Car Loans - Canadian Auto Loans

An auto loan is a loan, which is advanced for the purchase of an automobile. It is an installment loan used by borrowers to buy a new or used vehicle. Auto loans are also called car loans, and there are different types, including new car loans, used car loans, and bad credit auto loans.

The main components of a car loan are its term, interest rate, monthly payment amount, and down payment. Most car buyers focus on the monthly payment and down payment, but they are only part of the picture. It is important to set a budget before negotiating the terms of the loan. Some buyers underestimate this and become ‘payment buyers’, getting caught in the lender’s monthly payment figure.

Obviously, every car buyer wants the lowest APR possible. The interest rate varies and is based on the borrower’s credit history and the lender’s lending criteria. Used car loans, for example, go with certain advantages over new car loans, such as lower deprecation. At the same time, borrowers pay higher car loan interest rates.

Most experts recommend obtaining a car loan with a term of up to 48 months. Some car buyers are tempted to go longer, especially those who want to buy a more expensive vehicle and keep the monthly payment low. However, even if the car loan interest rate is relatively low, buyers who choose this option end up paying a lot of money in interest charges. In case the car is stolen or wrecked, such borrowers may find themselves owing more to the lender than the insurer is willing to pay. As a rule of thumb, if it is not possible to repay the loan at the best interest rate and within 48 months, it is better to go with a cheaper car.

Some borrowers assume that car dealerships are the best place to obtain a loan. Even borrowers who plan to finance at a dealership may want to check with credit unions and banks first. This is important as to get an idea of the typical interest rates for a person with your credit score and credit history. Generally, car buyers are encouraged to shop around for a car loan much like they would shop around for a vehicle. One way to find a good deal is to get preapproved elsewhere. This makes it possible to keep things simple and gives borrowers a bargaining chip during negotiations. It is like saying: I’ve been offered this, try to beat it. Then, if the lender offers a choice between a large rebate and a low rate of interest, having good offers from other financial institutions allows borrowers to take home both.

Regarding interest rates, Canadian credit unions usually offer lower car loan interest rates than banks and financial companies. Car dealerships offer the best deals in some cases, but these are not predictable, no matter what dealers advertise (‘no money down’, ‘lowest rates possible’, and ‘must sell’). The best way to find out is to do comparison shopping.

One way to get a low interest rate is to apply for a home equity loan. This makes sense when borrowers are looking for cheap financing but only if they can afford to repay the loan.

New Car Loans

Canadian borrowers in Manitoba, car buyers in Alberta, bank clients in British Columbia and elsewhere can get financing from the big banks, charter banks, credit unions, or other sources. RBC Royal Bank, for example, offers RBC car loans to its clients. Car buyers can opt for a loan from a car dealership offering financing through the bank. Alternatively, they can arrange a RBC Royal Bank car loan through any of the bank’s branches in Toronto, offices in Halifax, branches in Winnipeg, and in other locations. The bank offers flexible payment options, and clients can opt for a term of their choosing. Payments are automatically deducted from the borrower’s bank account, even if the account is not a RBC Royal Bank checking account. Clients can skip one payment a year, and no penalty applies. Borrowers are offered variable and fixed rates, and they can switch between them. Borrowers who choose a fixed interest rate can rest assured that the payment term and amount will be unaffected by interest rate fluctuations. If interest rates fall, borrowers have the option to switch to a variable rate of interest. Borrowers who choose a variable rate can save a substantial amount of money if interest rates go down. Monthly payments remain the same if interest rates go up, but the amortization term increases. Conversely, monthly payments remain the same if interest rates do down, and the amortization term decreases. Clients are allowed to switch to a fixed rate of interest if rates go up.

Clients of the Bank of Montreal who want to buy a car are offered a BMO personal loan. Borrowers who are approved for a personal loan can use it for any type of need. They can choose from a variable and fixed interest rate. In addition, borrowers can choose a repayment term and make larger payments without penalty. Fixed term payment is offered to clients who seek additional protection from interest rate fluctuations.

The Canadian Imperial Bank of Commerce also offers CIBC personal car loans to its clients. Car buyers can apply for financing through the bank’s branches in BC, offices in Nova Scotia, branches in Ontario, and elsewhere in the country. CIBC offers car loans with low monthly payments and flexible repayment schedules. Borrowers who apply for a CIBC personal car loan using the online application form enjoy faster approval. Once the borrower has been approved for financing, their information is only updated to make the processing of future credit applications faster. Clients of the bank can use EFT to schedule payments from their accounts. They can repay a part or the full amount of the loan at any time. Borrowers are also allowed to skip 2 payments a year.

TD Bank is yet another Canadian bank that offers auto financing and auto loans. The bank offers a range of options to meet its clients’ requirements and suit their budgets. Borrowers who opt for a TD car loan enjoy fixed regular payments and can choose from fixed or floating interest rates. The bank offers different repayment options as to make its car loans more affordable. Fixed-interest car loans are a good choice for customers who prefer set and structured payments. These loans are a preferred option for clients who want to budget around their regular monthly payments. Fixed-interest loans protect clients from interest rate fluctuations. Variable-rate auto loans, on the other hand, are a great choice for clients who want to benefit from periods when interest rates go down. Variable-rate loans are a good fit for persons who are not concerned with interest rate fluctuations. When interest rates fall, borrowers repay the loan amount faster because more of the payment will go toward the principal amount.

Scotiabank also provides car financing and auto loans to its clients. Scotiabank car loans are offered to clients who intend to buy a current or new model car. This is a good option for clients who want to benefit from convenient monthly payments and fixed interest rates. Borrowers enjoy flexible loan terms and repayment terms. To apply for a car loan, borrowers can make an appointment at any of the bank’s Nova Scotia offices, Alberta branches, BC branches, and elsewhere in Canada.

Generally, banks offer lower interest rates on new vehicles compared to used cars. Clients can choose a longer term for a new car than for a used car. This means that it is less expensive to finance a new vehicle than a used car.

Used Car Loans

Used car loans are intended for the purchase of used vehicles, and some loan providers in Canada offer used car loans to persons with poor credit. Obtaining such a loan is more difficult than getting financing for a new vehicle. First of all, it is difficult to determine the vehicle’s market value when it is used. In addition, used vehicles tend to lose value quicker compared to new ones. The vehicle that is offered as collateral is - in many cases - not worth enough to cover the loan’s balance if the borrower defaults.

The vehicle’s assessed value has to be approved by the car’s seller and the lender. The lender is also the seller oftentimes but if this is not the case, the process becomes more complicated. If possible, car buyers should make sure that the dealer and the lender use the same metric when determining the vehicle’s value. The lender will also set minimum insurance requirements. If it happens that the vehicle is damaged during the term of the car loan, the financial institution still has rights to the vehicle. Thus, lenders want to make sure that the car is repaired to standards. If the vehicle does not have insurance, the borrower may choose not to repair it because of the added expense. Speaking of used cars, the risk of damage is higher. The reason is that parts have to be repaired and replaced more often. Thus, many lenders require that borrowers buy a higher insurance coverage.

Used car loans are offered with shorter repayment terms because used cars tend to depreciate quicker. Thus, a used vehicle is often worth just a fraction of its original cost at the end of the loan’s term.

Some mainstream lenders in Canada offer used car loans. CIBC, for example, offers CIBC personal car loans to clients who intend to buy a used vehicle. Clients are offered a fixed or variable interest rate based on the bank’s prime rate. Borrowers can opt for low monthly payments which give them more flexibility, and they can choose from monthly, semi-monthly, weekly, or bi-weekly payments. Applying online guarantees faster approval. Borrowers are allowed to skip two payments a year and can repay a portion or the full loan amount without penalty. Borrowers who take a personal car loan can finance up to 100 percent of the vehicle’s cost. One alternative to personal car loans is a CIBC personal loan. The bank advertises personal loans as a good solution for borrowers who want to finance the purchase of a used car. Applicants may offer collateral, but this is optional. The repayment amount is based on the car loan’s amount and the chosen term. Early repayment is allowed, and borrowers can pay a part or the full amount at any time. CIBC offers fixed-term loans, featured with flexible repayment schedules and fixed or floating interest rates.

Bad Credit Car Loans

Loan providers in Canada offer loans to both truck and auto buyers with unique subprime requirements. Borrowers with poor credit who want to buy a used vehicle are usually offered a shorter repayment period and higher annual percentage rates. However, there are benefits to buying a used car, even with poor credit. New trucks and automobiles are being sold in great numbers because of the low-interest financing available and the rebates offered. This has resulted in a growing inventory of used vehicles, making it easier to shop around for good used vehicles.

Bad credit car loans are intended for Canadian borrowers with poor credit or limited exposure to credit. Self-employed persons, borrowers with no credit, those receiving social security, and persons with slow pays can apply for a bad credit car loan, depending on the lender. It has been estimated that 25 percent of all borrowers in Canada and the US need car financing and have poor credit. The growing competition among loan providers has made it possible for persons with no credit, repossessions, and bankruptcies to get approved for a bad credit car loan. To apply for a loan, the borrower has to complete an application form and enclose the documents required by the lender. Borrowers should present their ID or driver’s license to verify their residence and contact details. Borrowers with poor credit are also asked to present their employment records.

Even borrowers with good or excellent credit have to meet certain criteria. These include proof of identity and residence, proof of income, proof of insurance, and trade-in documentation, if applicable. Unless a borrower is applying for an auto loan at a Canadian credit union or bank they have done business with, they will be required to present proof of identity. Applicants for a car loan are also asked to provide proof of residence. Financial companies want to know where borrowers can be found if they stop making payments. Utility bills can be used to prove one’s current address. Borrowers are also asked to provide proof of income, and bank statements and pay stubs are normally considered sufficient proof. Some loan providers, however, call the borrower’s employer for verification. In addition, any assets the applicant owns can be offered as collateral. In most cases, the automobile to be bought serves as collateral, but some borrowers may want to have a backup. Borrowers are also required to provide information about the automobile they intend to purchase. Proof of insurance is another requirement for obtaining a Canadian auto loan. Loan providers require that borrowers have insurance when they are ready to purchase a vehicle, but it pays to buy insurance ahead of time. Finally, borrowers who are in the process of trading a vehicle and are applying for an auto loan should have all documents of the vehicle to be traded. These include registration and title papers, along with other documents proving ownership. This will have an impact on the amount of financing the lender will offer. Most financial companies that offer auto loans have such requirements. Borrowers who apply in person or online should provide the necessary information. Loan providers that offer car loans do not require excellent or good credit, and persons with credit problems can apply.

Car Loan Calculator

Car loan calculators are beneficial in helping car buyers with their buying decision. It is easy to use a car loan calculator, with borrowers entering the auto loan term, auto loan amount, the loan’s start date, and interest rate. In addition, some calculators allow borrowers to calculate extra payments by adding a certain amount of money to their monthly payment, as a one-time payment or as an extra yearly payment. Some car loan calculators allow users to enter lease and loan terms and compare the monthly payments for both. Borrowers who use such calculators enter the vehicle’s price, trade-in value, down payment, and sales tax. They also enter the term in months, the interest rate, and the monthly payment amount. Title, tag, and other fees, as well as destination charges, and acquisition fees are not included in the calculation, as it is only an estimate. Another type of calculator helps car buyers find out how much they can really afford. Borrowers can use the calculator to find the right car price by modifying the monthly payments, along with other loan terms (interest rate, down payment, sales tax, trade-in value, vehicle price, and term). Again, destination charges, acquisition fees, and other fees are not included in the calculation.

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