Tips for Bad Credit Car Loan Approval in Canada

Getting approved for a car loan with bad credit can feel discouraging like no matter what you do, lenders just see the number, not the person behind it.

We’ve worked with Canadians from all walks of life who’ve come to us feeling overwhelmed or uncertain about their chances. 

Some weren’t even sure what lenders actually care about. At Cars with Chloe, we’ve had the privilege of helping thousands navigate this process and we’ve seen time and again that approval is absolutely within reach, even with bruised credit.

Key Takeaway

• Know your credit score. It sets the stage for your strategy.
• Show steady income. This builds trust with lenders.
• Put down what you can. Even $500 can help.

Understand Your Credit Situation

One of the first things we suggest to our clients is to get clear on where their credit stands. It’s tough to build a strategy if you don’t know what you’re working with.

In Canada, credit scores range from 300 to 900. Most lenders consider anything below 650 to be “non-prime,” and once your score falls under 600, you're typically seen as subprime. That might sound discouraging, but it doesn’t automatically mean a rejection.

We’ve worked with individuals whose scores were in the low 500s and still got approved. The key is helping lenders see the full picture, not just the number. Stability, income, and recent financial behaviour often matter just as much.

Here’s what they usually consider:

• Your credit score, usually pulled from Equifax or TransUnion
• How reliably you’ve made payments lately recent missed or late payments tend to raise red flags
• Credit utilisation, which shows how much of your available credit you’re currently using
• The types of credit you have, like instalment loans or revolving credit
• Any recent applications or “hard inquiries” that could suggest financial stress

Have Proof of Stable Income

We can’t stress this enough because income stability is huge. Even if your credit score is low, showing that you bring in a steady paycheque is often enough to offset that concern.

Lenders want to see:

• Pay stubs (usually last 2–3)
• Bank statements
• Employment letters or contracts
• Self-employment income? Be ready with business records and tax returns.

At Cars with Chloe, we’ve seen applicants approved purely on the strength of their income even when their credit score was in the low 500s.

Save for a Down Payment

While it’s true that a down payment isn’t always required to get approved through us, putting even a small amount down can make a real difference. (1)

It shows lenders you’re invested in the purchase and helps reduce their risk which often translates to better chances of approval.

We’ve seen applicants come in with just a few hundred dollars saved, sometimes $500 or less and it genuinely helped tip things in their favour. One client told us they sold an old bike and a couple of gaming consoles to reach their goal. 

That effort, modest as it seemed, strengthened their application. It also meant they borrowed less and had slightly lower payments month to month.

For anyone wondering where to even start, the good news is that most people can find a way to set aside something, especially with a bit of planning. Some ideas we often share:

• Sell unused electronics, furniture, or tools collecting dust
• Pick up a few weekend shifts or freelance gigs
• Put aside your tax refund or GST/HST credit
• Ask a relative if they’re willing to help out with a small gift or loan

Limit Your Loan Request to What You Can Afford

When we review applications at Cars with Chloe, one of the first things we look at is whether the car choice matches the applicant’s budget. 

If your income is $2,500/month and you’re trying to finance a $45,000 SUV, it’s a red flag for lenders.

A more realistic approach:

• Choose a modest, reliable car
• Focus on value and condition, not bells and whistles
• Keep monthly payments to no more than 15–20% of your net income

This doesn’t mean settling for junk. It just means being strategic. Get something that meets your needs and fits your financial reality. Once your credit improves, you can always get approved with better credit later.

Consider a Co-Signer

This one isn’t for everyone, but it’s worth mentioning. If you have a family member or partner with good credit who’s willing to co-sign, it can drastically improve your approval chances and may get you better interest rates. (2)

What’s a co-signer?

• They’re legally responsible for the loan if you miss payments
• Their credit and income are considered alongside yours
• It shows lenders someone is backing you financially

We’ve seen many first-time buyers, especially younger applicants get approved this way. Just make sure everyone involved understands the commitment.

Don’t Apply Everywhere

One of the biggest mistakes we see people make? Applying at five different dealerships in a weekend. Each time you do that, a “hard inquiry” hits your credit, which can lower your score even further.

Instead:

• Do your research
• Apply with one trusted platform (like ours)
• Let professionals shop lenders for you

This approach benefits your credit score and enhances your chances of getting approved by avoiding multiple hard inquiries that may hurt your credit rating.

Bring the Right Documents

Being prepared tells lenders that you’re serious. Before applying, gather:

• Government-issued ID (driver’s licence)
• Proof of income
• Proof of residence (utility bill, lease)
• Bank statements
• Insurance information (if already arranged)

The more you can provide upfront, the fewer delays and questions you’ll face. We’ve worked with folks who walked in with nothing, and others who showed up with a complete loan application documents folder.

Be Honest on Your Application

It can be tempting to fudge income numbers or hide debts. But trust us it always comes out eventually. Lenders verify the information, and even small inaccuracies can cause delays or outright denials.

We advise all our clients to just be straight. If you’re unsure about something, we’ll help clarify. Our job is to present your application in the best possible light without making false claims.

Rebuild While You Wait

Sometimes, the best move is to wait a few months and work on your credit. During that time, consider:

• Paying off small debts
• Keeping credit card usage below 30%
• Making consistent, on-time payments

We’ve had clients improve their score by 50–100 points in under six months. That can mean better rates, more vehicle options, or lower monthly payments. It's worth the effort.

Work with a Team That Specializes in Bad Credit

Finally, one of the best things you can do is work with people who understand your situation. 

At Cars with Chloe, we’ve spent over 15 years helping Canadians with all types of credit get into vehicles that fit their lives and budgets.

We don’t judge, and we don’t overpromise. What we do is:

• Review your unique financial picture
• Help you gather the right paperwork
• Submit your application to the right lender
• Match you with a local dealership who knows what to expect

Whether your score is 580 or 480, we’ll help you figure out the best path forward without pressure.

Common Mistakes We’ve Helped Applicants Avoid

• Submitting cropped or unreadable photos
• Applying for luxury vehicles with low income
• Forgetting to disclose all sources of income (like side gigs)
• Using outdated documents
• Leaving required fields blank

These mistakes can delay or even block approval. Double-check everything before submitting.

Conclusion

Getting a car loan with bad credit doesn’t have to be a nightmare. We’ve seen it happen time and time again when someone takes the right steps, stays honest, and leans on the right help, approvals are possible.

At Cars with Chloe, we’re here to make that process smoother. If you’re ready to start, we invite you to apply online through our secure platform. It only takes a few minutes and doesn’t affect your credit score.

Start your application today

FAQ

Can I get a car loan in Canada with a credit score under 600?

Yes, it’s possible. Many subprime lenders work with individuals under 600. Approval will depend more on your income, stability, and down payment.

Do Cars with Chloe require a down payment?

Not always. We offer zero-down options, but putting something down can improve your approval odds and reduce your payments.

Will applying affect my credit score?

Our initial application does not impact your credit. We only do a hard inquiry if you're ready to move forward with a lender.

How long does the process take?

Many applicants receive pre-approval within 24–48 hours. The total time depends on how quickly documents are submitted and vehicle availability.

Do I need a job to qualify?

Some form of income is required, but it doesn’t always have to be traditional employment. Self-employment, government benefits, or pension income may also qualify.

Can I choose my car, or do you assign one?

You absolutely choose. We work with local dealerships and help match you with options that fit your budget and preferences.

References

• https://www.bankrate.com/loans/auto-loans/car-loan-with-bad-credit/#one
• https://www.investopedia.com/how-to-get-an-auto-loan-with-bad-credit-11730265

Related Articles

• https://carswithchloe.com/blog/approval-tips-for-bad-credit/
• https://carswithchloe.com/blog/how-to-get-approved-with-bad-credit/
• https://carswithchloe.com/blog/why-a-down-payment-helps-bad-credit