Can I Get Approved With Bad Credit?
We all know how important it is to get a car these days. Unless you’re one of the minority of the population who live in a built-up, urban environment with adequate public transport facilities to suit your needs, the chances are that you simply won’t be able to get by without your own automobile.
If what it takes is a bad credit car loan to make that happen, so be it. Cars are one of the major purchases that define our lives as adults, and securing approval for a bad credit car loan is often the first step many of us take as we attempt to build a financial life for ourselves.
Whether you’re new to the automobile loan world or you’re an old hand, the state of play is the same, and doesn’t change much between various circumstances, unless you’re one of the few who are able to save up enough money to buy the car up front. For most of us, that’s simply not representative of the reality of the situation, and we’ll need financing plans in order to be able to drive the car off the lot.
Your Credit Score And You
When it comes to financing, however, a lot of what the lender is going to be able to offer you will wind up coming down to your credit score. We know full well that it can feel impossible to avoid the credit score these days, no matter where you go—everybody seems to want to know what your score is.
When you consider it from the perspective of the dealer, it makes a lot of sense. They need a way to offset the risk they’re taking on by lending you money. The way we’ve developed to solve that problem is the credit score.
While the exact machinations that are in place to calculate your credit score are kept a closely guarded secret (by FICO, who provide the main score calculation used in Canada, as well as by the various other organizations who pay their actuaries high wages to come up with the algorithms in the first place), we’re able to extrapolate some data about best practices in order to increase your credit score.
If you’re in the market for a bad credit car loan, these specific techniques—typically referred to in the industry as credit repair strategies—are going to be of great benefit to you. To that end, towards the end of this article we’ll briefly discuss some of the most popular mechanisms you can put into practice in order to boost your own detail.
For the moment, though, it will suffice to elucidate that your credit score is going to be a serious factor in the kinds of loan you’ll be offered by whichever lender you’ve decided to use.
Approval Is A Real Possibility
There’s good news, however. Even if you do have a less-than-ideal credit score, there’s no reason to think you can’t get approved for a bad credit car loan with a little hard work and a lot of foresight. As a matter of fact, helping customers with bad credit scores get approved for bad credit car loans is one of the four main services autoloan.ca offer to our clients—you can learn more about that particular service here.
We consider every single application for a loan we receive, and we don’t discriminate based on financial history. That’s one of the things that sets us apart from the competition when it comes to helping our customers secure bad credit car loans in the Canadian automobile industry.
In order to properly discuss how likely it is that you’ll be approved for a bad credit car loan, and indeed how you can go about getting approved in the first place, it makes sense to first have a brief discussion about how exactly your credit score impacts the loan you’re offered by the lenders. After all, nobody tries to run before they can walk. In the same vein, we’ll talk now about what your credit score is going to do to your loan in concrete terms.
There are a couple main ways the credit score you have can affect the way the bad credit car loan is presented to you. These are the length of the loan, and the interest rate you’ll be offered. We’ll talk about these in more detail below.
The length of the bad credit car loan is often hardly even considered by potential buyers as a serious factor worthy of their time and consideration. The opposite could hardly be more true, however, especially when the loan in question is for a car. The reason this is the case has a lot to do with the fact that cars are depreciating assets.
In layman’s terms, this means that the minute you buy the car it starts to lose value. Although it may not be desirable to think about your brand new vehicle in such pessimistic terms, it’s simply part of the reality of the situation and shouldn’t cause you undue stress once you understand that it’s the same for everybody else as well.
Given that cars lose value as soon as you buy them, the length of time you’ll be allotted to pay back the bad credit car loan you’ve taken out is going to play a huge and inevitable part in considering how good the deal is as a whole. Consider, for example, the probability that the car you buy will at some point need repairs.
There are few among us indeed who would deny that any car, no matter how well-engineered or how well-maintained it is, can run into any number of problems that will necessitate monetary intervention in order to keep it road-worthy. After all, these are incredibly complicated pieces of equipment. The engine alone has thousands of parts in it, each of which could run into a problem at any time.
All of this makes sense, and as you’ve been reading you may have been wondering why on Earth we’re spending so much time elaborating on what is, after all, a relatively simple concept. We hope that the reason for this will soon become clear.
It comes down to the terms of the bad credit car loan: if you’re paying back the money you borrowed over a period of 60 months, you’re more likely to run into mechanical problems that will necessitate a spell in the garage than if the bad credit car loan is only going to take, say, 48 months to repay. If you run into a problem in the 50th month of your bad credit car loan, you’ll have to essentially spend money repairing an item you don’t even own yet.
On the other hand, if you’ve already paid back the bad credit car loan in full, you’ll be paying to fix an item you already own. It doesn’t take a genius to work out which of those two scenarios is more preferable, whether from a financial point of view or whether it’s just because of the all-important pervasive power of common sense.
Correspondingly, the worse your credit score is, the longer the bad credit car loan you’ll be offered is. It’s a pretty simple correlation that’s worth keeping in mind when you’re considering attempting to secure approval for a bad credit car loan in the first place.
It’s not the only factor, though; the interest rates you’ll be offered are also crucially important. We’ll now talk about what exactly interest rates are, as well as how they’ll be affected by your credit score in the overall calculation of your bad credit car loan.
Interest Rates Explained
Put simply, an interest rate is the mathematical approximation of the risk the lender is incurring by approving you for a bad credit car loan. That is to say, money that goes towards the interest rate has nothing whatsoever to do with the value of the vehicle.
Again, this can be a little uncomfortable to think about it, but picture it from the side of the dealership: they’re giving you an expensive piece of equipment, with essentially nothing stronger than your word that you’ll pay them back for the cost of the vehicle.
This is a risky proposition, no matter how you look at it. Given that a good credit score is built up by keeping a responsible financial history, and paying back the financial obligations you’ve taken on in full and on time, somebody with a bad credit score is going to represent more risk to the parties involved in loaning the vehicle.
Unfortunately, it doesn’t matter whether your bad credit score really is a result of historical financial irresponsibility, or if it came about because you were the victim of identity theft, or because of some calamitous, unforeseen event that took everybody by surprise and tank your rating. All these circumstances are treated as equal when they’re considering your credit score, and the terms of the bad credit car loan they’re willing to offer you.
So while you can indeed secure approval for a bad credit car loan with a bad credit score, it’s likely that you’ll be offered less-than-perfect interest rates, as well as longer loan terms than if you had a great credit score.
From that data, we can conclude that your best shot is to increase your credit score as much as possible before you attempt to secure approval for a bad credit car loan. To that end, here’s the single most important credit repair technique you can put into action in order to make sure your credit score trends upwards rather than downwards with each subsequent credit report you receive in the mail.
Pay Back Your Debts, In Full And On Time
While this may sound like a piece of advice so simple and obvious it’s barely worth mentioning, unfortunately the opposite is often truer. We’ve all gotten too familiar with the stress of bills piling up, to the extent that it can be easy to ignore some of the smaller ones in order to focus on the more restrictive debts.
This isn’t the right way to go about things, however, and is likely to harm your score more than it’ll wind up helping it.
The single best way you can boost your credit score is by making sure that you pay back every single bill in full and on time. If you can turn this into a habit, you’d be amazed at just how much it can help your overall credit score, which will prove invaluable in securing approval for a more favourable bad credit car loan.
So there you have it. The answer to the overall question is yes, you can get approved for a bad credit car loan with bad credit. Of course, boosting your score by practicing credit repair is a preferable course of action, but that’s not always feasible.
With that in mind, if you need approval for a bad credit car loan sooner rather than later, why not give the experienced team here at autoloan.ca a call? Like we mentioned above, we consider every single application we receive. We’d love to help you out of your specific situation, so get in touch and let us know what we can do to ease the strain.