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Bad Credit Car Loans in Cambridge

Bad Credit Car Loans in Cambridge

Having bad credit can make getting approved for an auto loan feel impossible. In fact, a recent report found that over 30% of Canadians have a credit score below 600, considered poor or bad credit. This makes getting approved for a reasonable car loan extremely difficult.

With limited options, many Canadians with bad credit feel stuck without reliable transportation. However, there are still financing options available with the right preparation and knowledge. Understanding the process and your rights as a borrower can help you get approved for the auto loan you need.

This guide will walk through everything you need to know about getting a car loan with bad credit in Cambridge, Ontario. We’ll cover tips for improving your credit score, finding lenders, negotiating loan terms, down payment assistance programs, and more. With the right strategy, you can get driving with bad credit car loan financing that works for your budget.

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What is Bad Credit?

Bad credit refers to having a poor credit history that negatively impacts your credit score. This typically means having a credit score below 600 on the standard 300-850 FICO scale used by the three major credit bureaus (Experian, TransUnion, Equifax). A score below 600 is considered poor credit by most lenders.

Your credit score is determined by analyzing your credit report, which details your history of borrowing money and paying it back, including credit cards, auto loans, mortgages, and other types of credit. Several factors impact your score, including payment history, amounts owed, length of credit history, new credit inquiries, and credit mix. A history of late payments, defaults, bankruptcies, foreclosures, and high debt loads will lower your credit score.

A bad credit score makes it harder to qualify for loans and credit cards. Lenders view applicants with poor credit as riskier borrowers who are more likely to default. When you do qualify, it will be at higher interest rates and with less favourable terms. However, there are still lenders willing to work with bad credit borrowers.


Why Bad Credit Happens

There are many common reasons why people end up with bad credit. Financial setbacks like job loss, medical bills, or divorce are some of the most frequent causes of bad credit. Here are some common reasons bad credit can happen:

Job Loss – Losing your job unexpectedly can make it very difficult to keep up with financial obligations like credit card or loan payments. The missed payments lead to late fees, increased interest rates, and lower credit scores.

Medical Bills – A major illness or injury can result in thousands of dollars in medical bills. Even with insurance, high deductibles and co-pays can be difficult to afford. Unpaid medical bills get sent to collections, damaging your credit.

Divorce – A divorce can wreak havoc on finances. Dividing up debt obligations, joint accounts, and assets can lead to late or missed payments. Spouses may end up with debt they cannot afford. Credit scores inevitably take a hit.

Overspending – Getting in over your head with debt from credit cards, personal loans or financing too much auto can negatively impact your credit if you cannot keep up with payments.

Lack of Credit History – If you have limited accounts or haven’t used credit much, you may have a low score due to thin or non-existent credit history. Without positive payment history, scores suffer.


Challenges of Getting a Car Loan with Bad Credit

Getting approved for an auto loan when you have bad credit can be challenging. Here are some of the common issues borrowers with poor credit face:


Higher interest rates – Lenders view borrowers with low credit scores as higher risk, so they charge more in interest to offset that risk. The lower your credit score, the higher your interest rate is likely to be on a car loan.


Lower approval odds – Traditional lenders have strict credit score cutoffs, usually around 600. If your score is below that threshold, you’ll have a hard time getting approved by banks and credit unions. Subprime lenders may approve borrowers with scores in the 500s, but will charge very high rates.


Down payment requirements – Many lenders require a 20-30% down payment if you have bad credit. With little or no money down, you’re more likely to end up underwater on the loan (owing more than the car is worth). The down payment reduces the lender’s risk.


Minimum Credit Score for Auto Loans

When applying for a bad credit auto loan, one of the most important factors lenders consider is your credit score. Your credit score gives lenders an indication of how risky it is to lend to you. In general, the higher your credit score, the better your chances of getting approved and securing favourable loan terms.

For bad credit borrowers, lenders usually require a minimum credit score of 500 to qualify for financing. This is considered a “subprime” credit score by most lenders. With a score in the low 500s, you may get approved but should expect to pay higher interest rates and get less favourable loan terms overall.

Each lender uses their own credit score thresholds when evaluating loan applications. But across the board, the most commonly required minimum scores tend to fall somewhere between 500 and 600. The higher you can get your score within or above that range, the better off you’ll be when applying for a bad credit auto loan.


Improving Your Credit Score

Improving your credit score takes time and discipline, but it’s one of the best ways to increase your chances of getting approved for an auto loan with bad credit. Here are some tips for boosting your credit score:


Check your credit reports: Request free copies of your credit reports from the three major credit bureaus – Equifax, Experian, and TransUnion. Review the reports closely and dispute any errors or outdated information that could be dragging your score down. Getting mistakes corrected can give your score an immediate boost.


Pay all bills on time: Payment history makes up a significant portion of your credit score. Set up autopay or calendar reminders for all your bills to avoid late payments. Paying rent and utilities on time also helps demonstrate you’re a responsible borrower.


Lower credit card balances: Keep credit card balances low compared to their limits. Experts recommend a balance that’s 30% or less of the total limit. Pay down high card balances aggressively to improve this credit utilization ratio.


Avoid applying for new credit: Each credit application can dent your credit score a few points. Try not to open any new credit accounts as you’re rebuilding. Too many inquiries in a short period can be seen as a red flag.


With diligence and patience, you can improve your credit score substantially within 6-12 months. A higher score will open the door to more auto loan options with lower interest rates.


Getting a Co-Signer

Having a co-signer with good credit can help you qualify for a car loan that you may not get approved for on your own. A co-signer agrees to be equally responsible for making the monthly payments, so the lender sees less risk in lending to someone with poor credit.

Before asking someone to co-sign on an auto loan, make sure they understand the responsibility they are taking on. If you fail to make payments, it will negatively impact their credit score as well. Also, the balance of the loan will appear on their credit report.

Look for a co-signer who has a long credit history and high credit score. Their income should also be enough to comfortably handle the monthly payments if needed. If possible, offer to make the monthly payments yourself and keep your co-signer informed of your payment activity.

While having a co-signer can help you get approved, it’s still important to shop around for the best rates. Just because you have a co-signer does not mean you have to accept a high interest loan.


Shopping Around for Bad Credit Car Loans

When you have bad credit, it pays to spend time shopping around for a car loan instead of just going with the first option you find. Though bad credit limits your options, comparing different lenders, banks, credit unions, and dealerships can help you find the most affordable financing terms.

Here are some options to consider when shopping for a bad credit car loan:


  • Banks – Large banks may be willing to approve those with poor credit, but often at a higher interest rate. Small community banks and credit unions may offer more competitive rates.
  • Credit Unions – Credit unions provide financial services for members and may be more flexible than banks in approving bad credit borrowers.
  • Online Lenders – Online lenders like provide quick pre-approvals and loan options tailored to bad credit.
  • Dealerships – Many dealerships work with special finance lenders focused on subprime borrowers. But watch out for excessive fees or interest rates.


Expanding your search across multiple sources gives you negotiating power to secure the most affordable monthly payments and interest rate. Pay attention to factors like APR, loan term length, down payment requirements, and any application or origination fees.


Applying for Bad Credit Car Loans

When applying for a bad credit auto loan, there are some key documents you’ll need to have ready to submit to lenders:


  • Proof of income – Recent pay stubs, bank statements, tax returns, or other documentation showing your income.
  • Government-issued ID – Such as a driver’s license or passport.
  • Proof of auto insurance – You’ll need to show you can get insured before getting approved.
  • Down payment amount – Having a down payment ready improves approval chances.


The loan application process itself is quite quick and can be completed online or over the phone. You’ll fill out a form with your personal and financial details which the lender will use along with your credit report to make a fast decision.

The approval timeline for bad credit auto loans can vary. Some specialized subprime lenders promise approvals in minutes or the same day. More commonly it takes 24-48 hours to get a bad credit auto loan approval decision after submitting an application.

Being prepared with the required documents and information ahead of time allows for a smoother application process.


Buying from Buy Here Pay Here Dealers

One option for getting approved for a car loan with bad credit is to buy from a “buy here pay here” (BHPH) dealer. BHPH dealers are different than traditional dealerships because they provide their own in-house financing to customers with poor credit.

The advantage of going to a BHPH dealer is that they are likely to approve customers with very low credit scores, even down into the 400s or 500s. This is because they specialize in lending to subprime borrowers. However, the interest rates at BHPH dealers tend to be much higher than traditional auto loans – often over 20%.

BHPH dealers know they are taking on riskier borrowers. To compensate, they charge higher interest rates. They also tend to sell older used cars that are low cost, so their risk is minimized if the borrower stops making payments and they have to repossess the vehicle.

If you need to get a car but have very poor credit, a BHPH dealer may be an option. Just be prepared to pay a higher cost over the life of the loan due to the increased interest rate. However, if you make your payments on time, it’s one way to start rebuilding your credit score.


Leasing vs Buying with Bad Credit

When you have bad credit, deciding whether to lease or buy your next vehicle can be a tricky decision. Both options have their pros and cons.

Here are some of the main advantages of leasing with bad credit:


  • Lower monthly payments – Lease payments are generally lower than finance payments on a new vehicle.
  • Drive a newer car – Leases typically run 2-4 years. This lets you drive a new car more frequently.
  • Easier approval – Some lease providers may approve applicants with lower credit scores versus lenders.


However, there are also some downsides to be aware of:


  • Higher interest rates – Due to bad credit, you’ll likely pay a higher interest rate on a lease.
  • Mileage limits – Most leases limit the kilometres you can drive annually, with fees for excess kilometres.
  • No equity – Leasing means you don’t build any equity in the vehicle.


On the other hand, here are some potential benefits of buying with bad credit:


  • Build equity – When you buy, the payments help build equity in the vehicle over time.
  • No mileage restrictions – When you own the vehicle, you can drive as many miles as you want.
  • Customization – You can customize a vehicle how you want when you buy it.


Meanwhile, some possible drawbacks of buying with poor credit include:


  • Higher interest rates – Lenders will charge higher rates for bad credit buyers.
  • Older cars – With a limited budget, you may only qualify for a used or older model.
  • Higher monthly payments – Buying a car with bad credit often means pricier monthly payments.


Weighing the pros and cons of both options can help you decide if leasing or buying is the better choice given your credit situation and transportation needs.


Maintaining Your Auto Loan

Once your bad credit auto loan is approved and you purchase your vehicle, it is critical to maintain your loan properly. The main goal is to make all your monthly payments on time and in full. Here are some tips to help you stay on top of your auto loan:


Make Payments on Time

Mark your due date on your calendar and set up reminders to ensure your payment is made before the due date every month. Many lenders allow you to set up automatic payments from your bank account, which can help avoid missed or late payments.


Sign Up for Email/Text Reminders

Most auto lenders will send reminders as your payment due date approaches. Opt-in to receive these notifications so you never miss the date.


Budget Accordingly

Make sure your monthly budget accounts for the auto loan payment. If money is tight, look for areas to cut back on discretionary spending to dedicate more to your loan payment. Putting extra money toward the principal can help you pay off the loan faster.


Avoid Missing Payments

If you are at risk of missing a payment due to a financial hardship, contact your lender immediately to discuss your options. They may be able to defer a payment or make other arrangements.

Staying current on your auto loan payments is the number one thing you can do to rebuild and improve your credit after getting approved for a bad credit car loan. Your payment history makes up a significant portion of your credit score, so timely payments will demonstrate you are now a responsible borrower.


Rebuilding Your Credit

Getting an auto loan is one of the best ways to start rebuilding your credit score. As long as you make your monthly payments on time, having an active auto loan will have a positive impact.

When you are looking for a lender, find one that reports your payment history to all three credit bureaus – Equifax, TransUnion and Experian. This ensures your positive payment activity is documented across all three of your credit reports.

You should also find out how often your lender reports your payment information. The more frequently they report it, the quicker it can help boost your score as long as your payments are on time.

In addition to making payments on time, you want to avoid maxing out your available credit on the auto loan. If possible, only utilize a portion of the credit extended so that your credit utilization ratio stays low. The lower your credit utilization, the better it is for your credit score.

Finally, having an open auto loan with positive payment history will increase the average age of your credit accounts, which is also beneficial for your overall credit score. Just be sure to keep the loan open and active – do not pay it off early if your goal is to rebuild your credit.

With responsible use of your auto loan, you can rebuild your credit score over time. Just be patient, make payments on time every month, and keep your credit utilization low.



In summary, having bad credit can make getting approved for an auto loan more challenging, but it is still possible with some preparation and perseverance. The keys are improving your credit score if time allows, having a down payment ready, exploring lenders that specialize in bad credit loans, and having a co-signer lined up if needed. With realistic expectations around factors like interest rates and monthly payments, those with poor credit can still find a dealer willing to approve their application.

A few final tips for landing a car loan with bad credit in Cambridge, Ontario include:


  • Get pre-approved before visiting dealerships so you know the rate and terms you qualify for
  • Consider buying a less expensive used vehicle to get approved for a smaller loan amount
  • Bring proof of income, residency, and references to the dealer
  • Negotiate the interest rate, down payment amount, and other terms
  • Read all paperwork carefully before signing and make sure you understand the deal
  • Make payments on time going forward to steadily rebuild your credit


With preparation and perseverance, those with poor credit can get the wheels they need through creative financing. Maintaining the auto loan responsibly will also help improve their credit and open up better options in the future.

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Cambridge Bad Credit Car Loan Questions

Getting approved for a car loan with bad credit in Cambridge, Ontario is possible with some preparation. Start by checking your credit score and report so you know where you stand. Anything below 600 is considered bad credit. Next, save up a down payment of at least 10% of the vehicle cost to improve your chances of approval. Shop for used vehicles in your budget to get reasonable payments. Apply for financing at dealerships that specialize in bad credit lending. They will work with subprime lenders to get you approved. Be prepared to provide proof of income and residency. With some diligence, you can get the car loan you need despite having poor credit.

With a credit score of 500, you can expect a very high interest rate on a used car loan in Cambridge, likely between 18-25%. This is considered deep subprime financing territory. The lower your credit score, the higher your interest rate will be since you are viewed as a risky borrower. 500 is an exceptionally low score, so do not expect to see rates lower than 18%. The average used car loan rate was 8.37% for borrowers with good credit in Q4 2022 per TransUnion. But subprime borrowers paid over three times higher rates on average. Shop for the best rate across multiple dealerships and get pre-approved before negotiating your purchase. Improving your credit score over time will open up better rates.

When applying for a bad credit car loan in Cambridge, come prepared with these documents to improve your chances of approval:


– Valid government-issued photo ID

– Proof of income – recent pay stubs, bank statements, tax documents

– Proof of address – utility bill, bank statement, rental agreement

– Down payment funds – bank statement showing available cash

– References – names and contact info of people who can vouch for you

– Proof of auto insurance quote/coverage


Having these documents ready proves you can afford the monthly payments and shows stability. Double check all application details for accuracy too. Providing everything upfront prevents delays from the subprime lender needing to request more information. Complete applications get approved faster.

The easiest place to get approved for a bad credit car loan in Cambridge is a buy here pay here (BHPH) dealership. BHPH dealers focus specifically on approvals for subprime borrowers with credit challenges. They have relationships with specialized finance companies willing to take on riskier auto loans. Approval odds go up since BHPH dealers only sell used vehicles they own on their lot. This gives them more flexibility to structure affordable payments that line up with your budget, compensating for lower credit. Applying is simple and you know quickly if you are approved. Just be aware that interest rates at BHPH lots tend to be higher. But they understand bad credit situations and help make owning a reliable vehicle attainable.

Yes, it is possible to get approved for a car loan in Cambridge even if you have an open bankruptcy or are under a consumer proposal. You typically need to have been paying your proposal for 12 months before applying for auto financing. Specialized subprime lenders are accustomed to working bankruptcy filings and proposals when evaluating loan risk, especially if you have steady income. Expect much higher interest rates due to the additional risk. Bringing a larger down payment like 20% or more improves your situation as well. Stay current on existing debt obligations and have all your income and bankruptcy documentation ready for the application. This helps offset some concerns related to bankruptcy when seeking a car loan approval.

These pro tips can score you better rates on Cambridge bad credit auto loans:


– Shop rates from multiple dealers and lenders instead of just one

– Put down at least a 10% down payment to reduce risk

– Apply with a co-signer in good financial standing

– Pay down other debt balances before applying

– Ask dealers to match competitor interest rates

– Explain past credit issues showing you learned financial lessons

– Voluntarily enroll in credit monitoring through your loan

– Commit to making on-time payments and pay down balances faster


Rates hinge on perceived risk, so reducing red flags wherever possible keeps rates as low as realistically feasible given poor credit. Habitual on-time payments also prove responsibility and can improve rates on future auto loans.

The top banks for bad credit used car loans in Cambridge are:


TD Auto Finance – Up to 9 year loan terms

Scotiabank – Flexible debt ratio rules

BMO Bank of Montreal – Online pre-approval available

CIBC – Low down payments accepted

Desjardins – Specializes in B & C credit scores

– Fairstone Financial – High approval amounts


These banks actively work with dealerships to accept subprime borrowers and understand unique credit situations. They offer both retail lending directly to customers along with indirect auto financing through dealership partnerships. Expanding your search across several reputable banks that work in the bad credit space increases your chances of securing favorable auto loan terms.

Yes, getting pre-approved for car financing is strongly recommended before visiting dealerships in Cambridge if you have bad credit. Pre-approval shows sellers you are a serious buyer and locks in guaranteed financing upfront. This gives you greater negotiating leverage on the vehicle price and purchase terms knowing the loan is secured. You can focus just on finding the right car for your needs and budget without financing uncertainty stress. Having a pre-set interest rate also protects you from potentially higher dealer financing markups. Simply ask the dealer if they can beat your pre-approved rate when discussing numbers.

When financing a used car with bad credit in Cambridge, aim to put down at least 10-20% of the vehicle purchase price. A larger down payment signals you are financially committed and reduces the unpaid loan balance, which lowers default risk. In turn, this helps compensate for having poor credit to get your car loan approved at a reasonable interest rate. Putting 20% down also negates the need for higher-cost financing types like balloon payments or extended terms over 7 years. Have the down payment readily available before starting your auto search. This shows dealers and lenders you can cover the required amount due at signing.



The most affordable and reliable used cars to finance in Cambridge with bad credit of under $10,000 are:


– Toyota Corolla

– Honda Civic

– Hyundai Elantra

– Kia Forte

– Ford Focus

– Nissan Versa


Stick to basic transportation models with lower mileage and accident-free history reports. Simple parts and repairs on common brands keep costs manageable. Getting a pre-purchase inspection also identifies any issues early. Choosing an economical used vehicle that fits your budget makes keeping up with loan payments easier on your finances.

Paying off a car loan is the perfect way to actively rebuild your credit in Cambridge. Make a habit of paying at least the minimum (preferably more) several days before the actual due date. Consistent on-time payments shows lenders you take debt obligations seriously. Staying on track with your loan builds positive payment history, which is the biggest credit score factor. You can further boost your score by keeping credit card balances low under 30% of limits and limiting new credit applications while paying off your auto loan. Check your credit reports too and dispute any errors with the bureaus.

If you get declined for a Cambridge car loan due to poor credit, stay proactive by taking these recommended steps:


– Order free copies of your credit reports to review for errors to dispute related to the decline. Waiting 30 days allows time for score changes from disputes and can improve your auto loan chances on another application.


– Speak with the lender/dealer about the exact reasons for the decline and what criteria need strengthening in reapplying, like income level or down payment amount.


– Enroll in credit counseling to get expert guidance on improving your credit health long-term. They can explain habits that rebuild scores.


– Add a qualified co-signer with good credit to your next auto loan application when reapplying. This gives you a much better shot at approval.


– Save up an even larger down payment amount before trying another auto loan, which offsets some risk.


Do not get too discouraged if declined at first. Persistence pays off.

Those needing a Cambridge car loan with no credit history still have solid options, such as:


– Applying for starter credit cards to establish initial positive payment activity on your reports. After 6 months to a year of diligent card payments, auto loan approval chances rise.


– Adding a co-signer like a parent or family member with strong credit to share responsibility for the auto loan until you build credit.


– Financing a newer used vehicle that still qualifies for manufacturer incentives and programs offering discounted buyer rates.


– Exploring peer-to-peer lending networks to connect with individual investors willing to finance your loan directly.


– Down payment assistance programs specifically help first-time auto buyers handle larger down payments when lacking credit.


Persistence and utilizing all available resources provides a clear road to approval.

The most effective car loan options for rebuilding credit in Cambridge are installment loans and secured auto financing. Installment loans distribute the auto loan amount into equal fixed monthly payments over 1-5 years. This structure makes keeping up with payments more manageable. Secured loans require collateral like the purchased vehicle’s title, so higher approval chances come from lower default risk. Make sure all payments are reported to credit bureaus. Ask lenders to pull your credit reports so positive payment activity consistently registers. These options give subprime borrowers an affordable chance to establish positive credit history through diligent auto loan payments.

Most financial experts recommend waiting at least 12 months before attempting to refinance an existing car loan if you have bad credit. This allows enough time to begin establishing a track record of consistent on-time payments. Most subprime lenders want to see timely payments for a year showing you can responsibly manage the debt. Refinancing too soon gives the impression you cannot handle the current loan terms. Pay down your loan balance as rapidly as possible too, so you have built 20%+ equity in the vehicle at the 12 month mark. This equity can be leveraged to get approved for refinancing at lower interest rates.

Follow these key tips for securing the best loan terms on bad credit auto financing in Cambridge:


– Shop rates from at least 5 loan providers before deciding

– Get pre-qualified to verify exact loan terms and rates before dealer negotiations

– Enroll in credit monitoring and dispute errors to maximize your score

– Put down over 15% as a down payment to reduce risk

– Select affordable loan repayment terms between 3-5 years

– Sign up for automatic payments to incentivize rate discounts

– Make payments early or pay extra each month to pay off loan faster


Casting a wide net and leveraging all advantages available to subprime borrowers results in the most savings on interest fees and best approval odds.

Those with bad credit seeking Cambridge car loans should steer clear of these things when applying:


– Applying for financing without checking your credit reports first

– Providing false information on loan applications

– Omitting current debt obligations

– Overstating your income

– Skipping steps in the online application

– Accepting extra products like extended warranties that raise loan cost

– Putting zero money down without a co-signer

– Agreeing to a loan term longer than 5 years


Being completely transparent on loan applications (and with loan officers) prevents headaches. It also positions you as an honest, responsible borrower committed to improving their credit standing.

The easiest type of car loan to secure when having bad credit in Cambridge is dealer financing. Dealers have special relationships and contacts with local lenders and banks that offer guaranteed financing approval. These subprime lending partners are accustomed to working with bad credit customers. Dealer financing provides one-stop pre-qualification and auto purchase simplicity. Applications typically get processed within an hour or less, taking the stress out of wondering if you will get approved or not. This route is best for those with little financial experience and in desperate need of a vehicle.

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