Car buyers with bad credit often look for a way to get a car loan with no down payment. With all the benefits that come with putting money on a car, you’ll be better off with a caring approach. Take this question we received last month:
“I would like more information on the process. I don’t have a down payment ready yet. How much would I typically need for a loan of $15,000-30,000? Thanks!”
How much money do you need for a car loan?
This consumer has the right frame of mind: he prepares in advance his plan of attack for the purchase of a car. Saving for a down payment is a great way to prepare your car loan for successbut how much will you need?
This consumer wants to know how much he would need for a loan between $15,000 and $30,000. If dealing with less than perfect credit, that person can expect to need around $1,000 for a down payment. Here’s why:
When it comes to special financing, lenders typically require borrowers to put down a $1,000 down payment or 10% of the car’s selling price, whichever is lower. Because 10% of $15,000 equals $1,500, many subprime lenders would only require a down payment of $1,000 (the lower of the two numbers).
However, keep in mind that this is only the minimum amount you are supposed to have. In fact, the bigger your down payment, the better off you’ll be with all the benefits that come with making a.
Reasons you’ll want a down payment
There are many advantages to paying a deposit, including:
- Increases your chances of being approved – A down payment is generally required for consumers with credit issues, but it also reduces a vehicle’s loan-to-value ratio. Learn more about how lowering this ratio can help you get approved here.
- You save money in the long run – Saving money means you borrow less money. When your loan is smaller, so are your monthly payments. More importantly, borrowing less reduces the amount you end up paying in interest charges.
- The option for a shorter loan term – Instead of reducing the monthly payment, you may be able to keep the payments in the same park while reducing the term of the loan. A a shorter loan will incur lower interest charges.
- Build Equity – Vehicles lose value and this can be a problem when you owe more on your loan than your car is worth. A down payment helps build capital and reduces the length of time you are upside down.
Do you have your deposit? Find a dealer
Despite all the benefits that come with it, we think it’s a good idea for consumers to put a down payment on their car purchase. If you’re dealing with less than perfect credit, it’s also wise to locate people who can help you find a loan.
AT Auto Express Credit, we help car buyers solve their credit problems by connecting them with local dealers who specialize in financing. Dealers in our nationwide network know what it takes to help consumers obtain financing. Start the process by filling out our secure and free form car loan application form today.