alternatives can assist with securing vehicle transportation.

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