If I Have Bad Credit, Can I Still Get a Car Loan or Mortgage?

Reach out to specialized lenders

If banks refused to lend you money because of your poor credit rating, consider specialized lenders. Some will agree to lend you money based on certain factors. For example, they will determine your minimum monthly revenue, ask for proof of employment and check your financial history.

Naturally, given your situation, they’ll offer higher interest rates than average. Therefore, you should exercise caution. If the interest rate offered is too high, you should go elsewhere.

There are four types of loans: secured loans, short-term loans, guarantor loans and pledge loans. For more information, read our article on the topic.

High-risk mortgages

When it comes to mortgages, individuals with a poor credit rating may be offered high-risk mortgages. These loans are offered by alternative lenders such as small banks, credit unions, private mortgage lenders and B lenders. Their term is usually shorter (less than two years) and the interest rates are higher than standard mortgage rates.

These types of loans are not recommended in the long term, but they can be a temporary solution while you rebuild your credit rating. However, you should be careful as the interest rates may be high.

Make a larger downpayment to offset your low credit rating

To increase your chances of being granted a car loan or mortgage, you can save for a larger downpayment. For example, if you want to purchase a car, the downpayment will be deducted from the loan and your monthly repayments will be lower. If you come up with a downpayment of 20% of your total mortgage, you’ll instill confidence in your lender, despite your poor credit.

Call on a co-borrower

If you have poor credit, you could apply for loans with a co-signer. You’ll have access to better loans. A co-signer is a person with good credit who agrees to sign your mortgage loan. Co-signers are often a parent or loved one. However, agreeing to co-sign a loan involves risk since the individual will have to repay your loan if you do not.

Make sure you understand your financial situation

Before applying for a loan, taking the time to understand your financial situation is important. Why do you have a poor credit history? Have you built up debt? Do you have sufficient income? These are a few of the questions you should ask yourself before taking measures to improve your financial situation.

Indeed, if you have a poor credit rating (lower than 600 usually), it means that your history of financial behaviour doesn’t instill confidence among lenders. To learn more about the five factors that impact your credit score, read our article.

Improve your credit rating

Once you have consulted your credit report and understand why banks refuse to grant you loans, improving your credit score is your best option. If you have the time, you can even improve your credit score before applying for a loan. Then you’ll be offered better rates. You can start adopting good financial habits as soon as possible. Improving your credit score can take several months, but it could pay off in the end.

For more tips on how to improve your credit rating, read our article on the topic.

In short, if you have a bad credit rating, obtaining a car loan or mortgage is still possible. However, since interest rates will be higher than average and loan conditions may vary from one lender to another, you must tread carefully. If you have time on your side, your best approach is to improve your credit rating. Then you’ll have access to traditional loans from financial institutions.

However, if you’ve accumulated debt and see no way out, don’t hesitate to contact one of our licensed insolvency trustees. They can help you find solutions. Your first consultation is both free and confidential.