How to get a car loan when you owe the CRA money

How to get a car loan when you owe the CRA money

Posted on June 28, 2022

Whoever coined the expression the only certainties in life are “death and taxes” was spot on. If you are looking to buy a car but owe the CRA money, getting a car loan can seem nearly impossible.

Most traditional lenders will not approve a car loan if you owe the CRA money because of the special creditor status that is given to them.

Why creditors don’t like dealing with borrowers that owe the CRA

If you owe a creditor money and don’t pay, they have to go through a complex and drawn-out process to try and get their money back by using a collections agency, taking you to court, getting a judgment against you then trying to find out if you have any assets to attach your judgment against.

The CRA does not have to go through that process at all. If the CRA feels you owe them money and aren’t paying them as agreed, they send out a simple fax to the bank you do business with (the CRA knows who you bank with because the account is tied to your social insurance number) and your bank accounts are frozen.

Not only can the CRA freeze your bank accounts, but they can also and will put liens against any property that you own, whether there is a lien on it already or not.

If you have a mortgage on a home and owe the CRA, the CRA takes the first position on the property, which means they get paid before the original lender.

This is why no traditional lender wants to deal with a borrower who owes the CRA money.

However, there is good news, you can still get a car loan, but there are a few things you need to do.

Work out a repayment plan with the CRA

Your tax debt is not going to go away, the Government is fair, but it is also required by law to collect on all debts.

Don’t wait until your bank accounts are frozen before trying to work out a repayment plan; contact the CRA and discuss your payment options.

Typically, they want the debt to be repaid within 12 months, but most will work something out if you are forthcoming and making a good faith effort to settle your debts.

Once you have the repayment plan in place, get it in writing from the CRA.

Boost your credit score to the highest possible level

Now that you have a repayment plan in place with the CRA, you can factor those payments into your budget. You should take this opportunity to also work on boosting your credit score to its highest possible level.

Creditors will feel better knowing that while you owe the CRA money, you are able to properly handle all of your other obligations.

Where to get a car loan when you owe the CRA money

You will not be able to get a loan on your own no matter what other websites claim; you need to go through a local car dealership.

The dealership will be able to explain your situation to prospective lenders and, at the same time, negotiate the lowest possible interest rate.

If you need a car and owe the CRA money, your next move should be going to visit your local car dealership today.

When you’re ready for a car lease or loan, get in touch with the Stoney Creek auto loan experts at Northway Ford for great deals on auto finance.