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Bad Credit Car Loans in Kingston

Bad Credit Car Loans in Kingston

Whether due to circumstances beyond your control, or just poor financial decisions when you were younger, having bad credit can feel like a dark cloud hanging over your head. It prevents you from qualifying for loans, getting a good interest rate, or even renting an apartment. But one of the biggest obstacles bad credit creates is when you need a car in Kingston – not just want one – but truly need reliable transportation to get to work or take your kids to school.


According to a recent study, over 30% of Canadians have subprime credit scores below 600. So if you find yourself needing a car but afraid no one will approve you for a loan, you’re definitely not alone. The good news is there are special financing programs and “buy here pay here” used car lots that work with bad credit customers every day. While you’ll pay higher interest rates compared to someone with excellent credit, the important thing is getting dependable transportation so you can improve your financial situation long-term.


This comprehensive guide will walk you through everything you need to know about getting approved for a car loan with bad credit in Kingston Ontario. Follow these steps and you’ll be driving off the lot in no time – sans sticker shock.

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What is Bad Credit?

Bad credit refers to poor credit health as determined by a credit score. Your credit score is a three-digit number that is calculated based on your credit history and reporting. It provides lenders with a quick snapshot of your creditworthiness and helps them determine the risk of lending money to you.

In Kingston, credit scores range from 300 to 900. A score below 600 is generally considered bad credit. This indicates to lenders that you have a history of missed payments, defaults, bankruptcies or other negative items on your credit report. The lower your credit score, the higher risk you are deemed by lenders.

Some key credit score thresholds:

 

  • 800-900 – Excellent credit
  • 740-799 – Very good credit
  • 670-739 – Good credit
  • 580-669 – Fair credit
  • 300-579 – Poor credit

 

Having bad credit makes it more difficult to get approved for loans and credit products. You may also get less favourable interest rates. Improving your credit score can expand your financing options.

 

Why Do I Have Bad Credit?

There are many common reasons why you may have bad credit. Here are some of the most common causes:

 

Job Loss

Losing your job can quickly lead to missed payments and mounting debt, damaging your credit score. With less or no income, it can be very difficult to keep up with credit card, loan, and other payments.

 

Medical Bills

Health issues and medical procedures can be extremely expensive, even with insurance. High medical bills can drain savings and make it impossible to keep up with other financial obligations, hurting your credit.

 

Divorce

A divorce often comes with large legal fees, alimony payments, asset division, and other expenses. Taking on these costs while transitioning to a single income can lead to missed payments and credit damage.

 

Lack of Credit History

If you have no credit history, it can be just as damaging as having bad credit when trying to get approved for new credit. Lenders prefer to see a proven track record of managing credit responsibly.

 

Consequences of Bad Credit

Having bad credit can have several negative consequences when trying to get approved for a car loan in Kingston, including:

 

Higher Interest Rates

Lenders view borrowers with poor credit as riskier, so you’ll typically pay much higher interest rates than those with good credit. Interest rates on bad credit car loans can be over 20% or even up to 30% with some subprime lenders.

 

Lower Chances of Approval

With bad credit, you may get turned down by mainstream lenders in Kingston who only accept applicants with credit scores of 650 or higher. Only specialized subprime lenders work with bad credit borrowers.

 

Need for Down Payment

Most bad credit lenders require a down payment of 10-30% or more of the vehicle’s value. This compensates for the risk of lending to someone with poor credit.

 

How to Check Your Credit Score

The first step to understanding your credit situation is to check your credit score. In Kingston, you can get free credit reports from two credit reporting agencies – Equifax and TransUnion.

To get your Equifax credit report, you can request it online at https://www.consumer.equifax.ca or call 1-800-465-7166. Make sure to request your full credit report, not just your credit score. The full report will provide details on your credit history, any late or missed payments, bankruptcies, and other factors affecting your score.

For your TransUnion report, you can request it at www.transunion.ca or call 1-866-525-0262. Like with Equifax, ask for the full credit report.

You are entitled to one free copy of your credit report from each agency per year. It’s important to check reports from both Equifax and TransUnion because they may contain different information. Comparing the two reports gives you a more complete picture of your credit standing.

Once you have your credit reports, review them closely and note any inaccuracies you want removed. This can help improve your score. Pay particular attention to identifying any fraudulent activity or accounts you don’t recognize.

 

Requirements for Bad Credit Car Loans in Kingston

When applying for a car loan with bad credit in Kingston, there are certain requirements you’ll need to meet in order to get approved. Here are some of the typical requirements for bad credit auto loans:

 

Minimum Credit Score

Most lenders will require a minimum credit score between 500-650 for approval on a bad credit auto loan. The lower your score, the higher your interest rate is likely to be. Some subprime lenders may approve loans with scores as low as 300, but interest rates can be over 20% with these lenders.

 

Income Level

Lenders want to see that your income is enough to reliably make the monthly car payments. Many lenders require a minimum monthly gross income, often $1,500 – $2,000 per month. Being able to verify your income with pay stubs or bank statements is usually required.

 

Down Payment Percentage

Since bad credit borrowers are seen as higher risk, a down payment is often required. Typically you can expect to put down 10-30% of the vehicle’s purchase price as a down payment. The higher the down payment, the better the loan terms will be.

 

Other Requirements

Having a valid driver’s license, auto insurance, and being over 18 are basic requirements. Proof of residency and a stable work history are also commonly required. Some lenders may require you to have a checking account, or may have guidelines on your current debt-to-income ratio.

 

Improving Your Credit Score

If your credit score is low, you can take steps to improve it so you can qualify for a better interest rate on your car loan. Here are some tips for boosting your credit score:

 

Pay Bills on Time

Payment history makes up a significant portion of your credit score. Set up automatic payments or payment reminders to ensure you pay all your bills by the due date. If you have any late payments, get current and continue making on-time payments.

 

Reduce Debt

High debt usage also negatively impacts your credit score. Pay down credit cards and other revolving debt to decrease your credit utilization ratio. You can also consider balance transfer cards with 0% intro APRs to lower interest costs.

 

Credit Counseling

If you’re struggling with debt, enrolling in a reputable credit counseling program can help. Counselors can work with you to pay down debt and advocate to creditors on your behalf. This can lead to lower interest rates and improved credit scores over time.

 

Getting a Cosigner

If your credit score is very low, you may need to get a cosigner for your auto loan in order to get approved. A cosigner is someone with good credit who agrees to be responsible for repaying the loan if you can’t. Here’s what you need to know about getting a cosigner:

Your cosigner needs to have good or excellent credit – generally a score of 660 or higher. They’ll need to provide proof of income and their credit history will be checked as part of the application process.

The cosigner shares equal responsibility for repaying the loan. If you miss payments, it will negatively impact both your credit and your cosigner’s. If you default, the cosigner will be responsible for repaying the remaining balance.

Being a cosigner is a big risk and responsibility. Make sure the person fully understands the role before agreeing to cosign. Have a plan for eventually refinancing the loan in your own name.

While a cosigner can help you get approved, the lender will still want to see that you can afford the monthly payments. A cosigner alone won’t compensate for income, down payment, or other application weaknesses.

 

Saving for a Down Payment

One of the most important things when applying for a bad credit car loan is having a sizable down payment ready. Lenders view a good down payment as an indication that you are financially committed to repaying the loan.

The recommended down payment for a bad credit car loan is typically 20% of the total vehicle cost. However, you may be able to get approved with as little as 10% down. Remember, the larger your down payment is, the more likely you are to get approved and the better your interest rate will be.

To calculate how much you need to save for a down payment, first determine how much you can afford to spend on a vehicle. If you can afford a $15,000 car, 20% down would be $3,000. If you can only afford 10%, you would need $1,500 saved.

Next, look at your budget to see how much you can reasonably save each month. If you can set aside $200 per month, it would take 15 months to save $3,000. But if you can save $400 per month, you could reach your goal in just 7-8 months.

Be disciplined and make saving a priority. Cut back on discretionary spending and look for ways to earn extra income that can be put directly into your down payment fund. The sooner you save enough for a sizable down payment, the sooner you can get approved and find the reliable car you need.

 

Choosing the Right Car

When you have bad credit, choosing the right car to finance is crucial. You’ll want to look for an affordable, reliable used car that fits your budget and lifestyle. Here are some factors to consider when selecting a car:

 

Price

Opt for an inexpensive used car, as the total cost will be lower than a newer model. Avoid luxury vehicles or anything over $15,000, as the monthly payments may be too high for your budget. Consider older models from reliable brands to get the most value.

 

Reliability

Choose a used car with a reputation for reliability and low maintenance costs. Japanese brands like Toyota and Honda are known for dependability. Research reliability ratings for the model’s year and check consumer reports to avoid a lemon.

 

Fuel Efficiency

Gas and maintenance costs add up, so fuel efficiency is key. Aim for a used compact sedan or hatchback over an SUV, and look up the EPA estimated miles per gallon for the specific model. Higher mpg means lower ongoing costs.

 

Finding the Best Bad Credit Car Loans

When looking for the best bad credit car loan in Kingston, ON, you have a few options to consider:

 

Local Dealerships

Many local dealerships work with special finance lenders and can help people with bad credit get approved for a car loan. The advantage of going through a dealership is you can shop for a car at the same time and take it home right away if approved. Dealerships will often highlight special bad credit offers on their websites.

 

Online Lenders

There are online lending companies that specialize in bad credit auto loans. They provide a quick online application process and can pre-approve you for a loan amount based on some basic information. This gives you an idea of what you can afford before going to shop. Rates may be higher than at a dealership or credit union.

 

Credit Unions

If you’re a member of a local credit union, they may offer bad credit car loans as a service to members. Interest rates are typically lower at credit unions. However, loan approval and amounts will be based on your credit history and debt-to-income ratio.

When researching options, compare interest rates, loan terms, down payment requirements and fees to find the best loan for your situation.

 

Applying for a Car Loan

Once you have your finances and credit in order, it’s time to formally apply for a bad credit car loan. This process involves gathering documents, completing an application, and deciding whether to go through a dealership or direct lender.

 

Documents You’ll Need

When applying for a car loan, you’ll need to provide documentation both for yourself and for the vehicle. Personal documents required include:

 

  • Proof of income – recent pay stubs, bank statements, tax returns
  • Driver’s license
  • Social insurance number
  • Proof of residence – utility bill, lease agreement

 

You’ll also need documentation on the vehicle such as the VIN number, mileage, condition report and purchase order or invoice if you already have a specific car picked out.

 

Completing the Loan Application

The loan application asks for information on your personal details, income, employment, and expenses. Be sure to fill it out completely and accurately to avoid processing delays.

You’ll also be asked for details on the loan itself – the loan amount needed, length of term, and information on the vehicle if you have selected one. Provide as much information as you can to receive the most accurate initial quote.

 

Going Through a Dealership vs. Direct Lender

You can apply for financing either directly through a lender’s website, through a dealership’s finance department, or via an online car loan marketplace. Dealerships allow you to bundle the price negotiation with financing, but may have limited lender options. Direct lenders often have the lowest rates but it takes more legwork to get loan approval before negotiating a vehicle price.

Online marketplaces match you with a network of lenders to compare loan offers side-by-side. This simplifies the application process and helps you find the best rates for your particular credit situation.

 

Getting Approved

After submitting a bad credit car loan application, the process of getting approved usually takes 1-3 business days. The lender will pull your credit reports and review all the information you provided to make a decision. Here’s what happens next:

Loan approval – If approved, the lender will inform you of the loan terms like interest rate, monthly payments, loan length etc. This means you can move forward with buying the car!

Request for more information – The lender may come back asking for additional documents like recent pay stubs, proof of residency etc. to verify your details. Provide requested info quickly so they can finalize their decision.

Loan denial – If your application is denied, ask for the reasons in writing. This allows you to identify areas to improve for future loan applications. A denial isn’t the end though.

If your loan is declined, here are some options:

 

  • Review the reasons and correct any fixable issues like providing additional verification documents.
  • Ask if a cosigner would help get approved.
  • Consider applying with other lenders who may overlook certain issues.
  • Improve your credit score and reapply after a few months.

 

With persistence and focusing on bettering your credit profile, approvals become much more likely over time.

 

Bad Credit Car Loan Terms

When you take out a bad credit car loan, there are certain terms you’ll need to agree to. These dictate how much you’ll pay for the loan and how you’ll pay it back over time.

Some key terms to know include:

 

Interest Rates

With bad credit, you can expect to pay a higher interest rate than borrowers with good credit. Interest rates on bad credit car loans typically range from 10% up to 25%. The higher your credit score, the lower the rate you can qualify for.

Your interest rate also depends on factors like your income, debt levels, down payment amount, and more. Shop around for the lowest rate possible for your situation.

 

Loan Length

Most bad credit car loans have terms of 2-6 years. Shorter loan terms often have lower rates but higher monthly payments. Longer terms come with higher total interest costs but more manageable payments.

Look for the shortest term you can comfortably afford. This minimizes interest and helps you pay off the loan faster.

 

Early Repayment

You typically have the option to pay off your bad credit car loan early to save on interest. Some lenders charge prepayment penalties, so make sure to ask about any fees for paying the loan off faster than the original term.

When possible, making extra payments or even paying in full early is wise to reduce interest fees and pay off your loan sooner.

 

Maintaining Your Loan

Once you have been approved for a car loan in Kingston and have purchased your vehicle, it is important to maintain your auto loan properly. This will ensure you remain in good standing and do not further damage your credit. Here are some tips for maintaining your bad credit auto loan:

 

Make Payments On Time

The most critical component of maintaining your auto loan is to make your payments on time, every month. Most lenders will report your payment history to the credit bureaus, so late or missed payments can negatively impact your credit score. Even one late payment can drop your score, so be sure to pay at least the minimum due each month by the due date.

 

Keep Insurance on Your Vehicle

You will be required to have both comprehensive and collision coverage insurance on a financed vehicle. Make sure this insurance does not lapse or get cancelled, or the lender may get their own coverage at a much higher price. You may also be required to have gap insurance to cover any difference between the value of the vehicle and the loan balance.

 

Report Any Changes

You must contact your lender immediately to report any changes that could impact your loan. This includes things like loss of job or income, change of address, an accident or damage to the vehicle, or losing your insurance coverage. Keeping your lender informed can help avoid having issues down the line.

Following the above tips will help ensure your bad credit car loan is properly maintained. Sticking to the terms and keeping your lender informed will also demonstrate responsibility, which will help rebuild and improve your credit over time.

 

Rebuilding Your Credit in Kingston

One of the best ways to rebuild your credit is to make sure you make all your car loan payments on time. By staying on top of your monthly payments, you demonstrate responsibility and reliability as a borrower. This has a positive impact on your credit score over time.

Most auto lenders report your payment history to the credit bureaus. So as you make timely payments month after month, your score will gradually improve. Just stick to the payment schedule laid out in your loan agreement to avoid any missed or late payments that could hurt your credit.

It’s also important not to take on additional debt while paying off your car loan. Too many new credit accounts can lower your score. Try to avoid applying for new loans or credit cards until your auto loan is paid off.

You may have higher interest rates initially because of your low credit score. But as your score climbs into the fair or good range, you’ll qualify for better rates on future loans. This makes a bad credit car loan a great stepping stone to eventually getting prime rates.

Within a few years of responsible payment history, you can potentially refinance your loan for a lower interest rate. This allows you to save even more money over the life of the loan. Just be sure to check with your lender about any prepayment penalties for refinancing.

Overall, a bad credit auto loan provides an opportunity to prove yourself as a borrower. With time and diligent payments, you can incrementally rebuild and improve your credit. A car loan can be an important part of re-establishing your financial reputation.

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Kingston Bad Credit Car Loan Questions

The minimum credit score needed to finance a car in Kingston is typically around 600. However, interest rates tend to be quite high for borrowers with scores in the low 600s. You’ll generally get better rates with a score of 650 or higher. The best rates are usually reserved for those with scores over 700.

Most lenders in Kingston will approve car loans for applicants with credit scores as low as 550-600. However, the interest rate you qualify for has a lot to do with your exact score. For example, with a score in the 500s, you may pay over 20% interest. To get a rate under 10%, you’ll generally need a score of at least 650. Those with scores of 700+ tend to get the lowest rates.

Yes, it’s certainly possible to qualify for auto financing in Kingston even if you have bad credit. Subprime lenders provide loans to borrowers with credit scores under 600. That said, your interest rate is likely to be quite high, perhaps over 20%. Improving your credit score can help you access more affordable loan options over time.

When applying for a bad credit auto loan in Kingston, most lenders will ask for:

 

– Proof of identity (driver’s license)

 

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

 

– Down payment amount

 

– Information on the car you wish to purchase

 

– Personal and contact details

 

Bringing these items when you apply in-person can help speed up the process. Be prepared to provide explanations for any credit challenges as well.

Tips that can help you get approved for a car loan despite having bad credit include:

 

– Shop around with multiple subprime lenders to compare rates

– Put down at least 10-20% as a down payment

– Bring someone on as a co-signer if possible

– Explain any past credit issues to the lender

– Only apply for the amount you can comfortably afford

– Consider an older used vehicle to reduce the loan amount

 

Following these suggestions can greatly help your chances of securing auto financing.

The easiest places to get approved for a bad credit auto loan in the Kingston area are usually:

 

  1. Specialty subprime lenders like Car Loans Kingston or Canada Drives
  2. Small independent car dealerships like Autohouse Kingston
  3. Indirect auto lending programs from places like Kingston Honda or Kingston Dodge

 

These types of lenders are often more flexible than big banks when dealing with bad credit borrowers. They understand the challenges people face and are willing to work with all kinds of credit scores.

Yes, Canadian lenders will often approve car loans for applicants with no credit history. Without a credit score however, interest rates tend to be quite high. Having a qualified co-signer with good credit can help you get a much lower rate on your first ever auto loan. Expect to put down a larger down payment as well.

The easiest route to get a car loan without any established credit in the Kingston area is through a small “buy here pay here” dealership. These dealerships handle their own in-house financing, so they can be more flexible with thin-file and no credit buyers. Interest rates are still quite high, but they’ll work with you provided you put enough money down upfront.

 

As a general guideline, you’ll want to put down at least 10-20% of the vehicle purchase price if you have bad credit. Some subprime lenders may approve loans with less down, but providing this amount upfront can help reduce your interest rate. A larger down payment also shows the lender you’re financially committed to paying off the loan responsibly.

Used car loan rates for borrowers with bad credit in the Kingston area typically range from about 15% on the low end up to 29% at the upper extreme. The exact rate you qualify for depends on factors like your credit score, down payment amount, income level, and the lender policies. Reviewing loan offers from multiple places can help you find the most competitive rate.

If you were to finance $10,000 for a used car in Kingston with bad credit, your typical monthly loan payment would be:

 

– 15% interest – approx. $310/month over a 3 year term

 

– 20% interest – approx. $340/month over a 3 year term

 

– 25% interest – approx. $370/month over a 3 year term

 

So you can expect to pay between $310 and $370 per month for a $10k used vehicle loan with subprime credit. Putting more money down and/or choosing a shorter repayment term could reduce the monthly cost.

If you plan to purchase a used car with cash in Kingston, be prepared to show:

– Government-issued photo ID

– Vehicle ownership documents signed over to you from the seller

– Used vehicle information package

– Valid insurance papers for the vehicle

– Safety standards certificate

Paying with an electronic bank transfer, certified cheque or money order is recommended over paying cash directly. Make sure to get a detailed bill of sale from the seller as well.

Yes, it is possible for international students in Canada to qualify for auto financing. However, you’ll likely need an eligible Canadian co-signer to apply with you. As a foreign student, you generally won’t have enough established Canadian credit history to meet most lenders’ requirements on your own. Partnering with a creditworthy co-signer helps compensate for this.

Some of the best Canadian banks to approach for bad credit auto loans are:

 

TD Canada Trust

Scotiabank

CIBC

– Royal Bank of Canada (RBC)

– Bank of Montreal (BMO)

 

These major banks have specialized programs to help applicants with challenged credit get financed. Approved loan amounts may be smaller and interest rates will be higher compared to prime borrowers.

Popular dealerships that offer specialized bad credit auto financing programs in the Kingston region include:

 

– Kingston Honda

– Kingston Dodge

– Autohouse Kingston

– Car Loans Kingston

– 401 Auto Credit

– Canada Drives Kingston

 

These dealers understand the unique needs of credit-challenged car buyers. They’re willing to finance customers that banks may turn down through in-house subprime lending.

Most Canadian lenders recommend waiting at least 12 months after a consumer proposal before applying for auto financing. This allows some time for your credit to start recovering. Waiting 18-24 months can give your score even more chance to improve, opening up better loan options. Get pre-approved first to see offers before fully applying.

The best ways to rebuild your credit score after bankruptcy so you can qualify for a car loan in Kingston include:

  1. Getting a secured credit card and using it responsibly
  1. Becoming an authorized user on someone else’s credit card
  1. Avoiding applying for more new credit right away
  1. Checking your credit report for errors
  1. Paying all bills on time going forward

Give yourself at least 12-24 months for your score to recover into the fair range before applying for a car loan. When financing, expect higher rates that steadily decrease as you continue improving your credit history.

Most Canadian lenders make you wait around 12 months after a vehicle repossession before they’ll consider approving you for another car loan. Some may want you to wait 24 months. The waiting period gives some time for the negative impact on your credit to fade. Use this time to pay bills on time and reduce debts to rebuild your score.

The easiest type of auto loan to get with bad credit in Kingston is typically a loan on an older, lower-priced used car. Focus your search on fuel-efficient sedans and hatchbacks priced under $10,000. Have at least $2,000 to put down and apply with subprime lenders like Car Loans Canada rather than a mainstream bank. This approach gives you the best approval odds.

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