Minimum Requirements for Securing a Car Loan–Things to Know

Getting a car loan in Canada can be intimidating, especially if you have a low credit score. However, with proper research and preparation, you can increase your chances of securing a car loan, regardless of your credit score. This article will comprehensively guide Canada’s minimum car loan requirements.

Credit Score

Your credit score is the most crucial factor lenders consider when determining whether to approve your car loan application. A credit score is a three-digit number that represents your creditworthiness and is based on your credit history. 

A credit score ranges from 300 to 900, with higher scores indicating better creditworthiness. Generally, a credit score of 650 or higher is considered good, while a score of 600 or lower is considered poor.

If you have a low credit score, options for getting personal loans for bad credit for debt consolidation are still available. However, you should expect to pay higher interest rates and fees than someone with a good credit score. To improve your credit score, you should pay your bills on time, reduce your debt, and avoid applying for too many credit products.


Your income is another essential factor determining your car loan eligibility. Lenders want to be sure that you have a stable source of income that can cover the monthly car loan payments. Lenders are more likely to approve your loan application if you have a steady job with a reasonable income.

However, if you are self-employed, your income sources may be less predictable, making getting a car loan more challenging. In such cases, you may be required to provide additional documentation, such as tax returns, to prove your income.

Down Payment

A down payment is a lump sum of money you pay upfront when purchasing a car. The down payment reduces the amount of money you borrow, which reduces the lender’s risk. A larger down payment also means that you will have to borrow less money, which could result in lower monthly payments and interest rates.

The minimum down payment required for a car loan in Canada is typically 10% of the vehicle’s purchase price. However, you may be required to provide a larger down payment if you have a low credit score. Sometimes, a lender may require you to pay up to 20% of the vehicle’s purchase price as a down payment.

Debt-to-Income Ratio

Your debt-to-income ratio calculates how much debt you have compared to your income. Lenders use this ratio to assess your ability to make loan payments. A high debt-to-income ratio indicates that you are already carrying a significant amount of debt relative to your income, which could make it challenging for you to keep up with additional loan payments.

Lenders typically prefer borrowers with a debt-to-income ratio of 40% or lower. If your debt-to-income ratio is higher than 40%, you may have a more challenging time getting approved for a car loan.


Collateral refers to an asset that you pledge as security for your loan. In the case of a car loan, the vehicle you purchase serves as collateral. If you default on your loan payments, the lender can repossess the car and sell it to recoup their losses.

Having collateral can increase your chances of getting approved for a car loan, especially if you have a low credit score. However, keep in mind that failure to make your loan payments could result in you losing your car.


You can improve your chances of getting approved for a car or personal loan by improving your credit score, having a stable income, saving for a larger down payment, and keeping your debt-to-income ratio low. Remember to shop around and compare different lenders’ terms and conditions before making a final decision. With these tips, you can increase your chances of getting a car loan and driving away in the car of your dreams.

Need a car but have bad credit? Our car personal loans at 365 Loans Canada can help. We understand that having bad credit can be stressful, but we believe everyone deserves a second chance. With our easy application process and fast approval, you can get the car you need in no time. Contact us now to learn more about our quick and straightforward auto loans! 

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