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Yes, you can get a car loan both during and after your consumer proposal. While the process and rates will improve after you complete your proposal, many Canadians successfully finance vehicles at both stages. Understanding your options at each point will help you make better financing decisions.
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Getting a Car Loan During Your Consumer Proposal
First, if you already have a car loan, there is no need to change your financing arrangements. Your lender cannot change the terms of your current loan or lease just because you filed a consumer proposal. As long as you continue to make your car loan payments, you can keep your car.
However, If you’re looking for a new car loan during your proposal, there are some things to consider.
When you file a consumer proposal, an R7 credit rating will appear on your credit report and temporarily affect your credit score. During your active consumer proposal, you may need to work with alternative lenders who specialize in helping borrowers with poor credit get an affordable car loan. You’ll find many dealerships have experience working with proposal clients or those with bad credit. These lenders focus more on your current situation than your credit history. They’ll want to see that you have stable employment, reliable income, and a good record of making your proposal payments. Most ask for at least 6 months of consistent proposal payments before considering your application.
Getting a Car Loan After Your Proposal
Completing your consumer proposal opens up more financing options. If you take steps to rebuild your credit, your credit score will start to improve, and more lenders will be willing to work with you. Many people find they can get approved by traditional lenders within a year of completing their proposal.
Interest rates after completion typically start lower than during the proposal and can continue to improve. You might start with rates between 10% and 20%, with opportunities for even better rates as your credit score increases.
Traditional lenders like banks and credit unions become options again, particularly if you’ve maintained a good banking relationship. They often offer more competitive rates and better terms than specialized lenders.
Understanding Car Loan Interest Rates And Consumer Proposals
Interest rates for car loans during a consumer proposal are typically higher than standard rates. This reflects the specialized nature of proposal financing.
You can expect interest rates between 15% and 29%. Some lenders offer programs to reduce your rate after establishing a good payment history. After a year or two of making on-time payments, you may be able to refinance at a lower interest rate.
When you apply for a new car loan, take time to compare offers from different lenders. Some may advertise very low rates but include extra fees or insurance requirements that increase your total cost. Others may charge extremely high rates above 30% – these high-interest offers are best avoided.
How Car Loans Can Improve Your Credit
A car loan can actually help rebuild your credit score over time. Unlike credit cards, a car loan is an installment loan with fixed monthly payments. Each payment you make gets reported to the credit bureaus, creating a record of responsible borrowing.
Making these regular payments on time shows future lenders you can manage credit responsibly. Even starting with higher interest rates, consistently paying your car loan helps improve your credit score and can lead to better rates on future loans.
Many lenders will consider refinancing your auto loan at a lower rate after 12-24 months of on-time payments. This gives you a clear path to reducing your borrowing costs while continuing to build a positive credit history.
Tips to Improve Your Car Loan Approval Chances
Here’s what you can do to increase your chances of approval and possibly get better rates:
- Save up a down payment – even a small one improves your application
- Gather recent pay stubs and proof of steady employment
- Get a letter confirming your proposal status (active or completed)
- Consider asking a family member with good credit to be a co-signer
- Work with lenders who specialize in consumer proposals
- Be ready to explain your financial recovery plan
- Check your credit report and fix any errors
Your Hoyes Michalos trustee can provide referrals to reputable car loan lenders and financing companies who deal with consumer proposal car loans.
Smart Car Financing Strategies
Follow these guidelines to make sure your car loan to keep your car loan payments affordable:
- Choose a car that costs less than you qualify for
- Keep your loan term as short as possible to avoid negative equity situations as your car ages
- Make sure your monthly payment fits your monthly budget
- Keep car loan payments below 15% of your take-home pay
- Read all loan documents carefully for extra fees and penalties
- Avoid unnecessary add-ons that increase your loan amount
- Consider starting with a reliable used car
Getting new credit, including a car loan with a consumer proposal, is possible. Whether you’re still completing your proposal or have finished it, focus on choosing an affordable vehicle and making sure the payments fit comfortably in your budget.
Many people successfully finance vehicles both during and after their proposals. By understanding your options and taking a careful approach to car financing, you can get the transportation you need while continuing to improve your financial situation.
Book a free consultation with a Hoyes Michalos Licensed Insolvency Trustee to learn more about managing your finances with a consumer proposal.
