Buying a Car Financing 

What is Car Financing?

Car financing simply means taking out a car loan that you have to refund with time. Getting financing for your vehicle means that you are collecting a loan from a lender to be able to purchase the full value of the car. The credit the lender gives out is usually equal to the vehicle’s total cost. 

Most times, the car is used as a sort of collateral by the lenders so that if you default on your payment, they can collect it back and sell it off. The lender you choose to use can either be the car dealership, an online lender, a traditional financial institution, or a credit union.

When you opt for a car loan to finance your car, you automatically agree to pay back the amount of money you borrowed with interest and any additional fee quoted by the lender. This is usually done within a set period.

How Does Car Financing Work in Canada?

In Canada, car financing works with a lender extending credit that is equal to the total cost of the vehicle to be purchased to a borrower. You pay the lender fees and interest to borrow that amount of money over a specific number of months.

There are many car financing options available, but it has been seen that getting car financing through traditional financial institutions, online lenders, and credit unions is usually less expensive than getting a loan from a car dealership. This is because most times, dealerships jack up their rate of interest to pay themselves for the money used to cover your finances. 

Once you have completed your loan term and have paid up all you owe to the lender, you will have 100% equity in and full control of your vehicle.

Applying for Car Financing

In Canada, when you have made up your mind to finance a car, the next thing is to shop and apply for a car loan. The process of obtaining a car loan is quite easy, the most difficult part is getting the loan approved. If you want to apply for a loan through the dealership, you can find out an application and submit your financial statements for observation. But if you choose to use a private seller, you have to apply for a loan in a traditional financial institution or an online lender by yourself.

The steps to apply for car financing goes thus:

Step One

Select a lender and fill out the lender’s application form for car loans. Fill in all your required personal and financial details.

Step Two

Submit any other documentation required by the lender. You might be asked to submit documentation concerning your income and expenses, notices and assessments, and other documents that support debt obligation.

Step Three

Patiently wait for your loan to get approved. Car financing loans are not like traditional loans, applications can take anything from a couple of days to a couple of weeks to get approved.

How Long Can You Finance a Car?

The amount of time you can finance a car is dependent on the negotiations and agreement you have had with your lender. Sometime in 2015, the average term of a car loan was five years and six months. But now, car loan durations are longer with some spanning up to seven years and more.

Longer car loan durations have proven to be beneficial for borrowers because of lower monthly payments. The longer you extend the length of the loan term, the more you stretch payments making the amounts lower. This is a great way to finance your car because it doesn’t apply stress to your budget and it is convenient.

The best thing to do is to discuss with your lender to come up with a payment plan that will suit both parties involved.

Eligibility Requirements for Car Financing in Canada 

When it comes to the issue of car financing, every lender has its exact requirements. But there are some general requirements that you should expect from every owner in Canada and they are:

• You must be a Canadian citizen or a permanent resident.
• You must be able to provide government-issued identification.
• You must be at least the age of majority in your province.
• You should be able to provide proof of insurance.
• You should be able to provide proof of income.
• You should be able to provide down payment funds.

Before completing an application form, you should ask the lender what their firm’s minimum requirements are. If you don’t meet all the minimum requirements, you should look for another lender because the chances of our application being approved are very slim.

Conclusion

Car financing is a great way to afford that car you have always wanted. But you have to be sure your finances are in check and you have a means of paying back what you have borrowed.

If you have no credit or bad credit, traditional financial institutions will most likely decline your application as they only love to work with outstanding customers. Instead, you can get your financing from alternative sources like online lenders. You should look around and compare loan offers till you find the best.