You may be required to make a down payment on a bad credit car loan in Los Angeles. How large of a down payment you should make depends on what's required from the lender and your specific situation. Putting money down is helpful because it not only improves your chances of getting approved, it lowers the overall cost of the loan and saves you money.
How Large Your Car Loan Down Payment Should Be
If you have bad credit and need an auto loan, you likely need to get financed with a subprime lender. These lenders specialize at helping borrowers with less than perfect credit, and work through special finance dealerships in Los Angeles.
There are requirements you need to meet in order to get approved for a bad credit car loan through one of these lenders, and a down payment is typically one of them.
Subprime lenders generally require a minimum of $1,000 or 10% of the vehicle’s selling price down, whichever is less. Keep in mind that the specifics can vary from lender to lender.
3 Auto Loan Down Payment Options
Regardless of where you go to get financed in LA, you can make a down payment in three different ways:
- Cash – You can make a down payment using cash.
- Trade-in equity – If you have a trade-in that’s paid off or is worth more than the loan balance, you can apply this equity as money down.
- Combination – If you want to make a larger down payment, or your trade-in equity doesn’t cover the minimum requirement, you can combine cash with the trade equity.
Even if you're not required to, you save money in the long run by making a down payment. This is because putting money down lowers the amount you borrow, which reduces your total interest charges paid and results in a lower overall cost. Not to mention, it also lowers your monthly payment.
How a Large Down Payment Helps Your Bad Credit Car Loan
If you have bad credit, making a large down payment helps you out even more than it would with good credit. Because bad credit auto loans come with higher than average interest rates, reducing the interest charges over the course of the loan becomes a much bigger deal.
Let’s say you want to finance a $12,000 car for 48 months and were approved at a 15% interest rate. Lucky for you, you have a trade-in that's worth $1,500. Check out how different down payment amounts affect your monthly payment and interest charges:
$1,000 (typical minimum)
$2,500 (trade-in plus $1,000)
As you can see, the more you put down, the lower your monthly payment and interest charges get. For this reason, the more you're able to put down, the more you're helping yourself out in the long run.
The Bottom Line
A down payment helps you save money on a bad credit auto loan in Los Angeles. How large of one you need depends on your specific situation and the lender, but now you know the typical subprime lender standard.
If you want to get connected to an LA dealer that knows how to handle unique credit situations, Auto Credit Express is here to assist. We work with an extensive network of special finance dealerships, and we can match you with one near you. Get started today by filling out our car loan request form.