How to Finance a Low Interest Car Loan in Canada
How to Finance a Low Interest Car Loan in Canada
Posted on October 21, 2021
If you are in the market for a new car in Canada and want to get the lowest interest rates possible, you will need to develop a game plan. Our Niagara Falls auto loans team have put together a list of things you should do if you want to save money and still get the car that you want.
Not all auto loan providers in Canada are created equal
Auto loan providers can be classified into one of two categories, they either focus on prime or sub-prime customers.
Some lenders take a hybrid approach of offering both prime and sub-prime loans but for the sake of simplicity, we will speak about prime and sub-prime lenders only.
Understanding the difference between prime and sub-prime
In the world of finance, prime refers to customers that meet or exceed the minimum credit score and income requirements to qualify for a loan.
When it comes to automobile financing that credit score is 680 or higher.
When a person has a credit score below 650 or erratic income, they are classified as sub-prime and would have to pay a higher interest rate to secure an auto loan.
How to safely improve your credit score
Before you can improve your credit score, you first need to establish a baseline. There are free services with TransUnion or Equifax which let you see your credit score in real-time for free.
When looking at your credit report, note whether there are any mistakes. After you have looked over your credit report and determined there are no errors, you can start taking steps to improve your score.
Are you paying your credit card and other bills on time?
Even if you are only making the minimum monthly payments, you should do it without fail. The moment you miss a payment no matter how small it may be your credit score will drop!
If you have made your payments on time but your score is still low, you might consider looking at your credit utilization. Consumers that are carrying too much debt will have their credit score negatively impacted.
Try to keep your debts as low as possible to help nudge your credit score higher.
Having a solid source of income
Auto loan providers want clients who have great credit but they also pay close attention to your income and whether you can easily service the debt.
If your credit score is high but you don’t have a large enough income you still won’t be able to secure the low-interest car loan. Lenders ideally want you to have no more than 40% of your gross pay allocated to servicing debt, so be sure you take that into account
Enlisting the help of a great local car dealership
Instead of going through all of these calculations on your own, do yourself a favor and reach out to a local dealership for help.
These dealerships have the expertise and ability to not only give you great credit-building advice but access to a network of lenders across Canada that will offer you a Niagara Falls car loan at super low interest rates.
Contact Unique Chrysler for help, advice and competitive Niagara Falls car finance and leasing.
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