Bad Credit Car Loans in Calgary: What You Need to Know

Bad credit car loans are financing solutions designed for low-credit car buyers. If your credit score is not close to the prime rating, it doesn’t mean you are locked out. The only challenge you will encounter is finding a lender willing to accept a bad credit report. This is why bad credit car loans are important for car buyers in Calgary with poor credit scores. 

Causes of Bad Credit

Credit problems make life harder, not just when it comes to getting a loan for a car. One of the easiest ways to hurt your credit score is maxing out your credit cards while paying back the loans with the compulsory minimum balance. If you have an overdue payment sent to a third-party debt collector, you will be in deep trouble. 

Taking expensive loans, applying for numerous credit cards quickly, and canceling them can do more damage to your credit history than you think. Other reasons for bad credit include defaulting on bank loans, credit card charge-offs, and filing for bankruptcy. 

You are likely to be charged higher interest if your creditworthiness is under par, which proves you are a risky borrower. You shouldn’t approach just any lender. Many will take advantage of your situation with high fees, interest rates, and obscure loan terms.

How to Get a Bad Credit Car Loan in Calgary

Before applying for a bad credit auto loan, examine your credit rating and improve it by all means possible. You need to set aside a good downpayment to increase your chances of getting more competitive rates. Evaluate the amount of debt you can afford to pay and choose a car accordingly (and an insurance plan). Lastly, get preapproved and embark on shopping around for the best bad credit car deals in Calgary.

When choosing a lender for a bad credit car loan, check their financing options, customer service, and overall reputation. You will be required to provide a photo ID, driver’s license, and proof of employment or income to apply for the loan. The whole process can take three to seven days at a traditional lender. However, ‘Buy Here Pay Here’ car loans can take two days or less. 

Factors to Consider When Choosing a Bad Credit Car Loan

When considering a bad credit car loan, your ability to repay the debt comes down to:

• Loan Term
  Longer repayment periods may result in lower monthly payments but can also result in more interest being paid over time.
• Monthly Payments
  Carefully consider your budget to ensure you can comfortably make these payments without undue hardship.
• Interest Rates and Fees
  Pay attention to the interest rates and fees associated with the loan, as these can significantly impact the total cost of borrowing. They should be reasonable and competitive.
• Pre-Payment Penalty
  Some bad credit car loans may come with pre-payment penalties, which can make it more expensive to pay the loan off early.

Tips for Improving Your Chances of Approval

You should constantly be working on improving your credit score. To increase your chances of approval for a bad credit car loan in Calgary, you can do the following:

• Provide a larger down payment: Zero money down could mean higher interest rates. More money upfront may lower the rates
• Get a co-signer: This is someone with excellent credit who will also be liable for the balance if you default

Risks of Bad Credit Car Loans

Bad credit car loans are more costly due to high-interest rates and additional charges. Your car might also hit negative equity through depreciation. This happens when the auto loan exceeds the vehicle’s value.

Conclusion

Bad credit should not prevent you from financing a car. By carefully considering the above factors, you can choose a bad credit car loan that meets your needs. Know what lenders want and look for ways to get reasonable rates.