The purpose of car financing is simply to make a once, an unaffordable vehicle become affordable.
Types of Car Loans
There are two different types of car loans available in Canada: Leasing and financing.
Let’s examine these two tours in more detail.
Leasing: Leasing a car is more or less like a long-term rental. Your lease is for said amount of time until the contract expires. Upon expiry you have one of three choices; return the vehicle, buy it outright, or finance the remainder.
Financing: Financing a car is different because in a finance agreement, you own your vehicle and you pay off the total amount over your contract. One main key to remember is that once this contract expires you own your vehicle. You are left with an asset, or retain cash value towards another vehicle.
Car Financing in Ontario
Financing a car is basically like asking someone else to buy the vehicle for you. You will then need to pay the bank, dealer or credit union the entire amount spent with interest over a predetermined time.
Unlike leasing a car, car financing will put you in complete ownership of the vehicle from day one. You will not have any restrictions on the use and customization of the tool. These are things you cannot do in a lease.
Bad Credit Car Loans
Everyone will have a credit score. People who show that they can be trusted with credit will have a higher credit score. Car loan lenders often base their lending decisions on your credit history.
Unfortunately, you may find yourself thinking that this means that people who have had financial difficulties in the past may have trouble getting a car loan. But even if you have a bad credit score in CarFinance, our experienced team is here to help you buy the car of your dreams.
There are many “sub-prime” lenders for all types of credit. Sub Prime lenders are private, 3rd party and even regular everyday banks such as TD Bank, Scotia bank and many others.
How Does Car Financing Work?
Getting a car loan in Ontario means going through a credit application process. The whole process is you trying to prove to a financial institution that you are reliable enough for a loan. The financial institution will then decide whether to approve, conditionally approve or decline an application.
Preparation is everything when it comes to financing a car, so you must do your research beforehand! Here are some things to expect when financing a vehicle in Ontario.
Do you know what you will need before applying?
Before filling out any form, make sure you have the following items ready.
- Government issued Photo ID*
- Proof of Income*
- Proof of residence/current address
- Social insurance number
- Down payment
We have already mentioned three different institutions to get a loan in Canada. Now, let’s examine this more specifically.
Ontario Banks: Banks offer auto loans. If you are already working with a bank, questioning the available car financing options is an excellent place to start. However, banks don’t want to lose money and generally prefer people with higher credit scores or history.
Ontario Dealers: Most auto dealers offer car financing options. These are more useful as the whole process is done in one place, is faster and more competitive.
Private automobile brokers: Unlike the previous two options, private brokers like CarFinance allow you to do the entire car loan application from the comfort of your own home. They also tend to have a 100% approval rate.
It’s essential to be meticulous and compare your different options. Rates will vary between lenders and financial institutions. Some places also require you to make a down payment, while others may not. Do a lot of research on the auto loan opportunities offered by your local banks and dealers, and then decide.
What to Know About Payment Car Financing Terms
Payment term refers to the amount of time a customer is given to pay the car loan.
For example, you take a $30,000 loan. You agree to repay it for 72 months with an annual interest of 8.4% and a minimum monthly payment of $532. That means you will have to pay $532 for 72 months plus the interest for that month.
Note that you don’t necessarily have to take out a loan for the vehicle’s entire value. If you have $5,000 ready as a down payment, you will only need to take out a loan for $25,000. This will cause you to save on interest.
* The first two are the mendatory requirements and the other three may be needed according to the conditions.
If you want to learn about car loan calculators, you can read our previous blog post.
[ Related post: Free Online Loan Calculator ]