Having a good credit history is essential if you want to apply for a car loan. However, if you are a person with bad credit do not panic, there are car loan options for you. Many dealerships, banks and credit unions have specialized financial packages and programs for people with bad credit. These following requirements are for people with bad credit history:
Proof of Income
- This requirement entails that you have a sufficient source of income, and the related documents for verification. In Canada, most lenders require that you have full time employment for a minimum of three months with pay stubs to prove it.
- In most provinces in Canada, the minimum income requirements is $1,750 per month gross income – that is, income before taxes and other deductions are taken off.
- Other assets could be valuable but not mandatory such as credit cards, and other loans and mortgages. These can show your ability to pay off the loan.
Proof of Insurance
- Car insurance is mandatory when driving or buying or a new car, so this requirement cannot be missed. You never want to get into an accident without car insurance.
- Firstly, it is against the law and secondly, it saves you from paying out of your own pocket. It is usually more convenient to have car insurance before purchasing your new car.
- Rates differ depending on provinces in Canada and insurance industries.
Proof of Residence
- The auto loan lender will need proof of residence at your current address, and also phone and utility bills. This information is required for repossessing vehicles if you cannot pay your payments.
Trade In Documentation (If Applicable)
- When trading in for a new car you will need the right documentation for the car you are trading in. Documents that provide proof of ownership, such as the registration papers for the vehicle, are required for the lender to determine the worth of your vehicle, and make the loan process easier.
- We are all bound to deal with credit issues once in our lives because it plays a vital role in large transactions. Having a good credit score and history is mandatory when applying for a car loan because there is a lot of money invested into a car.
- Credit history is recorded in files maintained by at least one of Canada’s two major credit-reporting agencies: Equifax and Trans Union Canada. Credit reports contain an individual’s entire credit history. It includes things such as your name and address, your job history, your outstanding debt, and you’re paying habits.
- If you are someone with bad credit history, the best way to rebuild your credit is by gradually paying off your debt to other assets and by applying for new credit.
There are a few ways to pay off outstanding debts these three ways are the quickest methods
- Pay more than the minimum – paying off the minimum payment for each month will take forever to pay off your debt. Try and increase your payment by gradually paying more than the suggested amount for that month or paying as much as you can afford.
- Pay off your most expensive debt first – this tip may seem to oppose the previous one but it could be the most beneficial strategy. Make minimum payments for all your debts except for the most expensive one that charges the most interest. Focus all extra money on this debt and by no time you will have debt the least expensive to pay down last.
- Decrease balance – Reduce your credit card or line of credit balances to below 75% of your limit. If your low credit score is due to having maxed out credit cards or very high balances on your revolving debts, this can be fixed quickly as you can bring your balances owing, down to below 75% of your credit limits.
Rebuild credit by applying for new credit such as prepaid credit cards, and department store cards. Stay on track by making a budgeting plan and keeping up to date with your monthly payments!