Bad credit car loan refinancing in Canada

What lenders look at when credit is weak

• The last 12 months of payment history on the existing auto loan, which is often better than the overall score suggests.
• Loan to value. A smaller balance relative to the vehicle improves approval odds.
• Income stability and whether it can be verified.
• Whether there is an active consumer proposal or bankruptcy, and how old it is.
• Whether a co-signer is available to strengthen the file.

Realistic expectations

Expect a higher rate than a prime borrower, but often well below the rate on a subprime dealership loan. The goal is a payment you can maintain so the payment history starts working for you.

Build from here

Every on-time payment is reported. Twelve months of clean payments on a refinanced loan frequently moves a borrower into a better tier at the next refinance.

Preparing your credit before you apply

Your rate is priced on risk. A few weeks of preparation can move you into a better tier before an application is submitted.

• Bring every account current and keep it that way for two billing cycles.
• Pay down revolving balances below 30% of the limit where you can.
• Avoid opening new credit in the month before you apply.
• Request your free credit reports and dispute any error that is dragging the score down.

How the refinancing process works

Refinancing is not a sale and it is not a new purchase. Your current lender is paid out in full, a new loan is registered against the vehicle you already own, and your payments restart on the new terms.

• Apply online with your VIN, the vehicle details and a rough idea of your current loan balance.
• Your finance manager requests a payout statement from your current lender.
• Documents arrive by DocuSign. Review the rate, term and payment, then sign from home.
• The old loan is paid out, the new loan begins, and your payment drops to the new amount.