Personal Loans
How Car Loans Work in Canada
24 minute read Tuesday, May. 14, 2024Have you seen the price of cars lately? You should sit down for this; the average price of a used car is over $35,000! The thought of credit checks, big money numbers, and financial commitments just went from exciting to terrifying, especially since we didn't learn how car loans work in school. And not all car loans are created equal either. Wait, they’re not? Don’t stress! Here's the lowdown on how car loans work in Canada so you can hit the open road with confidence.
How do car loans work?A car loan is a type of personal loan used to finance the purchase of a car without having to save up stacks of toonies yourself! In most cases, the borrower uses the vehicle they’re purchasing as collateral to secure the loan. The borrower then agrees to make payments over a specific period of time with interest.
Interest on a new loan for a car can range anywhere from 7.21% to 20% and repayment terms typically last anywhere from 1-7 years. Getting a car loan can be a cost-effective way to finance your ride to Tim Hortons - I mean work, or wherever you need to go. But for that statement to be true, you need to understand how car loans work and if you can actually afford one.
Why are car loans important?Owning a car isn’t always a luxury, sometimes it’s a necessity. Not only is Canada a massive country, but not all of us can afford to live close to work or the amenities we need. And we can’t all walk to the grocery store or access public transportation.
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