What is In-House Financing in Canada?

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There are different types of funding available to support Canadians. Generally, loans are the most prominent funding types people seek out when trying to fund a project. It is, therefore, no surprise when people only think of banks or credit unions when considering getting a car. 

However, some dealers offer in-house financing to people who are unable to secure a loan. These dealers work with private lenders to get a loan on your behalf or directly provide the funding. With in-house financing, there isn’t much requirement apart from proof-of-income.

In-House Financing

In-house financing is when you possess your car directly from a private lender or a dealership. With in-house financing, you don’t have to go through a bank to fill out a credit application. Instead, you carry out all the processes at the car dealership.

In-house financing is an alternative for car buyers who cannot qualify for a car loan from a bank or a credit union. They offer loans to car buyers using funds from banks, private lenders, or their money.

In-house financing is swift and convenient; they do not review your credit as part of their requirement. The funding is provided by a business directly to customers, eliminating the need to get a loan via any financial institution.

In-house financing allows you to get a car and a loan from the same source. Procuring your vehicle from the source can be more flexible and convenient than going through a bank. Since dealerships approve any loan, there’s usually no down payment requirement. Note that this kind of loan can be risky and often involve a higher interest rate.

How In-house financing Works

Getting in-house financing in Canada is pretty straightforward. You can go through an online car dealership using their website. Then complete the application form either online or in-person at the dealership.

Once you send in your application, the dealership will review it and notify you of your qualification status. The car’s funding comes from different Canadian banks, although the dealer prepares them at the auto dealership instead of a bank.

A dealer finance rep might recommend in-house financing to you, depending on your financial situation. In this case, the dealership either money gets the money from private lenders to help fund your car purchase or lends you their money. Bear in mind that not all car dealerships provide in-house financing.

In-house financing requirements

The requirement needed for in-house financing is quite simple. To fill out your application, you’ll need the following information:

  • Your name
  • Current employment details
  • Date of birth
  • Current residential address
  • Vehicle type
  • Social Insurance Number (SIN)

The social insurance number is not needed at the first stage of application; however, you’ll need it as you progress with your application.

In-house financing and your Credit Score

When you apply for in-house financing, your dealer will carry out what is known as a soft credit check on your account. This check is to verify your name and date of birth.

A soft check is different from a hard inquiry on your credit history; hence your credit will not be affected. This check shows your dealer your score and some details about your credit. Regardless of whether your credit is good or not, your chances of getting the loan are high.

Your credit score may or may not be affected when you go through an in-house dealership. This depends on whether or not your dealership will be reporting your repayment activities to credit bureaus.

In the case where they do, it’ll be an excellent way to build your credit score, especially if you’re making timely payments. You can always ask your dealer finance rep if they report to the credit bureaus or not.

Note that if your dealer reports to credit bureaus, having a missed or late payment could negatively impact your credit.

Pros Cons of In-house financing in Canada

  • Flexibility 
  • Swift pre-approval
  • Convenient
  • Extended warranties
  • Credit building
  • Get nicer cars

Cons of In-house financing in Canada

  • High-interest rates
  • pricey
  • Limited contract options 

Conclusion

Although in-house financing in Canada can be more expensive than a traditional car loan, it is a fast and unique way to fund an auto purchase. It allows you to finance your purchase from a dealership directing using either the dealer’s money or a private loan. 

You will have to make all repayment, including loans and interest, to the dealership. These dealers work according to your financial situation to provide you with a customized agreement that suits your budget.

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.