How do Car Loans work?

What you need to know.

In our effort to take the stress antd confusion out of finding an auto loan, we decided to offer you a crash course. Here are the basics:

The Main Factors

Here are a couple terms that you may have heard before. If you’re wondering what they actually mean, you’re not alone.


The total cost of your vehicle, including fees that the lender or dealership may have for your loan.


The length of time that you’ll be making your monthly payments. Loan Terms are commonly between 36 and 84 months (3–7 years), but shorter or longer terms are often available.

Interest Rate

The percentage that the lender is charging on the principal to loan you the money. The biggest factors in your interest rate are whether your vehicle is new or used and how much risk the lender perceives in making the loan.

These three things work together to determine your monthly payments. These payments will be made directly to the lender. We only deal with lenders who report to the National Credit Bureaus in Canada. Many financing sites and auto dealers offer “in-house” financing and, although this option might seem like a good idea on the surface, none of this “in-house” financing is reported to the Credit Bureaus so even if you make perfect payments for three years it will not improve your credit rating even a little. Our goal at is to not only get you a great loan and vehicle, but we are driven to help you improve your credit too!

What you’ll need

1. Proof of Employment or Income

Typically you need to be at your current job for three or more months and make at least $1400/month. Other forms of income, such as certain types of government assistance may also be accepted.

2. Driver’s License

It may go without saying, but to get approved for an auto loan, you need to have a valid driver’s license and be the age of majority in your province of residency. Customers are most likely to pay back their car loan if they can legally drive the vehicle, and lenders take this into consideration.

3. Bank Account

Lenders want to be able to take the monthly payment that you have committed to out of your bank account each month. When you purchase your car, you’ll need to provide a stamped pre-authorized payment form or a voided check.

4. A Current Address

For documents regarding your car loan and for the lender’s information, you’ll need to let us know where you currently live.

5. Down Payment

It’s not always necessary to put money down, but it can often help. Lenders are more likely to approve smaller loans. Don’t have a down payment saved up? Don’t fret – ask about zero-down auto financing options that are available to you.

There! Now you’re an expert on auto financing. We hope this information has been helpful, but it’s ok if you’re still confused. Whether you’re ready to ace the test or scratching your head over what you’ve just read, we recommend applying now. It’s fast, easy, and free, and once you do, one of our credit specialists will be in touch right away not only to answer your questions about car loans, but to provide you with a customized plan that will suit your specific needs.

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