Bad Credit Car Loan Interest Rates in Canada

Getting approved for any kind of loan is not easy because you need to prove that you are a responsible borrower who will pay back the money that you owe. A bad credit car loan is no exception. In fact, applying for a bad credit car loan is even more difficult because its interest rate is usually higher than other types of loans.

In this article, we’ll take a closer look at bad credit car loan interest rates so you can get a better idea of what you can expect to pay when you avail this kind of loan.

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Written by: Piggyy

What is the Average Interest Rate for Bad Credit Car Loans in Canada?


If you are planning to buy a car with bad credit, you need to prepare yourself for a higher interest rate than if you had good credit. The reason for this is simple. Lenders take a higher risk of lending money to borrowers with bad credit because they are more likely to default on the loan. 


In general, the average interest rate for a car loan in Canada is 4.5% to 10%. People with excellent and good credit history easily get the lowest interest rates on car loans. If you have a fair credit score, you will most likely fall close to the 10% mark. However, if you have a poor or bad credit rating, your loan interest rate can go as high as 30%.


How to Get a Better Car Loan Interest Rate if You Have Bad Credit?


Getting a bad credit car loan is not a walk in the park. There are many things that you need to do to make sure that you will get approved for a bad credit car loan. Here are some tips that will help you get the best interest rate considering your current financial situation:


Improve your credit score

Try to pay off all of your bills on time and use your credit card responsibly. If you can do this for a few months, you can see your credit score go up and your interest rate will fall.


Lower the loan amount

The price of the car is one of the most important factors that determine the interest rate. Instead of buying the most expensive car in the showroom, go for a car that is more affordable.


Save more money

Having more money in your bank account shows lenders that you are capable of making regular payments, regardless of your current credit rating.


Bigger down payment

Making a decent down payment gives loan providers more confidence in your ability to repay the loan. If you can pay a bigger down payment, there is a very high chance that you can get a better interest rate.


Lending Companies that Offer Bad Credit Car Loans in Canada


You need to be discerning when choosing a lending company because there are some that offer bad credit car loans that are very predatory. But, if you are going to look hard enough, you can find a lender that will be willing to give you a bad credit car loan with a low interest rate.


Here are some lending companies that offer bad credit car loans in Canada:


New Car Canada

New Car Canada is an auto financing company that offers bad credit car loans ranging from $5,000 to $45,000 with a starting interest rate of 3.49%. Their repayment term is between 36 months to 72 months.


Auto Loan Ca.

Auto Loan Ca. is another auto financing company that offers bad credit car loans of up to $200,000 with an interest rate starting from 4.9%. Their loan maturity date is up to 96 months.



AutoPark offers a wide range of financing options that are suitable for people with bad credit scores. They offer loans of up to $60,000 with a repayment term ranging from 12 months to 96 months. However, their interest rate can go as high as 29% depending on your credit score. 

Frequently asked questions

What are the factors that affect bad credit car loan interest rates?

When you apply for a car loan, the lender will consider several factors to determine the interest rate of your loan. These factors include the loan amount, your down payment, your credit score, and the type of car you are buying.

How do you improve a bad credit score?

The first step in improving your credit score is to pay off your existing debt as quickly as possible. Aside from that, you need to keep making on-time payments and keep your credit utilization at a minimum.

What are the documents needed to apply for a bad credit car loan?

Upon applying for a car loan, you will be asked to provide the most basic requirements like proof of employment/income, driver’s license, and proof of address.



Buying a car is one of the biggest expenses that you will ever have to pay for. You need to be aware of the risks that you are taking and make sure that you get a car loan that is affordable and will not cause you to become bankrupt.


״The secret of happiness, is not found in seeking more, but in developing the capacity to enjoy less״ - Socrates

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