The kind of down payment you can come up with for a bad credit auto loan can sometimes make a big difference
One of the questions we get asked most frequently is whether a down payment is necessary to qualify for poor credit auto loans.
We get asked this because for the past nineteen years we've been involved with bad credit auto sales both online and through our retail dealerships here at Auto Credit Express.
Our web site for people with bad credit that explains the terrible credit auto loans process along with making decisions that can avoid repossession while showing why, unlike tote the note dealer, our dealer's loans can lead to better credit scores.
The down payment question
Just about all bad credit car lenders require that you have a down payment in the form of cash or real trade equity. That's because lenders look at it as a way to increase the likelihood that you'll make your loan payments.
This is why: with little or no money invested in a car, especially during the early stages when a vehicle is worth less than the loan balance, it's much easier for a customer to walk away from that loan. But with 10% or more of their own money on the line, it's more likely that a customer will keep making payments.
A down payment also helps in two ways:
• It lowers the monthly payment. The larger the down payment, the lower the monthly payment.
• It can also be used to shorten the loan term. Instead of lowering the monthly payment, you can use a down payment to reduce the time the vehicle is worth less than the payoff – known as “negative equity” – for example by financing for 48 months instead of 60 months
In both cases a down payment reduces the total amount of interest that you'll pay. This is especially important with the higher interest rates associated with bad credit auto loans.
As we see it
With any loan, but especially bad credit auto loans, a down payment reduces interest expenses. Down the road it also allows you to trade out of your car and into a loan with a lower interest rate sooner.
Auto Credit Express has helped thousands of people with bad credit buy cars and reestablish their car credit through a nationwide network of dealers that specialize in approved auto loans.
So if you are serious about getting your car credit back on track, you can begin right now by filling out our secure online auto loans application.