common misconceptions about getting an auto loan in canada

Common Misconceptions About Getting an Auto Loan in Canada

Buying a car is an exciting process. The prospect of owning your dream ride and having the freedom to travel with ease are two major perks that Canadians enjoy. That being said, for most looking to purchase a new vehicle, whether it be a brand-new model or a used car, securing a loan is an essential part of the purchasing process. 


At Auto Loan Hub, we know that vehicle financing can often be a source of stress and unnecessary confusion for Canadians. There are (unfortunately) plenty of myths and misconceptions surrounding loans, which often leave potential purchasers feeling frustrated or like they won’t qualify for a “good enough term.” Backed by industry-leading experience, our team is here to help remove avoidable financing barriers for Canadians and to make sure you have the information you need to buy your next vehicle with confidence. 


Below, we’ll cover some of the top myths when it comes to getting an auto loan in Canada. Read on to learn more!

You Need Perfect Credit to Get a Car Loan


One of the most prevalent myths that deters Canadians from buying a vehicle is the misconception that you need to have a perfect credit score to secure a loan. While it is true that a higher credit score will most likely result in better interest rates and loan terms, many lenders specialize in partnering with individuals with less-than-perfect scores. 


However, to improve your odds of securing ideal lending terms, it is worth taking some time to boost your credit score before applying for a loan. Clear any existing debt that you can, focus on paying bills on time, and practice good financial habits to avoid unnecessary knocks on your credit rating. 

You Need a Large Down Payment to Get Approved


It’s true that making a substantial down payment on a vehicle can reduce the amount you need to borrow and may result in better loan terms, but unlike many assume,  it’s not a requirement for approval. With the right lender and financial situation, it’s reasonable to be able to secure a car loan with no money down.


On the other hand, it’s worth noting that being able to make a sizable down payment does undeniably help when it comes to lowering monthly payments and reducing the amount of interest you’ll pay over time. With this in mind, we recommend saving for a down payment where possible. If you can’t, don’t let that stop you from exploring your financing options!


It’s Always Better to Go Through Your Bank for a Loan


It makes sense that many of us are comfortable partnering with our bank for a car loan, and it’s understandable to assume that they’ll offer the best terms possible. This is often not the case, however, and can end up costing you significantly more. Dealerships, online lenders, and specialized auto loan companies may provide more competitive interest rates or be more flexible when it comes to loan terms. Whenever you make a major financial decision, whether it be buying a home or financing a vehicle, it’s important to shop around and find the best possible option for your current financial situation. 


Getting a Longer Loan Term is Always Better


Many borrowers are tempted to sign up for longer loan terms due to their lower associated monthly payments. While you may ‘save’ more upfront, you’ll typically pay far more in the long run due to interest rates. What might look like a good deal month-to-month can end up being more expensive in the long run; shorter loan terms may cost less monthly, but it’s important to consider how much you’re willing/able to pay for the total duration of the loan to find what solution works for you. 


Break Financing Barriers with Auto Loan Hub 


Understanding common auto loan misconceptions can help you prepare to make a more informed financing decision when you go to buy. At Auto Loan Hub, we’re committed to helping Canadians navigate the auto financing process with ease and confidence. Learn more about getting pre-approved for an auto loan by contacting our team today!

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