Do you need a car but worry your credit score isn’t good enough? You’re not alone!
Many Canadians believe they cannot obtain car loans due to poor credit. This stops them from getting the transportation they need for work and life.

But here is the truth: You can get a car loan with almost any credit score in Canada. Yes, even with bad credit or no credit history at all.
The key is knowing where to look and how to prepare. Getting approved for a car loan is about using the right resources and strategies.

This guide will show you exactly how to get approved. You’ll learn what lenders really want to see. Plus, you’ll discover simple steps to improve your chances and save money.

Minimum Credit Score for Car Loan Canada: No Strict Cutoff

There’s no single “minimum score,” but there are clear tiers that determine your options. Different lenders, creditors, and financial institutions set their own thresholds based on their risk tolerance and lending criteria. What qualifies as acceptable for one company might fall short for another. This creates a landscape where your score opens some doors while keeping others firmly closed. Understanding these various tiers and how different industries interpret them is key to maximizing your financial opportunities. Think of your score like a report card for money. The higher your score, the better deals you get. Here’s how credit scores break down:

• 300-559 (Poor): Getting loans is hard but not impossible
• 560-659 (Fair): You’ll pay higher rates, but can get approved
• 660-724 (Good): Most lenders will approve you
• 725-759 (Very Good): You get great rates and terms
• 760-900 (Excellent): You get the best deals available

The magic number most banks want is 660. But don’t worry if your score is lower. Platforms like CreditShift work with people who have bad credit or no credit history.

What Lenders Really Look At (It’s Not Just Your Score)

Your credit score is essential. However, it’s not the only thing lenders consider. They also check these four key areas:

1. Your Income and Job

Lenders want to see steady income. They usually look for:

• Two years at the same job or in the same field
• Prove your income can cover the car payment
• Recent pay stubs (documents from your employer showing how much you earned each pay period) and tax forms (like T4 slips that show your yearly income to the Government)

2. Your Debt-to-Income Ratio

This measures the amount of debt you have in relation to your income. Lenders prefer this number to be under 40%. For example, if you make $4,000 per month, your total debt payments should be under $1,600.

3. Your Down Payment

A bigger down payment helps in two ways:

• It reduces how much you need to borrow
• It shows lenders you’re serious about the loan
  

4. The Car You Want to Buy

Newer cars get better loan rates. Used cars older than five years often have higher rates. The car’s value also affects how much you can borrow.

Excellent Credit (760-900): Getting the Best Deals

If you have excellent credit, you’re in great shape. Banks will compete for your business. You can expect:

• Interest Rates: Often under 3%. Sometimes 0% on new cars.
• Loan Amount: Up to 100% of the car’s price.
• Loan Terms: Up to 84 months with flexible payment options.
• Special Perks: Cash rebates and waived fees.

Tips to Save Even More Money

• Shop During Sales Events: Car manufacturers offer the best deals at the end of each quarter.
• Check Credit Unions: They often have member-only discounts.
• Plan to Pay Early: Even with low rates, paying off your loan early can save you Money.
  

Good to Very Good Credit (660-759): The Sweet Spot

This credit range works well for most Canadians. Major banks, such as RBC, TD, and Scotiabank, will likely approve you easily.

• Interest Rates: Usually 3-7%, depending on the loan length.
• Loan Amount: Typically 80-100% of the car’s value.
• Loan Terms: 60-72 months are most common.

How to Get Better Terms

• Negotiate: Ask if you qualify for “preferred client” pricing.
• Put Money Down: A 10-20% down payment can lower your rate.
• Keep Your Credit Clean: Avoid applying for new credit cards before your car loan is approved.

Fair Credit (560-659): Subprime But Still Possible

With this credit, you’ll work with subprime lenders. These are companies that specialize in helping people with lower credit scores.

• Interest Rates: Expect 8-15%, sometimes higher.
• Loan Amount: Usually up to 80% of the car’s value.
• Down Payment: You’ll need a down payment of 20-30%.
• Extra Requirements: Stable job, low debt, maybe a co-signer.

Strategies for Getting Approved

• Get Pre-Qualified: Use online tools to compare offers without hurting your credit.
• Show Job Stability: Bring recent pay stubs and a letter from your employer.
• Lower Your Other Debts: Pay down credit cards before applying.
• Consider a Co-Signer: Having someone with good credit can help you secure better terms.

Poor Credit (300-559): Yes, You Can Still Get a Car

Even with poor credit, you can get a car loan. It will cost more, but it’s possible. This includes individuals who are first-time car buyers with poor credit histories.

• Interest Rates: Range from 12-20%+, depending on your exact score.
• Loan Amount: Usually 60-70% of the car’s value.
• Down Payment: Often 30% or more is required.
• Co-Signer: Almost always needed for approval.

Your Best Options

1. Subprime Specialists: Companies that focus on bad credit car loan approval and auto loans for bad credit.
2. Dealership Financing: Some dealers offer in-house financing and car dealer programs.
3. Credit Building First: Get a small loan, make payments for 12 months, then try again.

Subprime Car Loans Canada: Requirements and Tips

Subprime car loans in Canada cater to borrowers with scores below 650, who typically require proof of income (at least $ 1,800 per month), a valid ID, and often a co-signer. In 2025, expect rates of 8-20% but flexible approvals—shop with specialists for bad credit car loan options.

No Credit History: Starting From Zero

If you have no credit car loan history, you’re not automatically denied. Lenders need to see other proof that you’re responsible with money.

What Helps When You Have No Credit

1. Stable Job: Two years at the same workplace looks great.
2. Bank History: long-standing relationship with your bank is beneficial.
3. References: Personal and professional references matter.
4. Larger Down Payment: This reduces the lender’s risk.

For individuals with no credit history, starting with a secured credit card can help build credit quickly, a necessary step for those seeking a car loan.

 

The Complete Guide to Different Lender Types

Lender Type	Credit Range	Interest Rate	Pros	Cons
Banks & Credit Unions	660+	3-7%	Lowest rates, clear terms	Strict requirements
Subprime Lenders	Under 660	8-20%	Flexible approval	Higher rates
Dealership Financing	Any	10-25%	Fast approval	Highest rates

 

Choose the right lender type based on your credit situation. Each serves different needs.

Step-by-Step: How to Get Pre-approved for a  Car Loan with Bad Credit Canada

Getting pre-approved with bad credit or any credit level follows these steps:

Step 1: Check Your Credit Report

Get free reports from Equifax and TransUnion. Look for errors and dispute them. Even small mistakes can hurt your score.

Step 2: Calculate Your Real Budget

Don’t just think about the monthly payment. Include:

• Insurance costs
• Gas and maintenance
• Registration fees
• Parking costs

Keep total car expenses under 15% of your take-home pay.

Step 3: Shop Around for Pre-Approval

Apply to multiple lenders within 14 days. This counts as one credit check instead of many. Compare:

• Interest rates
• Loan terms
• Fees
• Down payment requirements

Step 4: Gather Your Documents

Have these ready before you apply:

• Recent pay stubs (last two months)
• Letter from your employer
• Tax documents (T4s)
• Proof of address
• Driver’s license
• Social Insurance Number

Using a Car Loan Calculator to Plan

A car loan calculator helps you understand what you can afford. Input different scenarios:

• Various down payment amounts
• Different loan lengths
• Different interest rates

This illustrates how each factor impacts your monthly payment.

 

Working With Subprime Lenders

A subprime lender specializes in helping people with credit challenges. They understand that life happens. These lenders look beyond just your credit score.

What Subprime Lenders Want to See

1. Recent Payment History: Your last 12 months are the most important.
2. Income Stability: Steady job for at least two years.
3. Reasonable Debt Load: Your total debts shouldn’t overwhelm your income.
4. Down Payment: Demonstrates your commitment to the purchase.

Rebuild Credit with Your Car Loan in Canada

Your car loan can improve your credit score. Many people are unaware that responsibly managing a car loan is one of the most effective ways to build or rebuild credit. Unlike credit cards, car loans demonstrate to lenders that you can handle large, long-term debt responsibly. Here’s how building credit works:

1. Payment History (35% of Your Score)

Making every payment on time is the biggest factor. Even one missed payment hurts. Set up automatic payments to never miss one. Expect gains of 50-100 points in 12 months, enabling refinancing for lower rates.

2. Credit Mix (10% of Your Score)

Having different types of credit helps your score. A car loan adds an installment loan to your credit cards.

3. Length of Credit History (15% of Your Score)

A more extended credit history helps your score. A car loan remains on your credit report for years, helping to build your credit history.

Bad Credit Car Finance: Success Stories

Many Canadians have successfully gotten bad credit car finance. Here are common patterns in success stories:

What Works

• Honest Applications: Don’t Hide Past Credit Problems. Explain what happened and how you’ve improved.
• Stable Employment: Holding a job for two years demonstrates reliability and commitment.
• Realistic Expectations: Accept higher rates initially, then refinance later.
• Extra Down Payment: Making a larger down payment can significantly improve approval odds.

When to Consider Refinancing

Refinancing means obtaining a new loan to replace your existing car loan, typically with more favorable terms and interest rates.
Your car loan terms in Canada aren’t set in stone. You can refinance when:

1. Your Credit Improves

If your score goes up by 50+ points, you might qualify for better rates.

2. Interest Rates Drop

If market rates fall significantly, refinancing can result in substantial savings.

3. Your Income Increases

Higher income might qualify you for better terms.

 

Red Flags to Avoid When Applying for a Car Loan in Canada

Watch out for these warning signs when shopping for loans:

Predatory Lending Practices

• Significantly High Rates: Anything over 25% is usually predatory.
• Hidden Fees: Read all paperwork carefully.
• Pressure Tactics: Never sign on the same day without reading everything.
• No Credit Check Claims: All legitimate lenders conduct credit checks.

The Truth About Dealer Financing

Dealer financing can be convenient, but it isn’t always the best deal:

Pros of Dealer Financing

• One-stop shopping
• Sometimes manufacturer incentives
• Quick approval process

Cons of Dealer Financing

• Often higher rates than banks
• Pressure to buy extras you don’t need
• Less time to compare options

Your Action Plan: What to Do Right Now!

Based on everything above, here’s what you should do today:

Immediate Actions (This Week)

1. Check Your Credit Score: Get free reports from both credit bureaus.
2. Calculate Your Budget: Use online calculators to see what you can afford.
3. Start Shopping: Get pre-approved with 3-5 different lenders.

Short-Term Actions (Next Month)

1. Improve Your Score: Pay down credit card balances that are below 30% of their limits.
2. Save for Down Payment: Even an extra $500 can help improve your chances of approval.
3. Gather Documents: Prepare all necessary paperwork before shopping for cars.

Long-Term Actions (Next 3-6 Months)

1. Build Credit History: Make all payments on time, every time.
2. Monitor Your Credit: Check your score monthly for improvements.
3. Plan to Refinance: When your credit improves, shop for better rates.

Conclusion: Your Car Loan is Within Reach

Getting a car loan in Canada is possible regardless of your credit score. The key is understanding what lenders want and preparing accordingly. Remember these main points:

• Credit score matters, but it’s not everything
• Different lenders serve different credit levels
• Preparation improves your approval odds and saves money
• Your car loan can actually help build better credit

Your new car is closer than you think. With the right approach, you’ll be driving away with both reliable transportation and a plan to build better credit for the future.

Frequently Asked Questions (FAQ’s)

1. Can I get approved for a car loan with a 500 credit score?

You can get approved for a car loan with a 500 credit score only through subprime lenders or dealership in-house financing, typically with 12–20% interest, a 30%+ down payment, and a co-signer required.

2. Is there a minimum credit score for a car loan in Canada?

No strict minimum exists; approvals possible below 500 via subprime lenders, but expect higher rates (8-20%)

3. What credit score is considered bad for a car loan?

Below 650-670 is subprime/bad; poor (300-559) requires specialists with 12-25% rates.

4. Can I get a car loan with no down payment and bad credit?

Possible but rare; most subprime loans require 20-30% down, but CreditShift offers zero down payment more often. Contact CreditShift for more details about bad credit with zero down payment.

5. How long does it take to get approved for a car loan with bad credit?

1-3 days with online pre-approval; gather documents, such as pay stubs, for faster processing.

6. What documents do I need for a bad-credit car loan?

Pay stubs (2 months), T4s, ID, proof of address, SIN—plus employer letter for stability.

7. Can a car loan help build a credit score for a new immigrant?

Yes, making consistent, on-time auto loan payments over 12–24 months improves your payment history and credit mix, potentially raising your score by 50–100 points for a new immigrant.

8. How to get pre-approved for a car loan?

Check your credit report, calculate your budget, shop and pre-qualify with soft inquiries, then gather pay stubs, T4s, proof of residence, driver’s license, and SIN for final approval. Go to Get pre-approved for your vehicle easily with CreditShift. Also, easily calculate your monthly payments before you apply.

9. What is a good interest rate for a car loan in Canada right now? (As of late 2025)

A good interest rate for a car loan in Canada in late 2025 is 3–7% for borrowers with good to excellent credit, with the most competitive offers around 4–6%.