So you’ve finally decided to take the plunge and get your financial life off to a roaring start by buying your first car in Barrie—which in turn is going to necessitate getting approved for a car loan in Barrie. This is undoubtedly an exciting and stressful time. After all, all of us can remember the thrill of nerves that ran through our bodies as we pulled up to the dealership in our friend’s car, ready to drive away after a short negotiation with our very own set of wheels.
For many of us, our first car was a milestone purchase for a number of reasons. For one thing, the independence offered by being able to drive yourself wherever you want to go, whenever you want to do it, is hard to match. Certainly nothing springs immediately to mind when we think about a single item that can grant you so much freedom.
Whether you’re fond of roaming just for the sake of it, or whether you’re interested in the freedom offered by an automobile for another reason, the sheer liberty of being able to get behind the wheel and just take off is hard to match.
For another thing, these days it’s difficult to function without a car. Unless you’re one of the fortunate few who live in a built-up, metropolitan environment with sufficiently good public transit services to get by, a car is going to be the way you get yourself to a job interview, not to mention the countless commutes to the workplace thereafter.
And that’s all before we even start to talk about how you need a car to get pretty much everywhere. To the grocery store to buy the food you’re going to need to eat; to the clothing store to make sure you have clothes to wear; to visit friends, family, relatives and in-laws; to make it to the cinema, or to a restaurant, or to a sports game, or to a party, or to nowhere in particular. After all, it’s about the journey, not the destination, right?
The Necessity Of Loans
As it happens, however, unless you’re able to save up enough cash to buy the car upfront (which, let’s be honest, very few of us are able to do), you’re going to need to pay for the beast by some kind of financing plan. And whether or not you can get approved for that financing plan to pay for your car loan in Barrie is going to depend on your credit score to a large and ultimately distressing degree.
While it can seem like an insignificant little figure (it’s only three digits, after all, and doesn’t get any higher than 850), your credit score is going to follow close behind you towards every important financial decision you’re going to make as an adult. Car loans in Barrie are only the most obvious example—when you become a homeowner for the first time, you’ll need your credit score to get approved for that loan. Television sets can require loans as well, as can just about everything too expensive to buy up front.
But what is your credit score, and how is it calculated? And what kind of credit score are you going to need in order to secure approval for a car loan in Barrie?
To answer this question, we’ll first of all examine what exactly a credit score is. It doesn’t make any sense to discuss a topic like this without first establishing some essential groundwork. To that end, we’ll be discussing the FICO score throughout this article, given that that’s the most common means of calculating a credit score in operation today in Canada.
A credit score, put most simply, is a mathematical way to represent how reliable you, the buyer, are when it comes to paying back money that they, the lender, gave to you. Given money’s importance in modern society, there’s no surprise that lenders want to go on something a little stronger than your word. After all, they’re essentially handing you money on the assumption you’ll be able to pay it back later. Which sounds crazy, right?
While it is crazy, it does make a kind of sense. Money is created in the first place by the implementation of debt—that’s where everything fiscal has its roots. When you take that into consideration, it really does sound a good deal more logical. What’s more, there are two main ways your credit score is going to affect the terms of your car loan in Barrie: interest rates and the length of the loan itself. We’ll discuss those in a few minutes.
It’s All About The Algorithm
Essentially, all your credit score is is an algorithmic representation of how likely you are to pay back the money you’ve been lent—we already went over that, but it bears repeating because it makes even more sense when you consider how your credit score is calculated, which is what we’re going to discuss now.
While the actual calculations that go into the credit scores are kept a closely guarded secret (think Coca Cola recipe levels of secrecy), we have previously identified ways we can fix our credit scores, and those themselves were derived from what we do know about the calculations. The most important thing, the most highly rated variable, that gets plugged into the algorithm is how often you pay back all of your financial commitments in full and on time. Other things are important as well, but they’re dwarfed by being timely with your repayments in terms of their overall importance to the score.
So, now that we have a general idea of how our credit scores are created, it’s time to discuss what kind of credit score you’ll need to finally secure yourself that first car loan in Barrie. We’ll do this by first laying out the various ways buyers are classed when it comes to lenders choosing to whom to lend money, and then we’ll talk about the ways your credit score is likely to affect the final terms of the car loan you manage to secure in Barrie.
Buyer Classification Guide
Keep in mind that while these are rough guidelines, every lender categorizes buyers differently, and so there’s no way to say for sure what’s a hard and fast cut off. What we can say, without a shadow of a doubt, is that no matter what your credit score is, you will be able to secure a car loan in Barrie. That’s not in question. What is in question, however, is how great that loan is going to wind up being. But first of all, the categories:
Deep Subprime buyers are typically those with a credit score between 300 and 500. This is the riskiest of all of the categories, and as such is likely to incur the longest terms of the loan and the highest interest rates. If your credit score is this low, you need to think about performing credit repair sooner rather than later, because the amount of monetary difference between even this and the middle category is significant to say the least.
The second category are Subprime buyers, whose credit score tends to range from 501 up to about 600. This isn’t a great credit score either, and the car loan in Barrie you manage to secure for yourself still won’t be anything to write home about, but it’s a step up from Deep Subprime all the same.
The so-called ‘middle tier’ or credit scores are those known as Nonprime. Scores in this category are usually somewhere between 601 and 660. These can be considered middling buyers—they’re not stellar, but they’re definitely nowhere near as risky an investment as is presented by the Deep Subprime and Subprime buyer categories.
The top two categories are called Prime (which score is usually between 661 and 780) and Superprime. Granted, there are plenty of people loaning money who won’t even recognise the Superprime category—these credit scores, from 781 to 850, are pretty much perfect and not all that different from one another. But the important thing to take away from these top two categories is that they represent practically no risk whatsoever to the person lending the money. They have long, consistent credit histories of paying back their debts in full and on time, and they’ve proven time and time again that not only do they know how to live within their means, they actively make it a priority.
The better your credit score is, the lower the interest rates are that will be offered to you. Conversely, the worse your credit score is, the higher the interest rate. This is because interest rates themselves don’t go towards the value of the vehicle.
They’re purely a way to offset the risk the lender is incurring by approving you for that car loan in Barrie in the first place. It can be thought of as a kind of insurance, if that helps make the subject appear any clearer. It’s a way for the dealership, in this example of attempting to secure approval for a car loan in Barrie, to mathematically safeguard themselves against the fact that, algorithmically speaking, you’re not likely to pay back your debts.
The other way your credit score is going to affect whether or not you can secure that car loan in Barrie is when it comes to the terms of the loan itself; that is, whether it’s a long-term or short-term prospect. While this may seem like an insignificant, almost semantic point, once you dive further into the topic it becomes obvious why it makes sense.
Until you’ve paid off the loan, you don’t own the car. If your car breaks down before you can pay the loan back, you’re essentially paying to repair an item that isn’t even yours. Similarly, the shorter the loan terms are, the more likely it is that you’ll have it all paid back (and, as such, will own the car you managed to get for yourself via a car loan in Barrie) by the time you have to invest any more money into the machine.
So there you have it. While it’s true that no matter what kind of credit score you have, you will be able to get a car loan in Barrie, the specifics of that loan are going to rely heavily on the credit score you possess, so it’s best to arm yourself with as much information as possible before stepping foot in the dealership.
By the way, if you’re tearing your hair out trying to secure a car loan with bad credit, why not give us here at barriebadcreditcarloans.ca a call? We consider every single application for a loan we receive, independent of credit score.