So you’ve decided to buy a new car. Well, unless you’re rich, or save up for a long, long time, you’re going to need to get a car loan. And that probably has you wondering: how easy is it to get a car loan in Canada? Luckily, we’re here to tell you what you need to know.
Check Your Credit
The first thing you need to do is run a credit check on yourself. Getting a loan with reasonable terms is going to depend on your creditworthiness. If you don’t have good credit, you may want to consider building your credit before buying a car.
Understand Your Debt-to-Income Ratio
To get good loan terms, you need a low debt-to-income ratio. That is to say, you need to have relatively little debt compared to your income. To calculate yours, add up your monthly debt, divide it by your monthly gross income, and multiply the result by 100. The number should be 40 at most and ideally should be 33 or under if you want to get an auto loan.
Improve Your Odds
If you have a high debt-to-income ratio or a bad credit score, you can improve your odds of getting a car loan by taking some or all of the following steps:
- Save up a large down payment to reduce the amount you need to finance
- Get a cosigner with better credit or a lower ratio
- Improve your credit score
- Lower your debt
- Make more money
Get the Needed Documentation
If you want to get an auto loan, you will need to present the right documents:
- Proof of income
- Driver’s license
- Proof of insurance
- Proof of residency
Find an Affordable Car
Next, find a car you can afford. A lot of people look for a car they like and then try to figure out how to pay for it. That is a good way to get yourself into financial trouble. Instead, you need to figure out what kind of monthly payments you can reasonably afford. Then look for a new vehicle in that price range. Make sure there’s enough money in your bank account to cover the down payment.
Get Pre-Approved
It’s a good idea to get pre-approved for an auto loan before you try to buy a car. Finding out your loan eligibility will allow you to find out whether or not you are going to be able to get the car you want. It can also help you get a lower interest rate when you do go to the dealer.
As you can see, you can’t exactly say that it’s easy to get a car loan in Canada. There are a lot of things to do, especially if your credit isn’t the best. However, it isn’t that difficult, either. Take the time and be thorough in your preparations, to maximize your chances of getting good loan terms. Contact FFUN Financial to learn about their wide range of financing options.
