Car Loans in Canada: Secured, Unsecured, and Bad Credit

A secured car loan uses the vehicle itself as collateral. The lender registers a lien, which means they can repossess the car if you stop paying. In exchange, the rate is usually lower because the lender's risk is smaller.

An unsecured car loan has no lien. You keep the title clear, but the lender is relying entirely on your promise to repay, so the rate is higher and the amounts on offer are smaller.

Most dealership and bank financing is secured. The lien stays on the vehicle until the loan is paid off, and it is recorded against the VIN.

That has a practical consequence: selling the car before the loan is cleared means dealing with the lien first. If you might sell within the term, an unsecured loan keeps your options open.

Auto lending is one of the few areas where a damaged credit file is less of an obstacle, because the vehicle backs the loan. Lenders in this space weigh your income and the value of the car alongside your credit history.

Expect a higher rate and a larger down payment than a prime borrower would see. A bigger down payment reduces the lender's exposure and often improves the terms you are offered.

Know the numbers before you shop. The vehicle's price, your down payment, and the term you want determine the payment, and a lender will want all three.

Bring proof of income, your ID, and your banking details. If you are buying from a dealer, they will usually handle the paperwork — but read the lien terms before you sign.