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Bad Credit Car Loans in London

Bad Credit Car Loans in London

Getting approved for an auto loan when you have bad credit can seem challenging, but it is possible. Bad credit simply means you have a low credit score, typically below 600. This score is calculated based on your past borrowing and repayment history. A low score makes lenders see you as a riskier borrower.

While bad credit can limit your options, it does not mean you cannot qualify for an auto loan in London, Ontario. In fact, special auto financing exists to help those with poor credit buy a reliable vehicle.

This guide will provide an overview of bad credit auto loans – explaining the basics of how they work, tips for getting approved, finding the best loan terms, and using a car loan to rebuild your credit. We aim to show that even with less-than-ideal credit, you can still obtain an auto loan and get behind the wheel of the car you need in London, ON.

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What is Bad Credit?

Bad credit refers to having a poor credit history that negatively impacts an individual’s ability to obtain financing. Generally, bad credit is defined as having a credit score below 579 according to FICO or below 600 according to VantageScore.

Here are the most common credit score ranges:


  • Very poor: 300 to 499
  • Poor: 500 to 579
  • Fair: 580 to 669
  • Good: 670 to 739
  • Very good: 740 to 799
  • Exceptional: 800 to 850


There are several factors that can lead to bad credit:


  • Missing loan or credit card payments
  • Defaulting on loans
  • Settling debt for less than owed
  • Bankruptcy
  • Foreclosure
  • High amounts of debt relative to available credit
  • Short credit history
  • Errors on credit report


Having bad credit makes it more difficult and expensive to obtain financing from traditional lenders. However, there are still options available for getting an auto loan even with bad credit.


Challenges of Getting a Car Loan with Bad Credit

Getting approved for an auto loan with bad credit can be challenging. Here are some of the common difficulties faced:


Higher Interest Rates

Lenders view borrowers with lower credit scores as higher risk, so they charge higher interest rates to offset that risk. The lower your credit score, the higher your interest rate will likely be compared to someone with good credit.


Lower Loan Amounts

Along with higher rates, lenders will often impose lower loan amounts for bad credit borrowers. This minimizes their risk exposure. You may only be approved for a portion of the vehicle’s value and have to make a larger down payment.


Difficulty Getting Approved

With stricter lending standards in recent years, it can be very difficult for those with poor credit to get approved at all. Many lenders will not work with borrowers below a certain score threshold. You may get turned down frequently before finding a lender willing to approve you.


Benefits of Getting an Auto Loan with Bad Credit

Getting an auto loan when you have bad credit can provide several advantages that make the process worthwhile. Some key benefits include:


Ability to Rebuild Your Credit

One of the biggest benefits of getting an auto loan with bad credit is that it gives you the chance to rebuild your credit history. As long as you make your monthly payments on time, an auto loan will demonstrate to lenders that you can handle this type of credit responsibility. This will gradually start to improve your credit score over the term of the loan.


Reliable Transportation for Work

Having your own vehicle becomes extremely important if you need transportation to and from your workplace. Public transit can be unreliable or unavailable in many areas. With your own car that you obtain through an auto loan, you don’t have to worry about being on time for work or getting home afterward.


Sense of Ownership

Finally, getting an auto loan gives you a sense of ownership that you don’t get from leasing a vehicle or buying an old car with cash. Making those monthly payments helps you feel proud of earning your vehicle, even if you started the process with less-than-perfect credit.


Requirements for Bad Credit Auto Loans

When applying for a bad credit auto loan, there are certain requirements you’ll need to meet for approval. This includes having a minimum credit score, steady income, and possibly a down payment. Here are some of the main qualifications to get approved for bad credit car financing:


Minimum Credit Score

Most bad credit lenders will require a minimum credit score between 500-600. This ensures you have some credit history and ability to manage payments. With a score below 500, it becomes very difficult to get approved for financing. If your score is in the low 500s, you may need to provide a larger down payment. Lenders will look at your full credit report, not just the score, in assessing loan risk.


Income Requirements

Lenders want to see you have a stable income that can support a car payment. Expect to provide recent pay stubs as proof of income. Self-employed borrowers may need to provide tax returns or bank statements. Your debt-to-income ratio is also considered, with most lenders requiring this ratio to be below 50%.


Down Payment

With poor credit, there’s an increased chance you may default on a loan. To offset this risk, many lenders require a 10-30% down payment on a bad credit auto loan. A larger down payment shows your commitment to repaying the loan. It also lowers the amount financed, reducing the lender’s risk exposure.

In some cases, bad credit buyers can qualify for $0 down deals. This usually requires an excellent history of income, a qualified co-signer, or a slightly higher interest rate.


How to Improve Your Chances of Getting Approved

If you have bad credit, getting approved for an auto loan may seem daunting. However, there are several steps you can take to improve your chances of getting the financing you need:


Improve Your Credit Score

The single most important factor in getting approved for a loan is your credit score. The higher your score, the better interest rate you’ll qualify for. Here are some tips for boosting your credit score before applying for a loan:


  • Pay all your bills on time – payment history makes up a major part of your score
  • Pay down balances on any credit cards – high utilization hurts your score
  • Dispute any errors on your credit report
  • Avoid applying for new credit before your auto loan application


Make a Larger Down Payment

Putting down more money upfront shows lenders you’re committed to repaying the loan. It also means you have to borrow less, reducing risk for the lender. Save up as much as you can for a down payment of 10-20%.


Find a Creditworthy Cosigner

If you have a family member or friend with good credit, they may be willing to cosign your auto loan. This means they’ll be equally responsible for making payments. While risky for them, it can drastically improve your chances of approval.


Work with Alternative Lenders

Specialty lenders like credit unions and subprime lenders are more likely to work with bad credit borrowers. Interest rates may be higher, but they’re often your best shot at getting approved. These lenders will look at factors beyond your score, like your income and assets.


Types of Lenders for Bad Credit Auto Loans

When you have bad credit, you’ll need to be open-minded about the type of lender you get an auto loan from. Here are some of the main options:



Getting approved for an auto loan from a traditional bank when you have bad credit can be challenging. Banks tend to be more risk-averse and have stricter credit score requirements. However, some large national banks may offer special bad credit lending programs, so it’s worth exploring bank options.


Credit Unions

Like banks, credit unions can be selective about auto loan applicants. However, some credit unions take a more personalized approach and may be willing to look beyond your credit score. Local credit unions are a good option to check out.


Online Lenders

Online lenders and financing companies cater specifically to bad credit borrowers. They tend to have more flexible credit requirements and quick online processes. Interest rates from online lenders may be higher to compensate for the risk.


Buy Here Pay Here Dealers

Buy here pay here (BHPH) dealers offer in-house financing for people with poor credit. BHPH can get you approved with minimal credit checks, but you’re limited to their inventory. BHPH loans typically have high-interest rates and GPS tracking on cars.


Comparing Loan Terms from Different Lenders

When you have bad credit, obtaining financing can be challenging. However, there are still options available from various lenders. It’s important to compare the loan terms offered by different lenders to find the best deal.

Here are some key factors to compare:


Interest Rates

Interest rates can vary widely between lenders when you have poor credit. Take time to shop around and compare rates, as even a small difference can add up to big savings over the life of your loan. Ask about any rate discounts that may be available as well.


Loan Amounts

Each lender will determine the maximum loan amount they are willing to approve based on your credit profile. Having pre-approval from multiple lenders gives you flexibility on the vehicle price.



Make sure you understand all fees charged by a lender, such as origination fees, documentation fees, or prepayment penalties. Less fees means more money in your pocket.


Loan Term Length

You’ll typically have a choice between loan terms of 36, 48, 60, or 72 months. A longer term means lower payments but more interest paid over time. Evaluate your budget to find the right balance.

By comparing loan offers from a few different lenders, you can choose the one that best fits your financial situation. Don’t just go with the first lender you find – taking the time to shop and compare can save you thousands on your bad credit auto loan.


The Car Buying Process with Bad Credit

The car buying process can be challenging when you have bad credit, but being prepared and knowing what to expect can make it much smoother. Here are some tips for navigating the car buying process with bad credit:


Finding the Right Dealer

Not all dealerships will work with bad credit customers, so finding one that specializes in bad credit financing is key. Look for “buy here pay here” lots or dealers that advertise financing for all credit. Read online reviews and make sure the dealer has a good reputation for working with credit-challenged buyers.


Getting Pre-Approved

Getting pre-approved for financing will show dealers you are serious and save time negotiating. Apply with banks, credit unions and online lenders that work with bad credit before heading to the dealer. Having a pre-approval letter in hand gives you leverage to negotiate the best terms.


Negotiating the Terms

Be upfront about your credit situation and discuss loan terms like interest rate, down payment and monthly payment before negotiating the vehicle price. Don’t just focus on the monthly payment, look at the total interest you’ll pay over the loan term too. Negotiate the best deal you can.


Avoiding Scams

Unfortunately, some predatory lenders and dealers take advantage of those with bad credit. Beware of dealers asking for large down payments or pushing loans with very high interest rates. Walk away if something feels off. Stick to reputable lenders and read all paperwork carefully before signing.

Following these tips will help ensure your car buying experience goes smoothly despite having bad credit.


Buying New vs Used with Bad Credit

When shopping for a vehicle with bad credit, one of the biggest decisions is whether to buy new or used. There are pros and cons to each option.


New Cars

Some of the benefits of buying new with bad credit include:


  • Reliability – New cars come with manufacturer warranties so you’re less likely to have major repairs, especially in the first few years.
  • Depreciation – Brand new cars lose a big chunk of value once driven off the lot. But with bad credit, used cars may already be overpriced for you. So buying new could equalize costs in the long run.
  • Latest features – New model year cars have the most up-to-date tech and safety features.
  • Custom options – You can likely customize a new car with your preferred colors, features, etc.


Downsides of new cars with bad credit financing:


  • Higher prices – Even with rebates and dealer discounts, new cars cost significantly more upfront.
  • Higher insurance – Insurance rates are highest for new cars and drop once they become used.
  • Higher interest rates – Due to the higher prices, expect to pay a higher interest rate on a new car loan.


Used Cars

Buying used can make more financial sense with poor credit because:


  • Lower prices – Used cars have already taken the big depreciation hit, so they cost much less.
  • Lower interest rates – You may qualify for a lower rate since the vehicle costs less.
  • Wider selection – Dealers usually have a bigger mix of used cars to choose from.


But used cars have potential drawbacks like:


  • No warranty – Most used cars are sold “as-is” without any warranty coverage.
  • Unknown history – It’s tough to know how well a used car was maintained or if it has hidden issues.
  • More repairs – The older and higher mileage a used car is, the more likely you’ll have repair bills.


Overall, consider both new and used when shopping for a car with bad credit. Evaluate the monthly payment you can afford, look for deals and incentives, and get the car thoroughly inspected before purchasing.


Maintaining Your Auto Loan

Once you have secured bad credit auto financing and driven off with your new vehicle, it is important to maintain the auto loan properly. This will ensure you stay on track with payments, avoid further damage to your credit, and keep the vehicle protected. Here are some tips for maintaining your auto loan:


Make Payments on Time

One of the most important aspects of maintaining your auto loan is to make the monthly payments on time. Set up automatic payments from your bank account, or set reminders to pay before the due date. Paying late can incur fees, penalty interest rates, and hurt your credit score further.


Budget for Payments

Be sure to properly budget for the monthly payment amount when you first get the loan. Factor things like insurance, gas, and maintenance costs as well. You want to ensure the payment takes up no more than 15% of your monthly income. Budgeting appropriately will help avoid missed or late payments.


Consider Loan Protection Options

Some lenders offer optional loan protection products that can help safeguard your loan and your vehicle. Gap insurance covers the difference between what your vehicle is worth and what you still owe if it is totaled in an accident. Credit life or credit disability insurance can cover loan payments if you lose your job, become disabled, or die.

Properly maintaining your auto loan is key after getting approved for bad credit financing. Sticking to your budget, making timely payments, and protecting the investment will help rebuild your credit and keep you on the road.


Refinancing Your Loan Once Your Credit Improves

Once you have taken out a bad credit auto loan, your goal will likely be to improve your credit score over time. As your score increases, you may have opportunities to refinance your existing loan and get better terms.

Here are some key things to consider when determining if it makes sense to refinance your auto loan:


When to Consider Refinancing

Generally you’ll want to wait at least 12 months before trying to refinance, as lenders like to see a consistent track record of on-time payments. It’s recommended to wait until your credit score has improved by at least 50-100 points before applying to refinance.


Lower Interest Rates

The main benefit of refinancing is that you can potentially qualify for a much lower interest rate due to your improved credit. This will lower your monthly payments and allow you to pay off the loan faster.


Better Loan Terms

In addition to a lower rate, you may also be able to get better loan terms when refinancing. For example, you may be able to remove a cosigner, extend your loan term back out to 5-6 years, or remove some restrictions like GPS tracking that were required due to your previous low score.

Just make sure to compare the costs of refinancing versus the potential savings. Refinancing itself costs money (application fees, title transfer, etc.), so you want to make sure the savings outweigh the costs.


Using Your Auto Loan to Rebuild Credit

Getting approved for a car loan when you have bad credit is just the first step. You’ll also want to focus on using the loan to help improve your credit so you can qualify for better rates in the future. Here are some tips for using your auto loan to rebuild your credit:


Making on-time payments – This is the most important thing you can do. Always pay at least the minimum due on your auto loan by the due date every month. Set up autopay through your lender if that helps ensure you never miss a payment.


Keeping your loan term length – Don’t try to shorten your loan length later on by doubling up payments. Keeping the loan open for the original term means more on-time payments get reported to the credit bureaus.


Checking your credit reports – Keep an eye on your credit reports to make sure your loan is being reported accurately. Dispute any errors with the credit bureaus to maximize your credit score improvement.


Bad Credit Car Loan Options in London, ON

London, Ontario has many options when it comes to getting a car loan with bad credit. Here are some of the top dealerships and lenders that can help you get financing:


Top Dealers for Bad Credit Auto Loans in London, ON

Some of the best bad credit car dealers in London include:


  • The Credit Medix – Offers guaranteed financing approval regardless of credit. Can help rebuild and establish credit.
  • Westgate Honda – Has a finance specialist to help people with bad credit get approved.
  • Ezee Credit – Provides quality used cars and bad credit loans to help people establish or rebuild credit.
  • Downtown Motor Products – Offers used car loans and financing options for all credit types.
  • Car Nation Canada – Advertises $0 down bad credit auto loans with guaranteed approval in London.


Loan Terms from London, ON Bad Credit Lenders

Bad credit car loans in London often have the following typical terms:


  • Interest Rates from 7% up to 29% for those with very poor credit.
  • Loan terms available from 12 months up to 8 years.
  • Down payments range from $0 to $1,500 for most subprime lenders.
  • Most dealerships work with local banks and lenders to find financing.


Cars Available for Bad Credit Buyers

The inventory available to bad credit buyers includes:


  • New and used vehicles from basic models up to luxury brands.
  • Mainstream brands like Honda, Toyota, GM, Ford, etc.
  • hatchbacks, sedans, trucks, SUVs, and minivans.
  • Late model used cars from 1-5 years old.


Overall, London has many options for customers needing bad credit auto loans. By leveraging top local dealers and special financing lenders, you can get approved and find the right vehicle to meet your needs and budget.



Getting an auto loan with bad credit in London, ON can seem challenging, but is very possible if you understand the process and prepare properly. Here’s a summary of the key points:


  • Having a credit score below 650 is generally considered bad credit. This makes getting approved for financing more difficult.
  • Specialty lenders that work with bad credit borrowers can provide financing options, but at higher interest rates.
  • Focus on used vehicles and put down a larger down payment to improve chances of getting approved.
  • Shop around for the best loan terms, and compare rates from online lenders, banks, and dealerships.
  • Try to get a cosigner with good credit to help qualify and get lower rates.
  • Build your credit score before applying by paying bills on time and lowering credit usage.


With preparation and persistence, those with poor credit can still find a lender willing to approve their auto loan and help them get driving again. Just remain patient through the process. With some time and diligent payments, your credit can rebound. Remember to make all your payments on time once approved to avoid further damage to your score. Contact lenders to discuss options even if you are declined at first – explaining your situation may help.

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London Bad Credit Car Loan Questions

Bad credit car loans in London refer to auto financing options available to borrowers with poor or limited credit histories. Lenders provide these loans to help people with credit challenges purchase vehicles by assessing factors beyond credit scores to determine loan eligibility. Bad credit car loans typically have higher interest rates and may require a down payment.

Yes, you can get approved for a car loan in London even with bad credit. Many lenders in London specialize in financing for borrowers with poor credit by considering factors like income, employment history, and down payment amount in addition to credit scores. Being prepared with the required documents can help secure an auto loan approval despite bad credit.

There is no definitive minimum credit score requirement for a bad credit auto loan approval in London. Lenders have approved loans for borrowers with scores as low as 500. That said, the lower your score, the higher the interest rate and down payment required. Boosting your score above 600 can help access more affordable loan terms.

Typical documents needed to apply for a bad credit car loan in London include:

– Proof of income – Recent pay stubs, tax returns, bank statements

– Proof of residence – Utility bills, driver’s license, lease agreement

– Proof of auto insurance

– References – Names and contact details of people who can vouch for you

– Down payment – Funds covering a portion of the vehicle price

Having these documents ready can speed up the application and approval process.

The typical down payment amount expected for bad credit car loans in London is 20-30% of the vehicle price. Putting down a larger down payment signals to the lender you are financially committed and can help secure loan approval despite credit challenges. Some lenders may approve $0 down offers too.

With bad credit, expect to qualify for higher interest rates on London auto loans – usually in the 10-25% range. The exact rate offered will depend on factors like your credit score, income level, loan amount, and lender policies. Improving your credit score and putting down a sizeable down payment can help lower interest rates.

Reputable options for bad credit car loans in London, ON include:


– Specialty subprime lenders like the Credit Medix, Easy Credit, and Refused Car Finance


– Indirect auto lending networks like CarNation Canada


– Franchised and independent car dealerships like Westgate Honda, Downtown Motor Products


– Online lenders like Canada Drives


Getting pre-approved can streamline the dealership buying experience later.


It’s generally better to get pre-approved directly through a lender first when seeking bad credit auto financing in London. This allows you to negotiate the vehicle price at the dealership knowing the loan terms and monthly payments you qualify for. If needed, the dealer can then submit your application to their lending sources.

With typical bad credit loan terms in London, you can likely afford:


– A $10,000 used car with 20% down payment


– A $15,000 used car with 30% down payment


– A $20,000 new car with strong co-signer and 30% down


Prioritizing used vehicles and putting down more cash upfront gives greater affordability despite credit challenges.

Tips to boost your bad credit car loan approval odds in London include:


– Lower your requested loan amount with a larger down payment


– Provide stable income proof and secure co-signer if possible


– Show timely payments on at least one active credit account


– Keep loan terms short (3 years or less) to lower total interest paid


– Apply with lenders specializing in second-chance financing


Strengthening your application can overcome negative credit history.


Due to higher risk levels associated with bad credit borrowers, expect to pay $300 to $400 per month or more for auto insurance required on London car loan vehicles. Factors like driving history, vehicle type, coverage limits also impact premium costs. Bundling with home insurance and asking for discounts can reduce the rates.


Yes, if you make all payments on time, an auto loan can help to rebuild and improve bad credit. Timely installments demonstrate responsible usage which gets positively reported to credit bureaus. This helps increase scores over the 3-year loan repayment period. Paying down balances also lowers credit utilization for added rebuilding benefits.

Compact and mid-size sedans like the Honda Civic, Toyota Corolla, and Hyundai Elantra tend to offer the path of least resistance for bad credit approval in London. These mainstream models hold value better compared to luxury or niche vehicles. Greater resale value allows lenders to secure their investment through the loan term.


The typical bad credit car buying process at London dealerships involves:


  1. Getting pre-approved for financing based on factors like income rather than just credit score


  1. Selecting a used vehicle from available bad credit inventory


  1. Having the dealer submit loan application to their lending sources


  1. Signing paperwork and driving home once loan approval comes through


Getting pre-approved directly is advisable before negotiating vehicle prices.

Important details to review in a London bad credit car loan contract include:


– Interest rate – Ideally as low as possible


– Loan length – Shorter terms have lower total interest


– Down payment amount – Larger is better


– Monthly payment dates and amounts


– Early repayment policy and penalties


– Vehicle mileage limits and condition requirements


Understanding these key loan parameters helps avoid future surprises.


Watch out for these common hidden fees with London bad credit auto financing:


– Documentation fees running $500+


– Dealer conveyance fees of $1,000+


– High post-delivery inspection fees


– Significant fees for missed or late payments


– Balloon payments required at loan maturity


Asking questions and reading the fine print is essential to avoid unexpected charges down the road.


If your application gets denied for a London bad credit auto loan, next steps can include:


– Waiting 6 months while improving your credit score and saving a larger down payment amount


– Applying with alternative subprime lenders who offer deeper second chance programs


– Finding a creditworthy co-signer to strengthen the application


– Considering lease options which have lower credit requirements


– Looking at private sellers where financing is separate from the sale


With some time and effort, auto financing is still possible despite the initial denial.

The Credit Medix, Easy Credit, and Canada Drives tend to offer some of the most competitive bad credit auto loan rates in London, often under 10% interest for borrowers with scores above 550 who put down over 20%. Shopping and comparing pre-approvals rather than just dealer finance offers saves substantially on interest charges.

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