The process of purchasing a car and getting approved for an auto loan can be overwhelming, considering the multitude of factors involved: deciding between new or used, the total cost, included technology and features, and more. Yet, this is only half the battle. Once you’ve found that perfect vehicle that ticks all the boxes, the next challenge arises – devising a financing or leasing plan, which can be easier said than done. Most people stress over the possibility of loan rejection, especially given that Canada’s average credit score hovers near the threshold of 660, which is also known as “subprime.” At Sherwood Credit & Leasing, we understand that the journey to securing a car loan can be daunting, especially if you’ve faced challenges with your credit history. Unlike traditional lenders, we approach the approval process with flexibility and understanding, recognizing that everyone’s circumstances are unique. We strive to help individuals get bad credit auto loan approvals in Sherwood Park, Edmonton, and surrounding areas.  In this article, we’ll explore the different options for those seeking a bad or no credit auto loan. As well, we will address common questions, and provide valuable insights on how to improve your credit to get approved for a bad or no credit auto loan in Alberta. 

Good Credit Automotive Loans vs. Bad Credit Automotive Loans

When considering financing options for a vehicle, it’s important to understand the difference between good credit auto loans and bad credit auto loans; because depending on which one you qualify for, you should be aware that they both come with a unique set of limitations and parameters. 

Good Credit Automotive Loans 

Good credit auto loans are tailored for people with good credit scores (above 660) and typically offer a range of advantages. These good credit auto loans often include lower interest rates, which lead to reduced overall borrowing costs. Moreover, lenders are usually willing to extend larger loan amounts to borrowers with good credit histories. This means you can finance a more expensive vehicle or cover additional expenses such as taxes and fees. Another perk of good credit auto loans is the availability of longer repayment terms. With extended periods for repayment, borrowers have more flexibility in managing their monthly budgets. Lastly, longer terms can result in lower monthly payments, making the loan more manageable over time.

Bad Credit Automotive Loans

On the other hand, bad credit auto loans or otherwise known as sub-prime or non-prime auto loans, provide a lifeline to individuals with credit scores under 660. These loans are specifically designed to accommodate borrowers who may have struggled to maintain an “above subprime” credit history, but offer them an opportunity for those in need of a vehicle to secure financing and rebuild their credit over time. While bad credit auto loans have an important purpose, they come with some drawbacks. One of the most notable differences is the higher interest rates associated with bad credit auto loans. Lenders view borrowers with poor credit as higher risk, leading to elevated interest rates to mitigate potential losses. As a result, borrowers may end up paying significantly more in interest over the life of the loan compared to those with good credit. Additionally, bad credit auto loans typically offer smaller loan amounts compared to their good credit counterparts. This restriction can limit your options when it comes to selecting a vehicle, since you’ll need to consider more affordable options within your loan amount.

Can I Get Approved with No Credit?

When it comes to discussing automotive loans, the focus often shifts automatically to the role credit history plays. However, little to no attention is given to options available for people without an established credit history. The reality is that no-credit car loans do exist, and those with limited or no credit history can still get approved for no credit auto financing. While having no credit history may pose challenges, there are lenders and dealerships that specialize in assisting individuals with no credit obtain car loans.  These lenders typically assess factors such as:

• Income
• Proof of Employment and employment stability
• Monthly expenses such as rent, phone bills, a student loan, etc.

By providing this information when applying for a no-credit car loan, you not only prove that you are a responsible spender but also demonstrate your ability to repay the loan. Additionally, offering a larger down payment or obtaining a cosigner with a strong credit history can strengthen your application and increase your chances for approval on your no credit auto loa. 

 So, How Can I Improve My Credit Score?

Improving your credit score is a huge step towards securing better loan terms and financial opportunities in the future. While it may seem impossible at first, there are several strategies you can implement to gradually boost your credit rating:

Make Payments On Time

Your payment history is crucial in influencing your credit score, as it accounts for 35% of your score. Make sure that you make all your payments, including credit card bills, other loan installments, and utility bills, on time. Late payments will negatively affect your credit score.

Reduce Your Debt

High levels of debt can also weigh down your credit score. Work towards paying off existing debts and try to keep your credit card balances low. Also, aim to maintain a credit utilization ratio: the amount of credit you’re using compared to your total available credit. 

Monitor Your Credit Statements

Make sure you review your credit report regularly to keep an eye out for any errors or discrepancies. This also allows you to track your progress as you work on improving your credit score.

Diversify Your Credit Mix

Having a diverse mix of credit accounts, such as credit cards, installment loans, and a mortgage, can positively impact your credit score. However, opening multiple accounts simultaneously can have the opposite effect, so be wary.

Avoid Closing Old Accounts

Closing old accounts can actually shorten your credit history and potentially lower your credit score. So, try to keep these accounts open to maintain a longer credit history, as it can be beneficial for your credit score.

How Can Sherwood Credit & Leasing Get You Approved?

At Sherwood Credit & Leasing, we are dedicated to providing you with the best, personalized experience while navigating through the process of securing an auto loan. Unlike big banks, we see you for more than just your credit score. Our hardworking team thoroughly reviews each client’s financial situation and considers multiple factors such as income, spending habits, and vehicle loan value. We make it our goal to find the best financing and leasing opportunities for you, get you approved for a car loan, and get you into a vehicle that suits all your needs. Contact us today to learn more about how we can get you approved for a bad credit or no credit auto loan in Sherwood Park or Edmonton, and help you drive away with confidence.