A person can be credit-damaged due to many reasons. You may have missed certain payments or paid them later than the stipulated date. However, the most common question that arises when bad credit individuals go for auto loan shopping is: Is there a possibility of an auto loan with no money down?
The answer to the question is positive. If you have suffered from a bad credit history, obtaining an auto loan with zero down payment is a possibility. The process of getting auto loan approval becomes easier if you have started to improve your credit score.
However, if you are still lurking in the waters of bad credit, you can avail car financing with no money down but you will have to work hard for it. To ensure success, take a look at the essential FAQs and understand how you can make the process simpler for you.
Is a Strong Source of Income Required for Bad Credit No Money Car Loans?
Sub-prime lenders are a shining beacon for individuals with bad credit. Usually, sub-prime lenders do not put unnecessary focus on the credit score of the applicant. Bad credit applicants who turn to sub-prime lenders can get auto loan approval within two business days.
However, a strong source of income is a necessity for getting bad credit auto loans, especially when there is no possibility of making an upfront payment. Lenders can only judge your creditworthiness on the basis of your income. Therefore, make sure you have proof of stable employment and a strong source of monthly income in order to qualify for the loan.
How Will a Cosigner Help in Getting Auto Loan Approval?
A cosigner with a stellar credit score can immediately give you a boost in credit approval. A lender assumes less risk while approving car financing when you have a cosigner. A cosigner is bound to repay the auto loan in case you miss a few payments.
So, make sure you have a cosigner who has been consistent in maintaining a good credit score and who has a substantial income to support you.
Should I Go for a New Car or a Used Car?
A used car will be inexpensive as compared to a new car and will help you to gain car financing with no money down. Alternatively, you can choose old car models that are lying with the dealer at a lower price. You can also choose demo cars.
Remember that when you buy a demo car from the dealer, you stand in a great position to negotiate as the dealer essentially wants to create extra shelf space for the new cars. Thus, make sure you purchase a car model after thorough consideration of the consequences.
Will the Interest Rates be affected when I do not make a Down Payment?
Yes. Compared to a traditional auto loan where you are paying money down, an auto loan with zero down payment will attract high interest rates. However, if you are regular with your payments, your credit score will increase. It will lead to lower interest rates in the future. If you want to reduce the total interest amount, you can make early payments and pay off the loan before the loan term ends.
Does avoiding a Down Payment put me in an Upside-Down Car Loan Situation?
Most car buyers are in an upside-down car loan situation during the first few years of the purchase. It is because of the depreciation rate. Your car depreciates in value as soon as you drive it off the lot. Do not worry about it.
If you want to sell your car early, make sure you make extra payments so that the loan amount decreases significantly. This way, avoiding down payments won’t have a major impact on the loan amount. It will help you to manage the situation in a better way.
Will bad Credit No Money Down Auto Loans improve my Credit Score?
Bad credit and no money down auto loans can only improve your credit score if you make regular payments and the lender reports your income to the credit bureau. Do not delay any payments. A co-signer will help you to maintain a good credit score and support you in the approval of car financing as well.
People who do not have a great credit score can avail auto loans where no money upfront is required. With bad credit zero down auto loans, you stand a solid chance to re-build your credit score. If you are unable to find a lender offering you the required auto loan option, go online. Many online auto financing companies deal with bad credit car buyers and will help you buy a car without a down payment.