Will I Qualify for A Car Loan in Canada?

A new car costs nearly $58,000 on average. Car ownership has increased to 83% of Canadians. While having a car is convenient, not everyone can afford one outright, so most people take out auto loans.

However, certain requirements must be met before anyone qualifies for a car loan. Read this article to find out what these are and how to increase your chances of success.

Car Loan Qualifications

Applying for a car loan is easy, but getting approved is not a walk in the park. The following are the necessary requirements to get approved:

Credit Score

Your credit score is vital when applying for a car loan. The interest rate and loan terms depend on it.

Financial institutions that offer car loans have a minimum credit score requirement of 600-650. Online lenders have a lower credit requirement (usually 300-580). 

The average auto loan interest rate was 7.21% in 2022. However, you will likely take on higher interest rates with a low credit score.

This is why it’s best to build your credit. A good credit score gives you a higher chance of approval. 

You can also look for lenders that offer no or bad credit car loans. Remember that they come with interest rates as high as 46.96%. 


Canadians allot $400 to $800 on car loan payments monthly. Along with expenses on maintenance, a vehicle demands a lot of money. 

Lenders require a minimum income to guarantee that borrowers can afford the loan terms. Depending on the lender, they usually ask for a monthly income of $1,500 to $2,000 before taxes. 

They look at your earnings and expenses to assess the percentage spent on loans. The higher your income is, the lesser portion of it goes to monthly payments. 

Canada Auto Finance requires a gross income of $1,500, while CarsFast asks for at least $2,000 monthly. Some lenders, like LoanConnect, do not have income requirements. 

Driver’s License 

Before taking on an auto loan, you need legal authorization to drive a vehicle — a driver’s license. 

Some provinces do not allow a foreign driver’s license or International Driving Permit (IDP), so getting a Canadian driver’s license would be convenient. 

Getting a license differ depending on your province or territory. Most of them require a written exam about road rules and traffic signs. You’ll also have to take one or two driving tests. 

Make sure to renew your license every five years to maintain its validity. 

Age Requirement

You can already get a learner’s permit in Canada at 14-16 years old, but car loans have a different prerequisite. 

You must be 18-19 years old when applying for an auto loan. Depending on your province, the age of maturity varies. 

You are considered an adult when you reach 18 years old in Alberta, Ontario, and Quebec. British Columbia and New Brunswick’s legal age is 19 years old. 

Reasons Behind the Denial of Car Loan Applications

Loan rejections are more common than we think. In a 2021 survey, 81.8% of respondents were rejected for personal loans. 

You can get denied when applying for a car loan for the following reasons: 

  • Information on the application

Loan applications will require forms, and lenders focus on technicalities. Any incorrect or missing information puts you at risk of getting denied. 

Before submitting your application forms, double-check everything. There must be no room for any grammar or spelling mistakes. Fill out the forms completely, too. 

  • Credit history

For financial intuitions, your credit score tells a lot about you. It indicates how likely you would be able to afford and pay off the loan. 

Having a lower credit score than the minimum requirement is risky for lenders. It can come with histories of bankruptcies, debts, and overdue.  

  • Employment history

Your income is the first thing lenders look at. They must know if you are earning enough to buy a car. 

They also look at your employment history to check if you are a seasonal or part-time employee. Unstable employment might mean irregular income. 

When applying for a car loan, check the lender’s requirements. If your application was rejected despite meeting everything, ask them for a reason.

Bottom Line

Being a car owner is challenging. Applying for car loans in Canada comes with many qualifications. There are a lot of things to grasp, too — from loan terms to credit scores. 

However, get ready to meet those requirements. That is the first step to getting the car you want.


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