Car Loans Explained

Posted by on November 08, 2017 @14:29:15 EST

Car Loans Explained

According to the Globe and Mail, approximately 57 percent of Canadians choose to finance their vehicle purchase by getting a car loan. To learn more about car loans, where you can get them and common myths, continue reading.

What is a Car Loan?

Simply put, a car loan is a personal loan that is granted by a lender for the sole purpose of purchasing a vehicle. In return, according to The Balance, “the borrower agrees to pay back the lender the amount of the loan, plus interest”. The Balance’s article also notes that in the case of a car loan, the loan is considered secure because the car is used as collateral. This is an important fact that may sometimes be overlooked, but because the car is used as collateral, if you fail to make payments on your car loan, expect to have your car repossessed and sold. If the car is sold for less than the loan amount, you’ll have to continue making payments to your lender until your full loan amount is paid off.

Where to Get a Car Loan

When you decide to obtain financing for your next vehicle, rather than lease or pay for the entire vehicle in full, you’ll want to know where you can actually get a car loan. Currently, there are three primary avenues through which you can receive financing for your next vehicle. You can obtain a car loan from a bank, a credit union or a dealership directly. There are pros and cons to each option, but it’s important that you have all of the facts available so that you can make an informed decision about where you will obtain automobile financing.

btain a car loan from a bank



We see them daily, use them often, but do we actually know the true purpose of a bank? An article for Finance & Development, a magazine published every quarter by the International Monetary Fund (IMF), defines banks as institutions that are able to “match up savers and borrowers”, ensuring that the economies which they serve continue to function effortlessly. Traditional banking institutions are in the business of making a profit and are regulated by federal laws within Canada. Regulations are in place to prevent the devastation that occurs to customers when a bank succumbs to its vulnerabilities, fails, and is forced to close. The regulations that are in place to limit “exposures to credit, market, and liquidity risks” help to keep Canadian banking institutions stable, meaning that they are a safe avenue through which to obtain your next car loan.

If you decide to obtain vehicle financing through a traditional bank, you can either go to the bank directly or you can work with an auto loan company that already has relationships with several banking institutions. has found that attempting to get a car loan directly from the bank on your own can be a lengthy and taxing process that may be complicated by your credit score if it is low. Alternatively, working with an auto financing company like that is experienced in bad credit car loans and has years of experience in working with the major banking institutions can make the process of obtaining car financing a breeze. By working with our auto loan specialists, you could be approved for a loan within 24 – 48 hours and receive better interest rates than the banks will offer you directly.

Credit Union

According to the Canadian Credit Union Association (CCUA), a credit union is a financial co-operative that has the ability to provide the same services as a traditional banking institution (e.g. advice, chequing accounts, loans, mortgages, etc.). Unlike a bank though, a credit union is an independent financial institution that is owned by those who bank with them and each member has a say in the affairs of the credit union. The CCUA also explains that credit unions are closely regulated by provincial regulators and that “credit union members have the same or often higher deposit protection than what is available to chartered bank customers.”

Maple Money has explained that since credit unions operate in a not-for-profit capacity, they tend to offer lower interest rates on loans. Their classification as a non-profit business affords them “tax benefits that banks don’t have, and because they aren’t trying to make a profit, those savings are passed onto members.” While this may persuade you to reach out to your local credit union for your next auto loan, be mindful of the fact that credit unions tend to be restricted to a local neighbourhood.


This is also often referred to as in-house financing since a dealership offering this has the ability to fund your loan without requiring a bank or credit union; the dealership is the lender. This may be the only viable option for individuals who absolutely cannot obtain a car loan from a traditional bank or credit union, due to serious credit issues. While that “NO CREDIT CHECKS” sign may seem like a dream come true, make sure that you are aware of what you are signing up for.

If you decide that in-house financing is the best option for you, remember that you will likely be paying a higher than normal interest rate than would normally be offered by a bank or credit union. The Consumer Financial Protection Bureau advises that upon accepting an offer of in-house financing, your monthly payments for the car will be made directly to the dealership. Also, since it’s the dealership’s money on the line and their clientele tends to have bad credit or no credit, they will often place a tracking device in the vehicle in order to “repossess or disable the vehicle if you miss a payment.” Even with serious credit issues, it may be best for you to work with an auto loan specialist who is trained to work with a variety of credit challenges.

Common Car Loan Myths

Common car loan myths and facts

When you think about getting a car loan, you may have some preconceived notions about what the process might entail based on what other people have told you. In reality, much of what you may have heard about getting a car loan is false, so here’s a list of some common myths regarding car loans:

Myth 1: You can’t get a car loan if you just started at a new job

FALSE. If you’ve just started a new job, no need to worry, you should still be able to get approved for an auto loan. Lenders will look at your previous work history if you have just begun working at your current job. It is important however, to produce proof in the form of pay stubs that you are earning a minimum of $2,200/month.

Myth 2: Self-employed individuals can’t get a car loan

FALSE. Self-employed individuals may need a car for their business, so it would be senseless to prevent these hard-working people from obtaining a car loan. Again, as long as you can produce evidence of the fact that you earn at least $2,200/month from your business, you should have no trouble getting approved for financing for your next vehicle.

Myth 3: If you don’t have credit you can’t get a car loan

FALSE. Everyone has to start building credit somewhere, and for some individuals, their first entry into credit is via a car loan. Again, proof of income (minimum $2,200/month)  is necessary. Not having previous credit should not significantly hinder your ability to obtain financing, but you should choose to work with an auto loan company that understands the challenges you face due to to your lack of credit.

Myth 4: If you have bad credit, you can’t get a car loan

FALSE. This is absolutely not true. In fact, the Financial Consumer Agency of Canada has reported that 25 percent of all approved Canadian car loans go to nonprime, subprime and deep subprime customers. Getting a car loan could actually help you to rebuild your credit. If you’d like to learn more, contact us today or check out our blog post, What Credit Score is Needed for a Car? for more information about bad credit car loans.

Myth 5: If you have no credit or bad credit, plan for a huge down payment

FALSE. There’s no need to assume that you’ll have to save thousands before being able to buy a car if you have no credit or bad credit. In reality, many customers with these credit issues are able to get approved for a car loan with $0 down.

Getting a Car Loan with

At we’ve perfected and simplified the car loan process. If you’re ready to work with an auto financing company that understands credit challenges, has maintained long-standing relationships with all of the major banks in Ontario and can offer you a wide selection of vehicles to choose from, then is the place for you.

We understand how difficult car buying can be, so here’s an explanation of our easy three-step process to buying a car through

Step One: Apply for a car loan

Head over to and fill out the application form. The application form is really easy to complete and should take less than two minutes. If you know your basic personal information and how much you make monthly (don’t worry about being specific, the form provides income ranges to choose from), then you’ll have no trouble filling out the application. Once you’ve hit the “Get Approved” button at the bottom of the form, someone from our team will contact you to verify your information. Once we can confirm that you did indeed apply for a car loan, then we can pull your credit and begin our search for the best approval for you.

Step Two: Select a vehicle

Once we get you an approval that you’re happy with, the next step is to actually begin shopping for your car. At this point, you will probably already have an idea of the type of vehicle, the make and the model that would work best for you. Since has access to over 5,000 vehicles, we are certain that we can find you your next ride. No need to worry about unrelenting car salespeople or kicking tires when you buy through, since we will provide you with a fully certified vehicle that is thoroughly inspected by our knowledgeable service team.

Step Three: Receive your car

Again, at, we are committed to simplifying the car buying process, so after you’ve been approved and selected a vehicle that matches your needs and budget, we will deliver the car directly to you. We can deliver your car, free of charge, to anywhere in Ontario. In the event that you really want to visit us at our dealership and pick up the car from us, we’ll be more than happy to accommodate your request.

Sometimes, customers have a change of heart regarding their vehicle selection. At, we don’t think you should be stuck with a vehicle that you’re not completely satisfied with, so we’re proud to offer a 30-Day Vehicle Exchange. At the end of the day, if our customers aren’t happy then we aren’t happy. Contact us today to learn more about our vehicle exchange program or to ask us any questions you may have.

Get approved for a bad credit car loan

Car loans are the primary method through which people finance their vehicle purchases. Auto loan lenders include banks, credit unions and dealerships (in-house financing). Be sure to consider all of the pros and cons regarding these lender options before making a decision about where to get your car loan.

If you’re ready to start the car buying process but don’t want a hassle, fill out an application here. has strong relationships with all of the major Canadian banks and a team of individuals specially trained and ready to handle all types of credit challenges. Let us help you get into the car of your dreams with a car loan that fits within your budget.

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