When you have a bad credit score, people tell you to put in a large sum of money as a down payment. They say it provides a better chance of loan approval. Experts recommend paying 10% of the total car value as a down payment. Is this true?
FACT: Larger the Down Payment, the Smaller the Lender’s Risk
People with bad credit scores hold a risk for lenders as they have a history of missing out on monthly payments. The amount of risk impacts the auto loan approval. If you pay a sizeable down payment, your loan amount will reduce.
Also, paying a large sum of money reduces the psychological risk of the lender as it proves that you will pay your loan on time. It will also positively affect your impression in front of the lender. Thus, it can improve your chances of getting a bad credit auto loan.
FACT: You can save money by making a Down Payment
Making a significant down payment helps you save money in the long run. It reduces the total loan amount and interest payable to the lender. Finally, it makes the loan affordable and reduces the chances of missing payments and repossession. Thus, you may have to pay money now but it will make your future financial condition more secure.
Does paying a Large down Payment guarantee Loan Approval?
Down payment is a crucial part of your auto loan application. But, it is not the only deciding factor. Even if you pay more than 50% of the car price as a down payment, the lender will still check your credit score and assess your financial condition. They will also ascertain whether you can afford the monthly payments for the loan.
Additionally, the loan amount you are applying for should fit their minimum criteria, and there are many other criteria for the vehicle you want to buy. Once the lender verifies all these aspects, they will approve your loan.
No Down Payment? You still have the option to buy a Car.
Just like paying a large sum as a down payment does not ensure loan approvals, not having a down payment does not mean auto loan rejection. Having a cosigner is one way of getting car loan approvals with bad credit. Even if you have a small or no down payment, many websites will help you approve car loans.
So, search for an online auto financing company with experience in serving bad credit car buyers without a down payment. Understand their auto loan approval criteria, and submit the online application.
Apply for no down payment auto loans online! Choose to work with CarDestination.com to get guaranteed auto loan approval.