If you have bad credit, you’re typically required to make a down payment when you finance a vehicle. There are a number of ways you can cover a down payment on a car loan, and we’ve got tips on how you can do that.

Why Make a Down Payment on an Auto Loan?

Lenders that work with bad credit borrowers look at many factors in addition to your credit score to help them get the full picture of your situation. One of these factors is your willingness to provide a down payment. When borrowers provide a down payment using their own money, it’s been proven that they’re more likely to successfully complete a loan.

Additionally, if you make a substantial down payment, you save money over the loan term by reducing how much you borrow, which reduces the interest charges over time. You can also reduce the amount of time you could spend with negative equity.

The amount you have to come up with for a down payment on a bad credit auto loan varies by lender and your credit situation. However, subprime lenders typically ask for a minimum of $1,000 down or 10% of the car’s selling price, sometimes whichever is less.

Options for Making Your Down Payment

When it comes to making a down payment, there are a few ways you do it. No matter how you pay, the money ultimately has to be your own. It’s not acceptable to take out a loan for a down payment on another loan – that could potentially lead to trouble with the loan if discovered.

Bad Credit and Auto Loan Down PaymentsLet’s look at how you can make a down payment:

  • Cash – Cash (or check) is king when it comes to making a down payment. If you can’t cover the whole down payment this way, or you want to make a larger down payment, you can combine cash with trade-in equity.
  • Trade-in equity – When you have a vehicle to trade in that has equity, you can use the equity as your down payment, or even combine it with cash. If you own your car, the value of the vehicle is the equity; if you still owe on it, and it’s actual cash value is more than you owe, the difference between the two is your equity.
  • Credit card – Though you may be able to put a small portion of a down payment on a credit card, this option is rare, especially if you're struggling with credit issues. It’s also not recommended, because you likely end up paying more due to potentially higher credit card interest rates.

Save a Down Payment and Find a Dealer

Knowing you need to make a down payment and actually coming up with the money to do it are two separate things. If you’re not sure how to come up with a down payment, saving a little at a time is always a good bet.

Once you have a down payment, you’re going to need a dealership that works with subprime lenders that can get you the bad credit car loan you need. At Auto Credit Express, we want to help with that.

We're teamed up with a nationwide network of special finance dealers that have lenders in place to assist those who are struggling with credit issues. Simply fill out our easy, fast, and free auto loan request form to get started right now!