A car loan may be helpful if you lack the funds to buy a new vehicle outright. If you don’t have enough money up front, an auto loan can help you finance your car purchase.
But you should exercise caution when it comes to potential frauds such as title washing, cosigner scams, yo-yo financing, and more.
In This Article
This post will discuss legitimate auto lenders, car loan scams to be aware of, ways to prevent them, and other related topics.
Car Loan Scams to Avoid in Canada
Here are some car loan scams in Canada you need to avoid:
Yo-Yo Financing: When a dealer lets you drive a car home but later informs you that your financing fell through, you’re stuck paying a higher interest rate.
Upfront Fees: In this scenario, the lender charges you a fee in advance of rendering any assistance. You won’t hear from them again after you’ve paid.
Loans with 100% Guaranteed Approval: Lenders who make this claim may offer loans with extremely high interest rates or additional costs.
Payments Concentrated on the Monthly Amount: In this scenario, the borrower is blinded by the lender’s attention to the monthly payments and is forced to overlook the loan’s total cost, high interest rate, or length.
Cosigner scam: This occurs when a lender makes you believe that you need a cosigner but only adds the cosigner to the loan.
Loan modifications: Typically, this happens when a buyer finds it difficult to make their car loan payments and asks a third party to help them, in exchange for a fee, modify their current loan with the lender. You might not hear from them again after you pay the fee.
Title washing: This is the illegal removal of information from a vehicle, usually information that could lower the vehicle’s value.
Packed Payments: These are incurred when a lender adds needless features to your loan, which can get expensive over time.
How to Avoid Car Loan Scams
Let’s discuss how to prevent car loan scams in the first place now that we are aware of the ones to watch out for:
Recognize your credit score: Your credit score affects both the amount and interest rate a lender is willing to loan you. Know your credit score to prevent receiving a poor loan offer.
Plan your financing. Prior to visiting a dealership, make sure your financing is in order. You have more negotiating leverage as a result.
Examine offers from several lenders: Never accept an offer from a single lender; instead, take the time to compare the offers made by different lenders and select the best one.
Understand the most common scams: Being aware of when you are being scammed is the best defense against them.
Car loan requirements in Canada
The requirements for auto loans in Canada will differ slightly depending on the lender, but these are the requirements you should anticipate from each one:
- Evidence of income: The minimum income required varies by lender; some have a $1,200 minimum, while others have an upper limit of $2,000.
- Check credit rating: Most lenders will ask for this. In general, you will need a minimum credit score of approximately 650 in order to be approved for a car loan with favorable rates.
- Proof of residency: Give evidence of your Canadian address or proof of residency.
- Provide a government-issued form of identification, ideally a driver’s license.
- Reach the age of majority in your province or territory. In most cases, this means being eighteen, but in some, you must be nineteen.
Legit car loan lenders in Canada
1. Carsfast
Through their nationwide network of dealers, Carsfast can approve your auto financing application in a matter of minutes. Applying online only takes a few minutes.
Their auto finance network is dedicated to assisting borrowers in obtaining financing, regardless of their credit history. More than 350,000 people have been approved as clients.
According to its website, Carsfast believes that regardless of credit history, everyone should have access to dependable transportation.
The following are Carsfast’s auto loan features:
- Amount of Loan: $500 to $75,000
- Interest Rate: 4.90% to 29.90%
- Loan Duration: 12 to 96 months
- Eligibility: minimum income of $2,000 and three months of employment
2. Loans in Canada
Loans Canada is comparable to a broker that links you with lenders. Before submitting your application, you can compare the offerings of several lenders in what is regarded as Canada’s largest lender network.
You will be matched with a list of lenders who have pre-approved you for financing once you submit the application.
Personal loans, debt relief, auto loans, business loans, credit score checking, credit building, credit cards, home equity loans, insurance, and credit building are among the services offered by Loans Canada.
The following are the features on Loans Canada that are especially dedicated to auto loans:
- Amount of Loan: $500 to $35,000
- Interest Rate: 2.99% to 46.96%
- Loan Duration: 3 to 60 months
- Eligibility: minimum income of $1,800, three months of employment, and a credit score of at least 300.
3. ZoomCarLoans
Through the platform ZoomCarLoans, you can connect with several lenders in Canada. To connect with lenders, all you need to do is complete the application, which takes a few minutes to complete.
Even with poor credit, you can get a car loan through this platform.
The following are ZoomCarLoans’ features for auto loans:
- Amount of Loan: Borrow up to $50,000
- Interest Rate: 2.00%–46.96%
- Loan Duration: 24 to 84 months
- Eligibility: minimum income of $2,000, three months of employment, Canadian citizen or permanent resident.
4. LoanConnect
You can search a network of lenders on LoanConnect to identify the best loans that meet your needs and have competitive rates.
You will be matched with a list of lenders who are willing to give you a loan once you submit the application. You have the option to borrow up to $50,000 at once, and the application process only takes a few minutes.
You are able to compare multiple lenders’ offers in one application. In order to obtain financing, collateral is also not required.
The following are LoansConnect’s features for auto loans:
- Amount of Loan: $500 to $50,000
- Interest Rate: 6.99% to 46.96%
- Loan Duration: 72 to 84 months
- Eligibility: at least 18 years old, a Canadian citizen, with a credit score of at least 550.
5. Clutch
Clutch is an online marketplace where vehicles can be bought or sold. Clutch is the owner of its inventory; they don’t put you in touch with a different dealer to purchase the vehicle of your choice.
To obtain competitive financing rates from their partners, simply select “Financing” during the checkout process after choosing a car to purchase on their platform.
The following are Clutch’s auto loan features:
- Amount of Loan: Minimum of $7,500 (no maximum)
- Interest Rate: Varies
- Loan Duration: 12 to 96 months
- Eligibility: three months of employment, max. 1 bankruptcy, from Ontario or Nova Scotia, and a credit score of at least 580.
6. CarDoor
CarDoor is an online marketplace where you can look for a car and apply for financing, much like Clutch. They have relationships with several lenders to get you approved quickly and find the best rates.
After selecting a vehicle, all you need to do is complete an application, which will be sent to CarDoor’s partners to find out what kind of loan you qualify for.
These are CarDoor’s features for auto loans.
- Amount of Loan: Varies
- Interest Rate: Varies
- Loan Duration: 24 to 84 months
7. Canada Car Loans
An online portal called Canada Car Loans links you up with different lenders. Any dealership that has partnered with the platform is eligible to accept these loans.
A representative will get in touch with you after you complete their online application to go over your options and assist you in locating the best loan for your needs.
The following are Canada Car Loans’ features for auto loans:
- Amount of Loan: Minimum of $7,500 (no maximum)
- Interest Rate: Up to 34.99%
- Loan Duration: 12 to 96 months
- Eligibility: minimum income of $1,900, three months of employment, and a credit score of at least 300.
8. Canada Auto Finance
For people who want to buy a car but may not have the best credit, Canada Auto Finance is a good choice.
It only takes a few minutes to complete their application form, after which a local lender will get in touch with you to pre-approve your loan if you meet the requirements.
The following are Canada Auto Finance’s features for auto loans:
- Amount of Loan: $500 to $45,000
- Interest Rate: 3 to 96 months
- Loan Duration: 4.90% to 29.95%
- Eligibility: minimum income of $1,300, three months of employment, and a credit score of at least 300.
9. Carloans411
With the help of the online car financing resource Carloans411, you can shop for a car and a car loan at nearby dealers.
Regardless of credit status, the platform works with hundreds of Canadian dealers to help Canadians find the ideal auto loan.
These are the Carloans411 auto loan features.
- Amount of Loan: $500 to $50,000
- Interest Rate: Up to 120 months
- Loan Duration: 6.99%–46.96%
- Eligibility: minimum income of $1,600, three months of employment, and a credit score of at least 300.
10. Canada Drives
To receive car loan offers from Canada Drives, all you need to do is fill out their online application. Even people with poor credit can take advantage of this.
After that, the platform will put you in touch with a nearby dealer who will show you a variety of cars that are within your price range.
The following are Canada Drives’ auto loan features:
- Amount of Loan: Varies
- Interest Rate: Varies
- Loan Duration: Varies
- Eligibility: have a minimum income of $1,800, have a valid driver’s license, have a Canadian address and active bank account, be of the age of majority in your province, and be a Canadian resident.
What Are the Average Car Loan Rates in Canada?
The credit score you have will determine the interest rates on auto loans.
In Canada, the average interest rate on a car loan is approximately 7.69%, according to Statistics Canada.
For this reason, maintaining a high credit score is essential to obtaining the best interest rate on a variety of loans.
FAQs
Do you have additional queries? We’ll respond to them for you:
How should a loan scammer be dealt with?
Filing a police report for fraud with all the required information and supporting documentation should be your first course of action.
Can someone posing as you obtain a loan in your name?
A con artist may apply for a loan in your name if you have provided them with private information such as your social security number or bank account number.
Are money scams refunded by banks?
It is the duty of banks to reimburse customers who have been defrauded of their money. If you are scammed, though, you might not always be eligible for a refund. It might be the result of insufficient proof or human error.
What occurs in Canada when a car loan is not repaid?
A number of consecutive missed payments puts you at risk of having your car repossessed.