You’ve finally decided to look at buying a car, you’ve got your sights set on the one of your dreams, and the only thing standing in your way is qualifying for a vehicle loan. We can empathize, it may seem like a daunting idea to take out thousands of dollars for a loan. Making the right decisions when it comes to interest rates, finding a lender and going to the right dealership all add up. Go Auto Outlet is here to make this process much easier. Follow along as we go through how to qualify for a car loan in Canada.
Before You Apply for a Car Loan
Before you think about getting a car loan, think about your current situation and decide if it’s a good time for you to buy, along with gauging your relationships with prospective financial institutions. Figuring out how much you can afford to spend monthly on a vehicle rests on a few things. Look at your and your spouse’s income (if you have one). In general, you want to spend a maximum of 10-15% on your vehicle, including maintenance and insurance. This percentage lowers depending on how much you’re paying with other monthly expenses such as a mortgage, rent payments, loan payments and credit card repayment. In some cases, you may be able to afford more, but this should be avoided as much as possible, and some financial experts actually halve the estimate to 10% of your regular income.
Check Your Credit
It’s true, more than half of Canadians have no idea what their credit score is. That’s millions of borrowing Canadians who don’t know enough about their financial stability, which certainly factors into how to qualify for a car loan in Canada. Soft credit checks, like verifying your own credit, won’t decrease your credit. However, hard credit checks, like the ones loaners do when you’re applying for credit, will affect your credit score if you do it too often. 10% of your credit score is made up of inquiries, so it’s best to keep hard checks to once a year. Other aspects of your credit score are payment history, amounts owed, length of credit history, new credit and types of credit. It’s important to know your score before you decide to finance a vehicle. A good Canadian credit score is over 680! Anything under 600, and you’re in a risky category, but that shouldn’t necessarily discourage you. Just know you might have higher interest rates with worse credit, but give it some time so you can refinance. Financing a vehicle is a great way to rebuild credit!
Who to Finance With?
The first thing to do is to look at your financial relationships. Have you always done your finances through one financial institution who would be more likely to give you a great deal? If so, talk to them first. But be sure to come see us at Go Auto Outlet because we’ll quite likely be able to negotiate an even better deal for you.
There are a few things you should bring with you:
- Proof of income
- Credit and banking history
- Proof of residence
- Vehicle information
- Insurance Information
What to Ask?
There are some financially important questions to ask when you consider how to qualify for a car loan in Canada. Situations change, so you’ll want to know how much, when and how long you’ll be paying.
- Can I see the calculations you’ve come up with?
- Is there any penalty for paying more early?
- What will my interest rate be?
- Can you tell me how this is within my budget?
Applying for Pre-Approval
The next step is to apply for pre-approval or approval. With the car financing process, there are three stages: pre-qualification, pre-approval and approval. Starting with the first of these steps can let you find out what kind of situation you’re in and whether you may get pre-approved. Applying for pre-approval with Go Auto Outlet is simple! After you’ve figured out your credit, thought about types of financing, and touched base with your bank, this is your next step to getting a car loan. After that, it’s all about actually getting approved!