How to Know if Your Car Loan Will Be Approved?
How to Know if Your Car Loan Will Be Approved?
Posted on January 6, 2026
Summary
IN SHORT
To know whether a car loan will be approved, you need to consider your credit score, financial stability, and debt-to-income ratio (debts compared to income). A strong profile increases the likelihood of approval with banks and dealerships, but specialized lenders offer options for more challenging files.
How Lenders Decide If Your Car Loan Will Be Approved
To find out if your car loan will be approved, in Quebec, lenders rely on a set of factors. How to know if a car loan will be approved? Explore our tips to maximize your chances.
Main Criteria: Income, Stability, Credit Score
First and foremost, lenders want to evaluate risk. Adequate income, overall financial stability, and steady employment all factor into their assessment. Of course, your credit score is one of the key car loan approval criteria. The minimum score required for a car loan varies from one lender to another, and each has its own requirements.
File Analysis: Debt Ratios and Past Payments
The debt-to-income ratio reflects the amount of debt compared to your income. A ratio under 30% gives you the best odds of being approved for a car loan. In addition, a history of payments made on time shows that you manage your obligations responsibly.
How Your Credit History Affects the Decision
Your history can influence the likelihood that your car loan will be approved or declined. Late payments, bankruptcy, a consumer proposal, or a thin file can give some lenders pause. Conversely, a consistent record is more favourable.
What Are the Signs Your Application May Be Declined?
Too Much Debt Relative to Income
A debt ratio over 40% significantly reduces the chances of car loan approval.
Recent Late Payments: A Major Factor
Delinquencies within the past 12 months signal that you may be facing financial difficulties and present a risk of non-payment.
Credit Utilization That Is Too High
As with the debt ratio, using more than 30% of your credit limit is a red flag.
How to Increase Your Chances of Approval Before Applying
How to improve your chances of car loan approval? Here are some effective tips.
Check Your Equifax/TransUnion Score
Knowing your score helps you anticipate the type of lender likely to approve your application. This avoids submitting applications, for example to a bank, that will be declined. Keep in mind that these refusals can hurt your profile.
If you suspect an error in your credit file, it's best to have it checked before you apply. It doesn't happen often, but it is possible.
Gather the Right Documents to Speed up the Review
Lenders generally request:
- Proof of employment or income
- Pay stubs and/or bank statements
- Proof of insurance
A complete file increases your chances of car loan approval, and above all, it speeds things up.
Reduce Certain Debts to Adjust Your Ratio
Sometimes, paying back specific debts can make a real difference in your file: it shows that you have “room” in your budget to repay a loan.
How Financement Automobile Montréal Can Approve a Challenging File
Financement Automobile Montréal specializes in approving files that banks decline. Unlike traditional institutions, we evaluate your current capacity to repay without dwelling on the past. Our numerous partnerships allow us to offer second and third chance financing with the best interest rates in town. As a result, we provide car loans that are advantageous and flexible.
Benefits of Second/Third Chance Financing
This type of financing makes it possible to get a loan even when traditional institutions say no. Second and third chance financing usually comes with interest rates that are a bit higher than first-chance options, but it allows you to secure your loan right away.
What's more, if you're looking at how to increase your credit score for greater financial ease, or if you're wondering how long it takes to improve a credit score, our experts answer your questions, offer guidance, and help you move in the right direction. You'll leave with a practical action plan and peace of mind.
FAQ
How do I know if I'll be approved for a car loan?
First, check your credit score and calculate your debt ratio. If your score is above 660 and your ratio is under 40%, you have excellent chances of being approved for a car loan. Otherwise, it's better to turn to a specialized lender for financing.
Can a bad credit score prevent your car financing approval?
Sometimes yes, but not with Financement Autmobile Montréal.
Banks or dealerships: who approves more easily?
Dealerships often approve more easily thanks to second and third chance credit options.
Can you be approved for a car loan with no credit history?
Yes, it's possible with specialized lenders, like Financement Autmobile Montréal.
Which documents increase my chances of approval?
Proof of employment, recent pay stubs, and bank statements can improve your chances if you're looking for how to get approved for a car loan. Make sure you submit a complete file.
