How Old Do I Have To Be To Get A Car Loan In Ontario?

How Old Do I Have To Be To Get A Car Loan In Ontario?

If you live in Ontario, or anywhere in Canada, and are thinking about applying for your first ever car loan, odds are there’s a ton of information you have yet to get under your belt that could turn out to be crucial when you’re negotiating the ins and outs of the whole deal with the salesman. After all, car loans aren’t straightforward, and while we can all relate to the thrill that comes with finally signing up and getting that first set of wheels, it’s easy, in hindsight, to forget all the stress that’s involved.

It’s likely that you’ve spent copious amounts of time on the Internet trying to research all of this, but even that isn’t as easy as some of us might like it to be. There’s simply too much information you need to know for most sites to be able to condense it enough that it’s readable, easily-digestible, and most importantly easy to remember. A quick google search turns up hundreds and hundreds of results, nearly all of them confused and convoluted. It’s enough to make anybody feel a little intimidated, let alone somebody who’s trying to apply for their first ever car loan.

Cars, Cars, Cars

Cars are one of those most fundamental of purchases which we tend to mark our lives by. Your life as a consumer could start out small, by taking out an easily-repaid loan for something like a television or a washing machine; or you might be able to go straight for your first apartment lease. Cars probably fit somewhere in between those two points on the serious financial obligation spectrum, but we’d be lying if we said we didn’t remember just how freeing and liberating it felt to finally get our first car.

As well as being a whole lot of fun, driving—for most of us who aren’t in a position to afford private jets—has in recent years evolved from being a convenient way to travel to being absolutely crucial for linking together your work and personal life, as well as those road trips you’ll take with your friends which will produce memories you’ll treasure for years to come. Unless you live in a highly-developed, built-up urban city environment with excellent public transport, the chances are you simply won’t be able to get by without an automobile.

Here at Carloans.ca, we know how overwhelming that first purchase can seem to the uninitiated. After all, we were there once ourselves. That’s why we’ve decided to put together a comprehensive list of everything you need to know about securing your first car loan in Canada, from how old you need to be, to which documents you need to bring with you, to even a basic explanation of credit and the various factors involved which are going to determine the price terms of the loan you need to pay back.

Let’s be frank: hardly anybody can manage to save up the requisite amount of cash to pay for their first car up front. That’s simply a reality which very few of us can call our own, and there’s no reason to feel bad about it, it’s just how it is. So a car loan is likely to be a necessity, just as much as the car itself will prove necessary for the life you’re planning to craft yourself, as somebody with financial obligations as well as somebody with multiple different avenues of living, from work to home and back again.

So whether you were wondering how old you need to be to get a car loan in Ontario, a brief list of the documents you’ll need to bring with you, or even what on Earth an interest rate is, by the end of this article we’re confident you’ll be armed with all the tools you need to complete that first, delightful purchase of a car. Here’s our comprehensive guide to securing your first car loan in Ontario.

Securing A Car Loan In Ontario

The first question any prospective automobile purchaser needs to ask themselves is whether or not they’re even eligible for a loan in the first place. While it might sound like a query that’s easily answered, that isn’t necessarily the case; and depending on where you live and what rules govern your personal jurisdiction, the answer can vary widely. We’ll attempt to make it as clear as possible so you’re left in no doubt about whether or not purchasing a car with a financial repayment scheme is a process that applies to you.

Age Isn’t The Whole Story

According to Ontario law, with a few exceptions, you can’t sign a legally binding contract unless you’re at least 18 years of age. While you can get your provisional and even full driving licenses younger than that, it’s crucial to remember that the main sticking point of securing a car loan is the obligation you’re undertaking to pay the money back. To the prospective lender considering signing you up for such a program, that’s the most important thing, not whether or not you’re able to drive. Obviously, having a license is required to drive any car, but the point we’re trying to highlight here is that simply being old enough to have a license isn’t sufficient to sign a legally binding contract for a car loan.

But just being 18 or older isn’t enough to ensure you’ll be approved for a loan. The way banks, and all other lends, consider the risk you present as somebody to lend money to is based entirely on credit. Your credit score is a little, three-figured number that encompasses entirely the mathematical risk you pose to the institution trusting you with their money.

The Importance Of Credit

A credit card and a phone.

Building up a good credit score requires putting together an impressive history of credit repayments, meaning primarily that you pay back your loans in full and on time. Sounds great, right?

The problem is that the vast majority of 18 year olds and early adults simply won’t have had the chance to build up much of a credit history. After all, what are you going to purchase in high school that requires you to borrow money in a legally binding manner? Very little if anything, is what we’re willing to bet. So, because the individual in question probably won’t be able to beef up his FICO assessment credit score, the best option is likely going to be jumping on the back of somebody else’s credit—usually a parent, older sibling, or other relative.

What you’re essentially doing when you’re signing up under somebody else’s line of credit is asking the lender to make the assumption that since they’ve been reliable (assuming their score is good enough to want to piggyback on top of in the first place!), they’ll be able to instruct you on how to behave responsibly with regards to credit as well. Think of it in the same terms as you would somebody else vouching for you for some kind of job, or a college interview.

To that end, the obligation you’re taking on is of even more grave importance, since you risk threatening the reputation of the person who stuck their neck out on the line for you. As such it should be treated very seriously indeed, and if you don’t feel like you’re mature enough to handle that responsibility it could well be best to just wait a little longer until you’re convinced you can own up to whichever consequences transpire as a result of your actions.

You’ll need the consent of whichever grown-up is going to allow you to use their line of credit as a reference, so this isn’t something you’ll be able to do behind their back. Not that you should want to do that in the first place, obviously. But a reliable credit score, even somebody else’s, still isn’t likely to be enough to get your first car loan secured.

Income Matters

Rolls of cash.

The next thing you’ll need to be able to prove to the lenders is that you have a steady stream of income. While you don’t need to be making superstar money, you do need to be receiving consistent amounts of cash into your bank account at a rate that won’t inspire nerves in the lender or make you appear to be any more of a risk than is absolutely necessary.

Your first job is likely to suffice perfectly well for this requirement. If you don’t have a job, there are still some options available to you we’ll get to in a moment. For now, remember to bring proof of your wage with you to the dealership. The most recent three months or so of pay stubs will do the trick, as long as there’s a figure written down somewhere of how much you’ve earned from your employer in total. You’ll also need to take some bank statements with you to corroborate the point you’re trying to make with the pay stubs, plus a government-issued ID, such as a passport or some other similar document.

Co-Signing

Planning writ large on a notebook.

If you don’t have a job and are still eager to get that first car loan under your belt, don’t worry—all is not yet lost. You will, however, have to ask for still another favour from whichever older relative you’ve asked to help you out with this process. They’re going to have to perform a process which is known as co-signing. Essentially, this means that they agree to be financially responsible for whichever debts you may incur in the process of your car loan, and they guarantee that they’ll pay any fees or amounts of cash you’re unable to come up with.

This is still another obligation on top of their line of credit which you may already be using, so it’s a big deal. Their own credit could suffer if they’re unable to perform their duties as guaranteed by the act of co-signing your loan, so if they’re in a tight spot at the moment or have a lot of other responsibilities, they might not be able to practically ensure that they will pay back whatever the figure turns out to be. If this is the case, it’s probably simply not the right time, and we’d recommend either finding a stable job if you can, or asking somebody else to help you out with the line of credit and co-signing procedure.

Summary

So there you have it. As you can see, there’s a lot more involved to getting approved for your first car loan than simply being old enough. Anybody who’s at least 18 can theoretically apply for a car loan in Ontario, but without a proven credit history and a consistent, stable income, you’re going to need the help of somebody else who already has those two factors.

At Carloans.ca, we provide auto loans for all ranges of credit score, so why not send us an email and ask how we can help you out?

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