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Getting a car loan with bad credit in Canada

By Raj Mukherjee · October 19, 2026 · 7 min read

If your credit took a hit from a job loss, a divorce, medical bills or just a rough couple of years, you’re not alone, and you’re not out of options. Plenty of Canadians with credit scores in the 500s and low 600s get car loans every week. What changes is the rate, the lender and the terms, and those are things you have more control over than you might think.

This guide explains how an approval actually gets decided, so you can walk in prepared.

What lenders look at (it’s not just your score)

Your credit score gets you in the door with some lenders and not others, but the decision on your file comes from a handful of things together:

• Your income and how stable it is. How long you’ve been at your job, whether you’re full-time, and whether your income can be confirmed with pay stubs or tax documents.
• Your monthly payments. Lenders add up your rent or mortgage, other loans and credit card minimums, plus the new car payment, and compare that to your income. If the total is too high, the answer is usually “a cheaper car” or “a bigger down payment”, not “no”.
• Your recent history. A late payment two years ago matters far less than one last month. Lenders want to see that things are heading in the right direction.
• The car itself. The loan is secured by the vehicle, so its age, mileage and value matter. Borrowing much more than the car is worth is harder to approve.
• Anything big on your file. A consumer proposal or bankruptcy doesn’t end your chances, but lenders will look at when it was and whether it’s been completed or discharged.

Five things that improve your approval and your rate

1. Put some money down. Even $1,000 to $2,000 lowers what you borrow and shows the lender you have skin in the game. A trade-in with equity works the same way.
2. Pick the car to fit the approval, not the other way round. Know your comfortable payment first, then shop. A slightly older, reliable car is often approved at a better rate than a stretch purchase.
3. Keep the term reasonable. 84 or 96 months lowers the payment, but you pay more interest and can end up owing more than the car is worth for years. If you can manage a shorter term, it usually pays off.
4. Bring your documents. Recent pay stubs, proof of address and a void cheque or bank details speed things up. If you’re self-employed, your last two Notices of Assessment help.
5. Consider a co-signer carefully. A co-signer with strong credit can get you a better rate, but they’re fully responsible if payments are missed. Only do it with someone who understands that.

Read the numbers before you sign

Lenders in Canada have to show you the cost of borrowing before you sign: the interest rate (APR), the total you’ll pay over the term, and any fees. Look at these three things together:

• APR, not just the payment. Two offers with the same monthly payment can cost thousands apart if one has a longer term.
• Add-ons. Extended warranties, rust protection or insurance products are often added to the loan. Some are worth it, many aren’t, and you can say no.
• Prepayment. Ask whether you can pay the loan off early or make extra payments without a penalty. If your credit improves, you may be able to refinance at a better rate later.

Your car loan can rebuild your credit

Every on-time payment is reported to the credit bureaus. After 12 to 18 months of clean payments, many people see their score climb enough to refinance at a lower rate or qualify for better terms next time. Setting up automatic payments on payday is the simplest way to make sure that happens.

Shopping around without hurting your score

A full credit check from a lender shows on your file. Rather than applying at five dealerships, it’s smarter to find out where you stand first. Meet can give you a payment estimate and, if you allow it, use a soft check that doesn’t affect your credit score. Then you only send your application where it’s likely to be approved.

This guide is general information, not financial or legal advice. Rules, rates and lender requirements change and vary by province. Estimates from Meet aren’t a credit decision, a pre-approval or an offer of credit.