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Bad Credit Car Loans in Mississauga

Bad Credit Car Loans in Mississauga

Getting approved for a car loan when you have bad credit can feel impossible. You may have heard that lenders will outright reject anyone with less-than-perfect credit or that interest rates will be sky high. While getting a car loan with bad credit in Mississauga does come with challenges, all hope is not lost.

In this comprehensive guide, we’ll walk through everything you need to know about getting a car loan when you have bad credit in Mississauga and surrounding areas. You’ll learn how bad credit affects interest rates, tips for improving your credit score, whether to buy new or used, and more. We’ve done the research so you can shop for a car loan with confidence, even with less-than-ideal credit.

With the right preparation and knowledge, you can get approved for a competitive car loan in Mississauga and be driving your new vehicle in no time.

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What Credit Score is Needed for a Car Loan?

While there is no fixed credit score required to obtain a car loan in Canada, lenders generally prefer borrowers with higher credit scores. Here are some general credit score guidelines for auto loans:


  • 650+ – Considered good credit, likely to be approved for new or used car loans
  • 620-649 – Average credit, may be approved but will pay higher interest rates
  • 580-619 – Poor credit, will be difficult to get approved without significant down payment
  • Below 580 – Very poor credit, unlikely to be approved for traditional auto financing


For new auto loans, lenders usually want to see credit scores around 700 or above. Used car loans may be possible with scores as low as 550-600, but interest rates will be quite high.

The better your credit score, the lower your interest rate will likely be. People with excellent credit in the 800-850 range can qualify for the best rates from most lenders.

While every lender has their own policies, having good or excellent credit gives you the highest probability of approval and the lowest rates. Work to improve your score before applying for an auto loan.


Getting a Car Loan with Bad Credit in Mississauga

Getting approved for an auto loan with bad credit in Mississauga can be challenging but is certainly possible. Lenders will look at more than just your credit score when assessing your application. With the right preparation and approach, you can get driving in no time.


Challenges and Options for Bad Credit Borrowers

The main obstacles for borrowers with low credit scores are higher interest rates, lower loan amounts and difficulty getting approved. Lenders view bad credit applicants as risky, so you’ll pay more interest and put down larger down payments. However, options exist if you put in the work.

Having sufficient income and a stable job is key. Bringing a cosigner with good credit or putting down a larger down payment can offset credit risk. Also, certain lenders specialize in bad credit lending, so shopping around is crucial.


Required Documents

To apply for a car loan with bad credit, you’ll need to provide proof of identity, income, employment and residence. Pay stubs, tax returns, utility bills and a driver’s license are common requirements. Being able to verify your financial situation is key.


Larger Down Payments

Expect to put down a larger down payment than someone with good credit – usually at least 20%. This immediately reduces the lender’s risk exposure on the loan. Saving up for a few extra months can make a huge difference in getting approved and lowering your interest rate.


Bad Credit Car Loan Interest Rates

When you have bad credit, you can expect to pay higher interest rates on a car loan. Lenders see applicants with low credit scores as risky, so they charge more in interest to offset the risk.

On average, someone with bad credit (a score below 579 according to FICO) will pay an interest rate around 9% higher than applicants with good credit scores of 700 or above. For a $20,000 5-year loan, that can mean paying thousands more in interest over the life of the loan.

The exact interest rate you’ll be offered depends on several factors, including:


  • Your credit score – The lower your score, the higher your rate will likely be.
  • Down payment amount – Larger down payments reduce the risk to the lender so they may offer a lower rate.
  • Loan term – Shorter loan terms tend to have lower rates.
  • New vs used vehicle – New vehicles often qualify for better rates.
  • Lender – Rates can vary significantly between banks, dealerships, and other lenders.


While bad credit borrowers face higher rates, improving your credit score and shopping around with multiple lenders can help you secure the most competitive rate possible.


Improving Your Credit Score

Improving your credit score is key to getting approved for a car loan with favorable terms. With a higher credit score, you’ll quality for lower interest rates which saves you thousands over the loan term. Here are some tips for raising your credit score:


Pay down balances – Keep credit card balances low, below 30% of the limit. Pay off any outstanding collection accounts if possible.


Avoid late payments – Set up autopay so you never miss a payment deadline. Payment history makes up a significant portion of your score.


Limit credit inquiries – Each application for credit dings your score a bit, so only apply for what you need. Too many inquiries signals risk to lenders.


Increase credit history – Keep your oldest accounts open and active if possible. The length of your credit history is factored in.


Check credit reports – Review your credit reports from Equifax and Transunion for any errors. Dispute inaccurate or outdated information.


It takes time to recover from bad credit – expect at least 6 months if you have late payments, and 2 years after bankruptcy or consumer proposal. But taking positive steps now will help increase your chances of a car loan approval down the road.


Getting a Cosigner

One of the best ways to improve your chances of getting approved for a car loan with bad credit is to add a cosigner to your application. A cosigner is someone with good or excellent credit who agrees to be equally responsible for repaying the auto loan.

When you apply for a car loan, lenders look at your credit score and history to determine your creditworthiness and risk level. By adding a cosigner with a high credit score, it shows the lender that the loan is less risky because your cosigner can cover the payments if you are unable to.

Most lenders will use the cosigner’s credit score and history when determining the interest rate and loan terms. So having a cosigner with a score of 700 or higher can help you qualify for much lower interest rates than you could get on your own with a poor credit score.

The higher your cosigner’s credit score, the better the rate you are likely to receive. A cosigner with excellent credit in the mid-700s or higher gives you the best chance at qualifying for prime lending rates.

Just make sure your cosigner understands they are equally responsible for making the monthly payments. Consider someone very financially stable that you trust and who trusts you to make the payments yourself each month.


Down Payment Options

When getting a car loan with bad credit, the size of your down payment can have a big impact on the interest rate you receive. Lenders view a larger down payment as less risk, since you are putting more money up front. Here are some tips on down payments when financing a car with poor credit:


Average Down Payment Amounts

For a new car, the average down payment for buyers with bad credit is around 10-20%. For a used car purchase, you may be able to get away with 5-15% down. Some lenders may approve loans with \$0 down for those with good income and other positive factors.


Down Payment Impact on Interest Rates

In general, the larger your down payment, the better interest rate you can qualify for. With a score below 600, a 10% down payment may get you around 8-12% interest on a used car and 10-15% for new. But with 20% down or more, you may see rates of 4-8% for used and 6-10% for new purchases.

Taking the time to save more for a larger down payment can really pay off over the long run. Even just 5% more down could potentially save you thousands in interest charges over the course of the loan.


Dealership vs. Bank Financing

When you have bad credit and are looking to finance a car loan in Mississauga, you generally have two options – going through a dealership or going directly to a bank/lender.


Dealership Financing




  • One-stop shop – can view inventory, test drive, and arrange financing all in one place
  • Dealers may work with special finance lenders tailored for bad credit
  • Can negotiate loan terms along with vehicle price




  • Rates may be higher than a bank
  • Less loan options – limited to lenders the dealer works with
  • Loan terms may be less flexible


Bank/Lender Financing




  • More loan options – banks, credit unions, online lenders, etc.
  • Can compare rates across multiple lenders
  • May qualify for better rates than a dealership




  • Pre-approval doesn’t guarantee loan – still need to finalize with dealer
  • Need to negotiate vehicle and loan separately
  • More legwork researching lenders and applying for loans


Overall, going through a dealership is simpler but bank financing may get you a better rate. It’s best to check rates from both to see what offers you can qualify for.


Buying New vs Used with Bad Credit

When shopping for a car with bad credit, deciding between new or used is an important consideration. Here are some key factors to weigh when making this decision:



New cars typically cost significantly more than used cars. The average price of a new vehicle in Canada is around $42,000, while the average price of a used vehicle is $27,000.

With bad credit, you’ll likely pay a higher interest rate which increases the total cost. Spread out over a 5-year loan term, a $5,000 difference in price (e.g. $30,000 used vs $35,000 new) can mean payments that are $100+ more per month.

Going with a used vehicle can help reduce the impact of the higher interest rate and keep monthly payments more affordable.



New cars depreciate rapidly in the first few years. A new car can lose 30% or more of its value in the first 1-2 years of ownership.

With bad credit, you may end up owing more than the car is worth if you finance a new vehicle. This makes buying used favorable since the depreciation has already occurred.


Warranty & Maintenance

New cars come with full manufacturer warranties (typically 3-5 years) as well as free scheduled maintenance for the first few years. Used cars have no or limited warranty coverage.

The warranty and included maintenance on a new car provides valuable protection, especially if your credit situation makes repairs difficult to afford. However, extended warranties can be purchased on many used vehicles if desired.

Overall, buying used with bad credit is often the more practical option. However, run the numbers carefully and look at all associated costs before deciding.


Avoiding Scams

When shopping for a bad credit car loan, it’s important to be vigilant against scams. Here are some common bad credit car loan scams to watch out for:


Advance Fee Loan Scams

In this scam, a company will guarantee they can find you financing, but require you to pay an upfront fee first. Once you pay, they take your money and disappear, without ever actually finding you a loan.


Yo-Yo Financing

This is when a dealer lets you drive away in a car before financing is finalized. Later they call and claim your financing fell through. They pressure you to sign a new, less favourable deal or threaten to take the car back.


Spot Delivery Scams

Similar to yo-yo financing, the dealer lets you take the car before financing is complete. But in this scam, after you’ve taken the car, they jack up the interest rate from what you initially agreed to.


Title Washing

Shady used car dealers will hide a car’s salvage history by illegally washing its title clean. This makes a rebuilt or flood-damaged car appear to have a clean title.

Watch out for red flags like a dealer pushing you to sign before reading everything, refusing to provide documentation, or insisting on dealing in cash only. Only work with reputable lenders and dealers to avoid scams.


Step-by-Step Process

Here is a step-by-step walkthrough of the process for getting approved for a bad credit car loan in Mississauga:


Step 1: Check your credit report and score. You can get a free credit report from Equifax or TransUnion to see where your credit stands. Knowing your score will help set expectations for interest rates.


Step 2: Research lenders and rates. Compare options from banks, dealerships, and specialty lenders. They will have different approval requirements and interest rates.


Step 3: Get pre-approved before visiting dealers. Having a pre-approval letter in hand shows dealers you’re a serious buyer and can strengthen your negotiating position.


Step 4: Shop for the right used car. Focus on reliable, fuel efficient models that suit your budget. Bring a mechanic to inspect it before purchasing.


Step 5: Negotiate the price. Don’t reveal your credit situation early on. Negotiate based on the car itself first before discussing financing terms.


Step 6: Finalize the loan with the dealer. They may be able to beat your pre-approval rate. If not, complete the purchase using your pre-approval lender.


Step 7: Review the loan contract carefully. Check for any hidden fees or inaccuracies before signing. Don’t let them rush you.


Step 8: Make payments on time. Stay on top of your payments to rebuild your credit. Refinancing in 1-2 years is possible if you improve your score.


Top Lenders in Mississauga

When looking for a bad credit car loan in Mississauga, it’s important to work with a reputable lender that understands your situation. Here are some of the top options for bad credit financing in the city:


Peel Chrysler Jeep

Peel Chrysler Jeep is located right in Mississauga and has years of experience providing auto loans to applicants with poor credit. Their knowledgeable financing team works to get customers with bad credit, no credit or past bankruptcies approved quickly.


AutoPark Mississauga

AutoPark Mississauga promises “unbeatable” used car financing, even for those with bad or no established credit. Their financing experts have strong connections to lenders and can find competitive rates.


Car Loan Masters

Car Loan Masters has a location in Mississauga focused specifically on bad credit auto loans. They work with customers who have faced bankruptcy, closed accounts, collections or simply have no existing credit.


Canada Drives

While Canada Drives doesn’t have a physical location in Mississauga, they provide a quick online pre-approval process and service the greater Toronto area. They connect applicants directly with lending partners.


Carnation Auto

Carnation Auto is a major Canadian used car dealer that offers financing assistance nationwide, including Mississauga. Their lending services are designed for those with poor or no credit.



Getting approved for a car loan with bad credit in Mississauga is possible if you know where to look. The most important things are having a decent down payment, finding the right lender, and having the proper documents ready to apply.

To recap, here are some final tips for getting a car loan with bad credit:


  • Shop around for lenders willing to work with bad credit and compare interest rates
  • Aim for a down payment of at least 10-20% if possible
  • Have proof of income, residency, and a valid driver’s license ready
  • Consider getting a cosigner to improve your chances of approval
  • Check your credit report and try to resolve any errors
  • Be wary of “buy here pay here” dealership financing and loan scams
  • Consider rebuilding your credit first before applying if your score is very low


With some preparation and persistence, those with poor credit can still find a lender willing to give them a chance at a reasonable rate. Drive off the lot with confidence by following the steps outlined above. Wishing you the best of luck as you start your search for the perfect set of wheels!

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Mississauga Bad Credit Car Loan Questions

The minimum credit score for a car loan in Mississauga can vary depending on the lender, but you may be able to qualify for a loan with a score as low as 500. However, interest rates will typically be higher for borrowers with lower credit scores. Many lenders prefer a minimum score of 650 for the best rates. While there is no single minimum score requirement, improving your score as much as possible will help you qualify for a more affordable loan.

While a cosigner is not always required, having one with good credit can significantly improve your chances of getting approved and help you qualify for a lower interest rate. A cosigner agrees to be responsible for repaying the auto loan if you are unable to make the payments yourself. Make sure any cosigner understands the obligation they are taking on before they sign the loan.

When applying for a car loan with bad credit in Mississauga, most lenders will require proof of income, government-issued photo ID, proof of address, recent pay stubs, and possibly bank statements. Having all your financial documentation ready will help demonstrate your ability to afford the monthly payments and improve your chances of getting approved.

Yes, it is possible to get approved for a car loan in Mississauga even if you have had recent bankruptcies, consumer proposals, or other major credit events. However, interest rates may be higher and you may need to make a larger down payment. Make sure to shop around with subprime lenders that specialize in helping borrowers rebuild their credit. Time and demonstrating responsible credit behavior will also help improve your rates down the road.

While down payment requirements vary, bad credit borrowers can typically expect to put down a minimum of 20 percent of the vehicle’s purchase price. Some lenders may require as much as 30-50 percent down for buyers with low credit scores. Putting down more upfront shows your commitment to repaying the loan and can help you qualify as well as get better interest rates.


Many lenders allow you to check your potential auto loan rate by completing a quick online pre-approval form on their website with some basic personal information. This soft credit check gives you an estimated rate without impacting your credit score. Comparing loan offers from multiple lenders can help ensure you get the most competitive bad credit auto financing option.

For used car loans in Mississauga, borrowers with bad credit scores below 620 can expect to pay significantly higher interest rates. According to Q1 2023 data, the average used car loan rate for borrowers with credit scores under 620 was 13.87 percent. Those with lower credit scores likely paid rates averaging over 20 percent. Improving your credit score can make a big difference in loan affordability.

You do not necessarily need to avoid dealerships if you have bad credit. Many work with special finance lenders focused on helping those with credit challenges. However, be prepared for them to potentially run multiple hard credit checks that could temporarily impact your score. Getting pre-approved directly through a subprime lender first can put you in a better negotiating position.

While specific loan terms depend on the lender, bad credit borrowers can typically qualify for used car loan terms of 36 to 60 months and new car terms up to 72 months. Stretching out your repayment timeline on a bad credit car loan can help lower your monthly payments to more affordable levels, but will cost more overall in interest.


While 0 down payment auto loans for bad credit borrowers in Mississauga are very rare, they can occasionally be found with certain subprime lenders or during special promotions. Most lenders will require at least some down payment even for buyers with challenged credit. Putting more money down increases the chances of getting approved and getting better rates.


Tips for negotiating the lowest bad credit auto loan rate include having a down payment of at least 10-20 percent, knowing your credit score, getting pre-approved before negotiating, being flexible on the car model and features, limiting your financing term length, and comparing multiple lender offers to leverage the best deal.

Banks and credit unions generally offer some of the lowest rates available, but usually only to borrowers with good to excellent credit. If you have bad credit, specialized subprime lenders are more likely to approve your application. But once you improve your credit, transitioning to more mainstream financing can save substantially on interest costs over the long run.

Buy here pay here (BHPH) dealerships cater specifically to credit-challenged buyers. Pros are easier approval, while cons include very high interest rates, older cars, and mandatory GPS tracking devices on cars that may disable your vehicle if you miss payments. Weigh options carefully as mainstream lenders tend to offer better rates to subprime borrowers who qualify.


Yes, there are some bad credit lenders that will approve auto loans based mainly on your ability to afford payments each month rather than strictly on your credit score or income source. Make sure to confirm with potential lenders in advance if they finance borrowers on social assistance or disability income. You may need to provide documentation of benefits.

Experts strongly recommend getting pre-approved for financing from a lender before visiting dealer lots to shop for vehicles. Knowing your budget and interest rate ahead of time prevents overpaying and gives you greater negotiating leverage. As a buyer with credit challenges especially, having financing pre-arranged can give you peace of mind.

Yes, some specialized subprime lenders offer auto financing programs specific to borrowers with active consumer proposals. Interest rates are typically quite high and you’ll likely need a reasonable down payment as well as some ability to demonstrate making ongoing proposal payments. Make sure the lender is aware upfront of your situation if applying.

Tips to get approved for the lowest auto loan rate possible with bad credit include paying down balances on revolving credit, limiting hard credit check applications, avoiding taking on new debt prior to your car loan application, staying current on existing accounts, providing a larger down payment, enlisting a creditworthy cosigner, and shopping around for the best subprime lending rate offer.

Most reputable subprime auto lenders require that at least 12 months have passed since you have completed all payments and received your formal discharge papers. A longer waiting period demonstrates responsible credit management and allows some time for your credit scores to begin improving, which can qualify you for lower interest rates on an auto loan.

In Mississauga the maximum loan amount for bad credit borrowers can vary substantially based on the lender as well as your specific financial qualifications, down payment, and credit situation. While amounts up to $50K or more are possible with some subprime lenders, expect reduced maximums approved if you have very low credit scores or significant negative credit history until you establish a positive track record.

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