How to get a loan as a first-time car buyer in Canada

How to get a loan

It can be challenging to get a loan as a first-time car buyer because first-timers often don’t have strong credit histories. Luckily, there are several things you can do to help you get a car loan.

Build credit

As a first time buyer, you’ll need to establish some type of credit history to get a traditional car loan. The best way to do this is to establish credit with a company that makes monthly reports to the top credit information agencies. For instance, department stores will often offer credit cards to people without any credit. Once you’ve established a history (you need six months minimum), you will have an easier time applying for a car loan.

How to get a loan if you have bad credit

However, in addition to building credit, you also need to make sure you’re building good credit. This means that you need to make sure to make your credit card payments on time. By paying off monthly instalments in full, you will establish an acceptable debt to income ratio. This is something lenders look at when you apply for a loan. Furthermore, make sure you spend below 50% of your limit, as this is something lenders also look at.

  1. Research lenders

Various lenders offer a variety of interest rates at different times. For this reason, you must find the lender that has the best rate at the time you’re looking to buy your first car. Luckily, various sites on the internet connect you with loan providers and allow you to look at a car loan application online.

Get pre-approved

Before you go car shopping, it’s best if you get pre-approved. There’s nothing worse than finding a car you love, only to discover you aren’t approved for a loan amount large enough to finance it. Going through the pre-approval process tells you exactly how much of a car you can afford. Furthermore, getting pre-approved doesn’t mean you have to go with that lender, so if a better deal comes along, you’re free to take it.

Choose an appropriate car type

As a first-time car buyer, you may find it difficult to get the financing to afford a new car. Therefore your best bet is to look at a used vehicle. A lot of manufacturer’s authorized dealers have used car lots where they offer inspected and warranted used cars. Dealers prep these vehicles so they are both operationally sound and cosmetically appealing. Dealers will also usually provide limited warranties on these cars. That being said, lenders usually won’t finance cars that are more than five years old or that have more than 50,000 km on them.

Prepare documentation

When applying for a car loan, make sure you have all the necessary documentation in place. You will need to provide proof of income, as well as financial statements. Lenders will also want to know about any other loans or debt obligations you have. Additionally, you will need to show proof of residency and insurance.

Have a down payment

In general, first-time car buyer loans require the borrower to offer a minimum 20% down payment. This is known as a secured loan. In this way, the car you purchase acts as collateral for the loan since you have a 20% equity stake in the vehicle that you will want to avoid jeopardizing, making it less likely that you’ll default on the loan. At least, this is what lenders believe. Furthermore, the larger the down payment you make, the less risk the lender takes, and the more favourable your loan application will be.

Summary

It can be both exciting and intimidating to shop for your first car. However, the car loan process can take the wind out of your sails if you’re not prepared. Therefore, you need to make sure that you have a good credit history, find the right lender, get pre-approved, choose to buy a used car, prep the proper documentation for your application, and have enough money for a 20% down payment. If you do all these things, you should have no problem getting a loan as a first-time buyer in Canada.

Other articles from mtltimes.catotimes.caotttimes.ca

DJ Miss Shelton

Local Montreal DJ’s to entertain Montreal Canadiens Fans with pre-game shows

Facebook
Twitter
LinkedIn
Email
safest cities

Why Montreal is one of the safest cities to visit in 2025

If you’re planning a trip to Canada, Montreal has been ranked the sixth safest cities to travel to in 2025, according to a recent report by insurance company Berkshire Hathaway. When you break it down, Montreal’s safety is a combination of aspects that makes this city a favourite destination among safety-conscious travelers. Here’s a look

dermal fillers

The ultimate guide to dermal fillers: Are they worth it?

For decades now, dermal fillers have remained the go-to treatment for fighting the signs of aging, such as lines, wrinkles, and sagging. Apart from these, they are also extensively used to elevate some facial features by adding contour and volume to areas like lips, cheeks, and chin. Although the average cost of a dermal filler

Winnipeg’s Bold Commerce announces new PayPal integrations

Winnipeg’s Bold Commerce announces new PayPal integrations

Bold Commerce has built on its existing long-standing relationship with financial services platform PayPal. The firm has announced that small and medium-sized enterprises (SMEs) in Canada currently using its OpenCart and Gravity Forms solutions will benefit from the integration of PayPal’s full payments suite. This includes digital wallets, Venmo, Fastlane, as well as its Buy

Montreal Bungee

Montreal Bungee jumping in the Old Port of Montreal

Get ready, Montreal! The team behind MTL Zipline is taking adrenaline to new heights with Montreal Bungee, a bold new attraction launching in Spring 2025. Set against the stunning backdrop of the Old Port, this is not just another thrill ride—it’s an experience that redefines adventure. Perched at the Convoyeur Tower, the tallest urban jump in Canada

Interpol notices

Understanding Interpol notices and their impact on legal cases

Interpol is the largest international organization facilitating cooperation among law enforcement agencies in over 190 countries. Its notices serve as tools for tracking suspects, locating missing persons, and pursuing international criminals. However, for ordinary citizens, encountering the Interpol system can be challenging and stressful, especially if the notice comes as a surprise. Such situations often

Mtltimes Subscription

The latest on what’s moving Montreal and the world – delivered straight to your inbox