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Bad Credit Car Loans in Montreal

Bad Credit Car Loans in Montreal

Imagine finding your dream car while having bad credit. The sleek curves, shiny paint job, and powerful engine call out to you. But your less-than-ideal credit score feels like a roadblock preventing you from the driver’s seat. Without good credit, getting approved for an auto loan in Montreal can be an uphill battle.

However, all hope is not lost. Having bad credit does not mean you cannot get a car loan. With some knowledge and preparation, you can end up with reasonable financing despite your credit challenges. This guide will explore strategies to improve your chances of getting approved for a car loan in Montreal with bad credit.

We’ll look at tips like building your credit score, getting a cosigner, and maintaining your vehicle. While bad credit makes financing more difficult, you can still find a lender willing to work with you. Use this advice to hit the road in your new car sooner.

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Define What Bad Credit Means

When it comes to obtaining financing, the term “bad credit” is commonly used to refer to individuals with low credit scores or insufficient credit history. In Canada, most lenders consider a credit score below 650 to indicate bad credit, though some may draw the line at 600 or even lower. Essentially, the lower your credit score, the more difficult it becomes to get approved for loans and credit products.

Lenders use your credit score, calculated by credit bureaus like Equifax and TransUnion, as an indicator of how reliably you’ve repaid debts in the past. The calculation takes into account factors like payment history, amounts owed, length of credit history, new credit inquiries, and credit mix. If you have limited experience handling credit or a history of missed payments and defaults, your score will take a hit.

Besides a low score, not having enough credit history can also lead to bad credit. If you are a young adult just starting to build credit or a new immigrant without established Canadian credit, you may struggle to get approved by lenders who base decisions heavily on credit scores. With little information to evaluate, they view these applicants as risky.

Understanding where you stand in terms of credit score and history is key when shopping for an auto loan with bad credit. Knowing the precise challenges you face allows you to explore specialized financing options suited to your situation. Be sure to obtain your credit reports from Equifax and TransUnion before applying.


Challenges of Getting Approved with Bad Credit

When you have bad credit, getting approved for an auto loan can be challenging. Here are some of the common issues bad credit borrowers face:


Higher interest rates – Lenders view bad credit applicants as riskier to lend to. As a result, bad credit car loans typically have much higher interest rates than loans for people with good credit. Interest rates of 10-20% or even higher are common for bad credit borrowers.


Lower loan amounts – In addition to charging higher rates, lenders will also limit the amount they’re willing to lend to subprime applicants. So you may only be approved for a few thousand dollars rather than the full amount you need.


Difficulty getting approved – With bad credit, there’s no guarantee a lender will approve your application. Many will outright reject you or require you to have a cosigner with better credit to get approved. You may need to apply to multiple lenders before finding one willing to finance you.


Building Your Credit Score

One of the most important things you can do if you have bad credit and want to qualify for an auto loan is to work on improving your credit score. Here are some tips that can help:


Pay bills on time

Payment history makes up a significant portion of your credit score. If you have late payments on your credit report, it will negatively impact your score. Try setting up automatic payments or calendar reminders for bills to avoid late payments in the future. Paying all your bills on time, and not just your car loan, will steadily improve your credit over time.


Lower credit utilization

Credit utilization is how much of your available credit you are using. Experts recommend keeping this below 30%. One way to lower utilization is to pay down balances, especially on any maxed out cards. You can also ask for credit limit increases on existing accounts. Just having more available credit can decrease your utilization and lift your score.


Fix errors on credit report

Incorrect information on your credit report could be needlessly dragging down your score. Review all three of your credit reports carefully. If you find any errors, file disputes with the credit bureaus to have them corrected. This can give your score an easy and quick boost.


Getting a Cosigner

Having a cosigner with good credit can significantly improve your chances of getting approved for a car loan when you have bad credit. A cosigner agrees to be responsible for the loan if you can’t pay. This lowers the risk for the lender.

When you apply for a loan with a cosigner, the lender will consider the cosigner’s credit score and income along with yours. If your cosigner has an excellent credit score and stable income, it can offset your poor credit.

While having a cosigner can help you get approved, it also puts responsibility on your cosigner’s shoulders. If you miss payments or default on the loan, it will negatively impact their credit too. The cosigner is equally liable for repaying the loan as you are. Make sure any cosigner understands the risk they are taking on before agreeing.

Asking a family member or friend with good credit to cosign is one option. There are also some online services that can connect you with potential cosigners for a fee. Just be sure the cosigner understands the obligation and risks involved. Having a cosigner can significantly improve the chances of getting approved but also creates a big responsibility.


Using a Down Payment

Making a larger down payment is one of the most effective ways to improve your chances of getting approved for a car loan when you have bad credit. A down payment reduces the amount you need to finance, which makes lenders more willing to approve your application despite your low credit score.

For applicants with poor credit, lenders typically require a minimum down payment of 5-20% of the vehicle’s purchase price. The larger you can make that down payment, the better. Some lenders may require as much as 30-50% down for borrowers with very poor credit scores below 500.

A bigger down payment gives the lender more assurance that you are invested in repaying the loan, and also lowers the loan-to-value ratio of the vehicle. Lenders assess a higher risk of default when loaning to borrowers with bad credit, so a large down payment helps offset that risk. Even an extra few thousand dollars down can make a difference in getting approved when you have derogatory marks on your credit history.


Considering a Less Expensive Vehicle

If you’re having trouble getting approved for a car loan due to bad credit, one strategy is to consider a less expensive vehicle. Lenders view financing a cheaper car as less risky, so they may be more likely to approve applicants with poor credit for these vehicles.

Generally, the less expensive the car, the easier it will be to get financing approval. Older used cars with higher mileage tend to have lower prices, making them a smart choice if you want to improve your chances of getting a car loan approved.

Opting for a lower-cost used sedan, hatchback or small SUV rather than a brand new luxury vehicle or truck is a good move when dealing with bad credit. The lower the loan amount, the more manageable it will be for you financially as well.

While you may have your heart set on a specific vehicle, being flexible and open to less expensive options is key when trying to secure a car loan approval despite bad credit. Getting a reliable used car first can help you rebuild your credit to a point where you can qualify for financing on a nicer new car down the road.


Shopping Around to Multiple Lenders

When trying to get approved for a car loan with bad credit, it’s important to shop around and apply to multiple lenders. Each lender has different approval criteria and specializes in certain types of borrowers. By applying to several lenders, you increase your chances of getting approved.

Make sure to compare loan terms and interest rates between lenders. One may approve you at a higher interest rate than another. Rates can vary significantly for borrowers with lower credit scores. Even a small difference in the interest rate can mean thousands of dollars in savings over the loan term.

Online lenders like Canada Drives tend to use more flexible approval criteria than banks and credit unions. They may place more emphasis on your income and down payment amount than your credit score alone.

Applying online is fast and won’t negatively impact your credit as long as you complete applications within a short window of time. You can easily compare quotes from multiple lenders without having to visit each one in person.

By taking the time to shop around, you can increase your chances of approval and potentially save money on interest charges. Don’t settle on the first loan you are approved for without exploring all your options first.


Considering a Secured Car Loan

If you have poor credit but some money saved up, a secured car loan may be an option. With a secured loan, you use something of value like savings or another asset as collateral to secure the loan. This gives the lender more confidence in approving your loan application even with bad credit, since they have the security of the collateral if you were to default.

To get a secured auto loan, you’ll need to have cash available to put down as collateral, usually at least $1,000 or 20% of the vehicle purchase price. The lender will hold these funds in an account while you make payments on the loan. As long as you make your payments on time, you’ll get the money back once you pay off the loan. However, if you default, the lender can seize the collateral funds to recoup their losses.

The main advantage of a secured car loan is that it can be easier to get approved if you have poor credit. You also may get a lower interest rate than with an unsecured loan. Just be sure you have enough savings on hand to put down as collateral. And make your payments on time so you don’t risk losing your hard-earned savings.


Looking at Special Finance Programs

Some dealers offer special bad credit programs that can help make purchasing a vehicle easier if you have credit challenges. These programs are specifically designed for people with low credit scores or past credit issues.

Special finance programs will often be more flexible regarding credit history. They may approve loans for people with scores in the 500s or even lower in some cases. The interest rates may be higher to offset the additional risk, but it provides an opportunity to get approved and rebuild your credit.

Dealers partner with lenders and essentially act as middlemen to get buyers with bad credit financed. They have relationships with subprime lenders and access to programs that standard banks typically don’t offer.

Special finance departments at dealers will be familiar with the types of stipulations and requirements their lenders have for approving applicants with poor credit. They streamline the process and handle all the necessary steps for getting subprime buyers financed.

Some things to keep in mind with special finance programs:


  • You may be required to make a larger down payment, often 10-30% of the purchase price.
  • Interest rates can be significantly higher, often 10-25% or more.
  • The loan term may be shorter, like 3 years instead of 6.
  • You’ll likely need proof of income and a recent utility bill.
  • There may be limitations on the age or mileage of vehicles available.
  • Expect to have your credit pulled multiple times during the process.


While the stipulations may be more stringent, special financing can open up options if your credit has limited other opportunities. Be sure to get all the specifics on the loan terms so you fully understand the commitment.


Buying From a BHPH Dealer

One option for getting a car loan with bad credit in Montreal is to buy from a buy here pay here (BHPH) dealer. These types of dealerships specialize in selling vehicles to people with poor credit by providing in-house financing.

BHPH dealers operate differently than traditional dealerships. They do not rely on outside lenders to provide financing. Instead, the dealership itself finances the purchase of the vehicle. This allows them to be more flexible with approvals since they make their own lending decisions.

To buy from a BHPH dealer, you will need to provide proof of income and residency. But they typically have more relaxed standards when it comes to credit scores and down payments compared to traditional lenders. Many will work with credit scores below 500 and will only require a few hundred dollars down.

The biggest advantage of BHPH financing is it provides an opportunity to purchase a vehicle when you may not qualify through other lenders. However, interest rates are typically much higher, often exceeding 20% APR. You also have a limited selection of vehicles to choose from compared to a traditional dealership.

If you need a car and have exhausted all other financing options, a BHPH dealer may be your only choice. Just be sure to compare interest rates and terms across multiple BHPH dealers to find the best deal. Also factor in the older age and higher mileage of vehicles sold on BHPH lots.


Maintaining Your Vehicle

Once you have secured financing and purchased a vehicle with bad credit, it’s important to properly maintain it. Follow the recommended maintenance schedule in your owner’s manual for oil changes, tire rotations, fluid flushes, and other services. This will help keep your car in good running condition and prevent expensive repairs down the road.

You should also be sure to keep full coverage insurance on your vehicle at all times. Comprehensive and collision coverage will pay for damage from an accident, weather events, vandalism, or theft. This protects your asset and prevents you from having to come up with money for repairs out of pocket.

Simple maintenance like checking tire pressure, fluid levels, belts, and hoses can also prevent many common roadside issues. Be diligent about addressing any problems right away before they turn into larger repairs. Protect your investment by taking care of your vehicle.


Making Payments on Time

Your payment history is critical for improving your credit score. Payment history makes up a large portion of your credit score, so consistently paying your car loan on time can significantly raise your score over time. Try to never miss or be late on a payment if possible.

Consider setting up autopay through your lender so your payments are automatically deducted from your bank account each month. This prevents you from forgetting and avoids late fees or reporting a late payment to the credit bureaus, which would further damage your score. Just be sure you have enough in your account each month to cover the payment.

You may also receive notices each month from your lender about an upcoming payment. Pay attention to these so you remember when your payment is due. All of these small actions to pay on time each month will demonstrate responsibility and reliability, gradually improving your credit.


Refinancing Your Loan

One option that may be possible after making timely payments and improving your credit score is to refinance your auto loan. Refinancing involves taking out a new loan to pay off your existing loan. The goal is to potentially qualify for a lower interest rate on the new loan, which can lower your monthly payments.

Most lenders will want to see that you have significantly improved your credit score and have a solid history of on-time payments with your current loan before approving a refinance. But if you’ve diligently worked to build your credit back up, refinancing could be a great way to save money on interest charges over the remainder of your loan term.

Shop around and compare offers from multiple lenders when considering a refinance. Look for options with no application fees or prepayment penalties. Crunch the numbers to see how much you can potentially save by getting a lower rate. Refinancing usually makes the most sense if you plan to keep the vehicle long term.



Getting approved for a car loan in Montreal with bad credit may seem challenging, but it’s certainly possible with the right strategy. By taking steps to build your credit score over time, finding a cosigner, making a reasonable down payment, shopping around for the best rates, and exploring lenders that specialize in bad credit, you can improve your chances of getting financed. Maintaining your vehicle properly and making on-time payments will help rebuild your credit so you can potentially refinance at a lower rate down the road.

In summary, key points to keep in mind when trying to get approved for a Montreal bad credit auto loan include:


  • Check your credit report and focus on improving your score
  • Consider getting a cosigner with good credit
  • Save up for a down payment of 10-20% if possible
  • Look at less expensive used vehicles to reduce the loan amount
  • Apply to multiple lenders, including subprime specialists
  • Explore secured loan options that use the vehicle as collateral
  • Ask dealers about special finance programs they may offer
  • Compare rates and terms carefully before signing anything
  • Make all your payments on time once approved
  • Consider refinancing in the future once you build your credit


With persistence and the right approach, Montreal residents with poor credit can get the car they need. Don’t get discouraged if you get turned down at first – explore all your options and you can drive off with an auto loan despite your credit challenges.

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Montreal Bad Credit Car Loan Questions

The minimum credit score for a car loan in Montreal and across Canada typically ranges from 500 to 650 depending on the lender. Many lenders prefer scores of 650 or higher as this is considered good credit, but there are options for bad credit borrowers as well. With scores below 650, you may pay higher interest rates or need to put more money down.

Yes, there are many lenders in Montreal that specialize in bad credit auto loans. Options include dealerships that offer in-house financing, banks, credit unions, and online lenders. Having a steady income and down payment can help improve your chances even with bad credit. Expect higher interest rates than with good credit, but getting approved is possible with scores as low as 500.

Typical documents needed to apply for a Montreal bad credit auto loan include:


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

– Government-issued ID – Driver’s license, passport, permanent resident card

– Proof of address – Utility bill, bank statement with your address

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

– Down payment – 5-20% of vehicle cost required by most lenders


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

Most Montreal lenders that offer bad credit auto financing will require a minimum down payment between 5-20% of the vehicle purchase price. Generally, the lower your credit score, the larger down payment you will need to qualify and get approved. Putting 20% or more down shows the lender you are financially committed.

Bad credit car loan interest rates from Montreal lenders typically range between 10-30%, depending on exactly how poor your credit score is among other factors. With good credit (scores above 700), rates range from 3-10%. The lower your score, the higher your interest rate will likely be. Shop multiple lenders to compare rates.

Most Montreal lenders that finance auto loans for bad credit borrowers will offer terms between 24-72 months (2-6 years). Longer terms up to 84 months may also be available in some cases. The longer the repayment term, the lower your monthly payment will be, but the more interest you pay overall.

While 0% down deals do exist, they are very rare for borrowers with bad credit in Montreal. Most lenders require at least 5% down, if not 20% or more when financing a vehicle for someone with poor credit. Putting some money down shows commitment and lowers the lender’s risk. Save up a down payment first before applying.

Yes, many car dealerships in Montreal work with special finance lenders or have an in-house finance department that can approve bad credit buyers for dealer financing. This allows them to sell cars to more customers. Dealer financing tends to come with higher interest rates, but they may be more flexible for those with poor credit.

Many online lenders now offer pre-approval for bad credit car loan financing in Montreal with just a soft credit check. Getting pre-approved gives you negotiating leverage at the dealership and shows the dealer you can secure financing. Final loan approval typically happens after choosing a vehicle.

The easiest places to get approved for a bad credit auto loan in Montreal are often smaller buy here, pay here dealerships that focus specifically on special financing for borrowers with poor credit. Approval rates can be higher than at large dealerships and banks, but interest rates are usually higher too.

Mainstream brands that typically offer more affordable financing options in Montreal for bad credit buyers are:


– Nissan

– Kia

– Hyundai

– Ford

– Dodge


These brands cater well to subprime borrowers with specially discounted models and promotional rates to help those with challenged credit.


Getting approved for luxury car financing with bad credit in Montreal can be challenging, but is possible in some cases. The most important qualifying factors will be your required down payment amount and income level rather than your credit score alone. Expect to put down at least 20% when financing a luxury vehicle with poor credit.

Simply applying for a Montreal bad credit auto loan will likely have little or no negative impact on your credit score as long as the inquiries are spaced out. Too many hard inquiries in a short period can lower your score somewhat. An actual loan approval helps build positive credit history which can improve your score over time.

Yes, you can qualify for a Montreal car loan after bankruptcy or a consumer proposal, typically after 12 months of good payment history. Interest rates may be higher and you’ll likely need 20% or more as a down payment. Re-establishing your credit should be a priority after a proposal or bankruptcy.

The most commonly used banks for bad credit auto loans in Montreal are:


TD Auto Finance


BMO Bank of Montreal


– Royal Bank of Canada (RBC)

National Bank


While bank interest rates tend to be lower than other lenders, approval rates for bad credit applicants may also be lower with stricter requirements.

Two excellent resources for finding Montreal lenders that offer bad credit auto financing are:


  1. Car Loans Canada (
  2. LoanConnect (


Both websites let you easily compare detailed loan offers from Canada’s top bad credit car lenders and apply online for free. They match borrowers with the best lenders for their unique credit situation.

One company you can call to be connected with a specialist who can help find Montreal-area lenders for bad credit car loans is Car Help Canada. Their phone number is:




Advisors are available 24/7 to take your call, learn your financing needs, credit status and connect you with lenders offering guaranteed loan approvals to those with poor or no credit.

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