A down payment is your best friend if you have a bad credit history and want to purchase a car. Usually, people see down payment as just another process to obtain an auto loan, but it is much more than that. Down payment will help you to save money in numerous different ways. Understand the different reasons why putting money down will benefit you. It will help you to better prepare for your next auto loan.
Here’s how you can take maximum advantage of the down payment amount if you suffer from bad credit.
1. Catalyst in Auto Loan Approvals
A down payment acts as a catalyst in the auto loan approval process. When you put money down, it shows the auto lender that you are trustworthy and you are serious about your financial situation. The amount you borrow significantly decreases as you make a down payment which means less risk for the lender. Therefore, for credit-challenged individuals, if the lender is second-guessing to approve your auto loan, a large down payment of 20% of the total amount will make it easy for him to trust you and give you a faster car loan approval.
2. Interest Savings
Down payment means that a certain amount of the car price is already paid off. The interest rate will only be calculated on the remnant car loan amount. Therefore, you save a lot of money in terms of interest savings. You can invest that money in something else such as your mortgage or add it to your savings. Bad credit individuals can also get good interest rates if you back your auto loan with strong financial proofs such as a consistent income source, stable employment source, and a co-signer.
3. Helps with Offsetting Car Depreciation
Cars lose value over time. The minute you drive off the dealership, your car will start to depreciate. However, putting money down can help you to certain extend to fill the gap between what your car is worth against the amount you owe for your car. As a result of a large down payment, bad credit car buyers will also face less negative equity. Therefore, a decent down payment will help you to offset the initial hit of your car depreciation. This will also help you with good resale value in the long run.
Down Payment: A Must for Bad Credit Car Buyers
A down payment is usually non-negotiable when it comes to people with bad credit. However, putting money down has many advantages that will help you in the long run. You can trade-in your old car and pay for a down payment. Make sure the amount you use for the down payment is earned and not borrowed from another personal loan. In the end, look for bad credit lenders and work your way to a “good” auto loan deal by putting money down.
A down payment is essential to obtain a good auto loan with decent interest rates. However, everyone can’t manage the down payment amount. If you are a bad credit car buyer without a down payment, do not worry. Apply now to get quick approval on no money down auto loans. Pre-approved car financing is available!