It’s true that having a vehicle repossession in Canada on your credit history can make getting approved for an auto loan difficult. But when it comes to auto financing in Canada there is a little known secret that you can get approved for a car loan even after vehicle repossession.
Thanks to an increased demand for bad credit loans, Canada now has several banks, special finance dealerships and subprime auto lenders that specialize in bad credit loans, bankruptcy loans and yes, even car loans after repo.
Make no mistake there is no magic formula or secret to getting approved for a car loan with bad credit but there are ways for Canadians to increase their odds.
Here are just few ways to get approved for a car loan in Canada after repossession. If you have a repo on your credit history, take note of these financing scenarios, because you just might qualify for a bad credit car loan too:
- Old Credit, New Job – If you’ve gotten a new, better job since your vehicle repossession, then you could be approved for a car loan. In Canadian finance there is a thought process often referred to as “old credit new job”. Sometimes credit issues arise because the debtor just isn’t making enough money. If the debtor has a bad payment history but takes on a new job, then the affordability issue might go away and they might qualify for a car loan. The chances of approval depend on when the repossession happened, what the new job is and how many payments have been since the new job began.
- Repossession Paid Off – After a repossessed car has been sold at auction, there is almost always a negative balance left owing. If unpaid, the auto loan balance will be reported to the credit bureau as an UNPAID COLLECTION. If however, you’ve paid off the bad debt from your vehicle repo, then you’re on the right track. Once paid, the collection on your credit bureau will begin reporting as PAID. While it’s still considered bad credit to have a paid repo on your credit file, it’s less damaging then an unpaid repo. Getting approved in this situation is dependent on when the repo occurred, the repo amount, when the repo was paid off and which bank you apply too.
- Minor Auto Loan Write Off – Sometimes a repo isn’t really a repo. In Canada when someone owes their auto lender or lease company a small amount towards the end of their loan, a minor write off can occur. A small amount owed such as extra mileage or kilometers at lease end, a final payment or unpaid late charges can be disputed or forgotten long enough that the auto lender writes it off as bad debt. While different than a repossession, a vehicle write off is still considered bad credit and is often mistaken by banks for a repo. If you have an I9 reporting to your credit bureau and it’s only for a small amount, make sure you point this out to the dealership or finance company you are dealing with. Sometimes an explanation can turn a decline into an approval.
- Equity Car Loan Approved – Regardless of how bad your credit is, in Canada with the right vehicle and the right amount of money down, almost anyone can be approved. When a car dealer is selling a car close to its actual value, the equity position is favorable. If the individual buying the car has a significant amount of cash down, then the equity position becomes even more attractive to the bank. There are situations where the value of the vehicle, because of cash down, is greater than the amount needed for financing. When this happens, the bank or finance company is in a very strong position and their risk is greatly reduced. If you’re got very bad credit and access to cash down, an equity car loan might be for you.
- Subprime Auto loan – In Canada a subprime auto loan is a high risk car loan usually granted by a special finance company or non prime auto lender. Subprime auto loans have high interest rates and sometimes strict conditions. If your credit is bad, then a subprime car loan might be your only option. If you get approved for a subprime loan in Canada, remember that your monthly payment is more important than the interest rate and you should focus on finding a car payment you can afford instead of worrying about interest rates. While it’s not an ideal approval, a subprime loan isn’t that bad, after all it’s someone taking a risk on you and giving you access to a car loan.
- Co Signor Car loan – With the right co-signor, even a repo on your credit history can be overlooked. Just remember if someone is nice enough to co-sign on your car loan and get you approved, you will be held accountable for their credit history as well as your own.
Those are just some examples of bad credit auto loans and how to get approved for a car loan after repossession in Canada. In order to find out if you qualify for auto financing, you first need to contact a car dealership or broker that deals in special finance, bad credit and subprime credit.
When you contact a car dealer, ask them straight up if they deal with special finance. If they say anything but yes or they don’t understand the question – keep looking.
In Canada hundreds of auto dealers make claims they cannot back up and unfortunately promises to “get anyone approved” or “low interest rates for bad credit customers” are often empty. Please remember that one of the most important decisions to make when shopping for a car with bad credit, is where you shop.