How to Get a Car Loan with Bad Credit
Getting approved for a car loan can be difficult if you have bad credit. Sometimes, it can feel impossible to find a reasonable car loan if your credit score is poor or non-existent. Thankfully, there are other options! Lenders and dealerships, particularly us at Magma Motors, are available to work with people who have poor credit, alternative forms of income, and more to help you get the car loan you need.
What is Bad Credit?
Bad credit refers to a person who has failed to pay their bills on time, accruing large amounts of debt or late fees. A history of failing to pay bills on time leads lenders to believe that a person is at higher risk of failing to make timely payments in the future, so the person is given a low credit score.
In Canada, credit scores range from 300 to 900. A very poor credit score is anywhere between 300 and 579, while 580 to 669 is considered not ideal or fair. A good credit score is anywhere above 660 to 900. If you don’t have a credit score, this is often an indicator that you have not received any loans or financing, so there is no record of your ability to pay bills on time.
Why Do People with Bad Credit Get Denied Car Loans?
There are two primary reasons a person with bad credit may be denied a car loan. The first is that your credit score is just too low and you’re considered a high-risk borrower. Another reason could be that your income is considered too low to be able to meet the payment requirements.
If your credit score is below 660, it can be very difficult to get a car loan. If you have a low or no credit history, you can come across the same issues as someone with a poor credit score. Even if you have a bad credit score, you can sometimes get approved for car loans if you have a high enough income. If you have poor credit, the usual minimum requirement for a monthly income to still receive a car loan is $1800. In Alberta, if you work a minimum wage job, you would need to work at least 30 hours per week. If you do not meet the minimum income requirement, there are sometimes other options available to get approved for a car loan.
How to Get a Car Loan with Bad Credit
If you have a poor credit score, there are a few things you can do to get approved for a car loan.
1. Work with Magma Motors
The best way to get approved for a car loan if you have bad credit is to work with a bad credit card dealership such as Magma Motors. Our team will work with you to assess your income (including small business e-transfers and government assistance) and find a budget that works for you. We’ll look at our inventory to find a vehicle that will meet your needs and your financial requirements. Every other piece of advice in this blog can be found when you work with Magma Motors!
2. Create a Realistic Budget
If you are looking to buy a new car and get a car loan, your first step should be to truly understand your budget. Look at your monthly income and expenses and put together a realistic budget of what you could afford for a monthly car payment. Make sure you consider all monthly payments and expenses, from rent/mortgage payments to food and gas, and ensure that what you’re willing to pay monthly for a vehicle is doable.
3. Look at Used Vehicles
Although you may want a new vehicle, sometimes it is wisest to choose a used vehicle that will fit better in your budget. As you make continuous payments for your car loan, you will slowly build your credit up, so you may be able to afford a new car later on.
4. Save Up for a Down Payment
If you can take some time to save up for a down payment, you may be able to greatly reduce your monthly payments. If you know what you can realistically afford for a car loan budget, put these payments aside in a savings account for a few months to build up a down payment.
5. Consider a Co-Signer
If you have someone in your life who is willing to co-sign a loan with you, you will have a much better chance of being approved. If someone co-signs a loan, they are taking responsibility for payments if you fail to pay your bills on time. Having a co-signer gives lenders more peace of mind over providing a higher-risk loan, and can help you get approved for a car loan even if you have low or bad credit.
Get a Car Loan with Magma Motors
Magma Motors has a wide range of vehicles to fit any budget. Our team offers creative solutions to bad credit car loans. Our team will look at government assistance programs, e-transfers, and personal business payments, as well as other forms of income to help you get the best deal. Contact us to get a car loan today!