How a down payment affects your car loan



Down payments are a great way to get your car loan started. In terms of their impact, they can have many benefits – and improve your chances of getting approved for a car loan if your credit score is worse for wear and tear.

Down payments can really make an impact

When you put down a down payment on a car loan, that money is applied to the vehicle’s selling price. If you buy a $ 15,000 car with a 10% ($ 1,500) down payment, then you are only financing $ 13,500 (excluding surcharges, taxes or other charges that you can build into your loan).

Down payments have many benefits, besides reducing the amount you have to finance! Possible impacts that a down payment can have on your car loan:

Down payments can expand your vehicle options. If you want a car that exceeds your maximum loan amount, a down payment can bridge that gap for you. Want a $ 20,000 vehicle but only got approved for $ 15,000? Deposit $ 5,000 and fund the $ 15,000! Having money saved for financing a vehicle can get you a more expensive car.

Also, since you paid for part of the vehicle up front, a lender does not need to finance the entire sale price, only the remaining amount. This leads to a smaller loan balance, a smaller monthly payment, and lower interest charges overall!

Auto loans almost always use the simple interest formula. This means that your interest charges add up daily based on your interest rate and your loan balance. So when you deposit money it has a direct impact on the amount of interest you earn over the course of your loan – in a good way!

With a down payment, lenders may also be more willing to negotiate the terms of your car loan. This could mean getting a lower interest rate or qualifying for a shorter loan, which can save you money in interest charges.

Down payment terms with poor credit

If your credit score is bad or less than 660, chances are you will need a down payment to qualify for a car loan. The amount you actually need can vary, as it can depend on the vehicle you are looking to finance and the lender you are working with, but many bad credit lenders have similar stipulations.

Subprime lenders – lenders who help borrowers with bad credit – almost always demand a drop of at least $ 1,000 or 10% in the vehicle’s selling price. It can be cash, cash back, or a combination of the two.

Down payments not only provide you with many benefits as a borrower, but also provide additional security for the lender. Borrowers who put money aside on their auto loans generally have a better chance of successfully closing the loan.

In other words, the down payments give the lender more confidence that you can complete the loan and increase your chances of approval!

Is it possible to get a car loan without a down payment?

Yes, it is possible to get approved for an auto loan without a down payment requirement. However, the luxury of qualifying for 0% off car deals is usually reserved for borrowers with good credit scores. In most cases, when there are credit problems, there is also a down payment requirement. But the less money you need, the less money you are likely to need.

Used cars are generally much cheaper than their new counterparts, which can mean a lower down payment requirement. So if your credit score is less than stellar, it may be wise to choose a used vehicle.

Looking to hit the road?

Even with a down payment in hand, it can be difficult for borrowers with credit problems to find lenders who can help them. Most dealerships are registered with lending partners and some are registered with subprime lenders.

Subprime lenders specialize in helping borrowers with credit problems obtain auto financing. These lenders don’t stop at your credit score – they look at the other moving parts of your financial stability to see if you can afford it.

Here has Auto Express Credit, we want to point you in the right direction for your next car loan. Instead of going into the fray on your own, complete our free auto loan application form and we’ll find a dealership in your area with bad credit loan resources.


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