Were you declined for a loan?

A couple of years ago, when the COVID-19 was first keeping us at home, many of us were hesitant to pursue credit. Now, with the return to the office, people are again pursuing alternative lending methods in order to get the automobile they need.

Understanding what comes with an alternative lending loan

People with credit hiccoughs in their past, or what lends might consider low income, are known as “sub-prime” or “credit constrained” customers. These customers rely heavily on these alternative lending solutions: loans from non-banks or non-traditional lenders.

In exchange for offering approvals to clients who might be considered "greater risk," these lenders charge higher interest rates and sometimes add extra fees. These can be higher NSF fees, missed payment penalties, collection fees, and loan closing or origination fees (sometimes known as the "document fee"). These fees are completely legal, and part of what you are agreeing to when you sign your loan contract. They are usually meant as added incentives to make your payments on time.

Here at iRide Auto Financing we want to make sure you are aware of these differences, because the alternative lending market in Canada is less regulated and can expose you to greater risk if you are not aware of these extra conditions and fees.

According to LoansCanada.ca, a large percentage of customers who enter alternative lending loans feel as though they were pressured into the loan due to "time-sensitive offers" (thought it is hard to be sure if this is just a tactic by other dealers or if the offer would actually be pulled). Even more troubling is that in these high-pressure situations, the customer is not able to carefully review the material before agreeing to the loan, and may agree to conditions they were not aware of, or did not fully understand.

Being under pressure and making a financial decision does not make sense.

We recommend that before you sign the loan agreement that you step back for a few hours to review and understand the terms and conditions. Feel free to ask us any questions you might have, and let go of some of that stress that can come with a new purchase.

If English is not your first language, we recommend having someone you trust review the information with you so you can be confident you understand the terms you are agreeing to. And we are happy to answer any questions that might come up!

Key things to make sure you pay close attention to:

• Total cost of the purchase
• How much the payments are
• Payment frequency (monthly, bi-weekly, semi-monthly?)
• Interest rate
• Does this fit your budget?
• Additional costs (fuel, insurance, maintenance, etc.)

We definitely understand that purchasing a new vehicle can be very stressful. Compared to other purchases a vehicle is a high dollar amount, and it is something you are going to use every day. When you discover that you do not qualify with a typical lender, and you need to look at alternative options — with loan agreements using unfamiliar terms and legal jargon — things get even more stressful.

iRide Auto Financing can eliminate a lot of that stress, and work with you to make sure that when you do decide to upgrade your vehicle, all of the necessary steps have been taken to make a well-informed decision, and to avoid the buyer’s remorse that can come days, weeks, or months down the road.