Borrowers with less than perfect credit will find it difficult, under most circumstances, to use a postdated check for the down payment on a car loan
Down payments with bad credit
Here at Auto Credit Express we recently received this question from a potential applicant, who we're assuming had credit problems, regarding down payments: "Is a postdated check acceptable for a down payment?"
The answer to this question, in most cases, is no.
People with past credit issues need subprime auto loans which are considered riskier than traditional auto loans. In order to reduce this risk, lenders ask borrowers to "participate" in the loan with a down payment either in cash or actual trade value. As with any loan, the larger the down payment in relation to the value of the security (a car), the less risk the lender is taking.
Since postdating a check usually means there are currently no funds in the account to cover it, the check has no real value and can hardly be considered a "cash" down payment – in other words, no down payment, no car. Lenders also consider delivering a vehicle without the required down payment to be fraud and can rescind the deal as well as cancel their contract with the dealership.
Getting around a postdated check
But there is one scenario in which a postdated check might be accepted as a down payment for a bad credit car loan: if the dealer is willing to hold the car until the check is deposited and the funds clear the account.
Even in this instance, however, delivery of the vehicle will have to be delayed until the dealership receives the down payment amount from the bank.
The Bottom Line
A postdated check is not an acceptable down payment on a car loan and can result in the lender rescinding the deal and cancelling a dealer's contract. The only way to avoid this, if the dealer is agreeable, is to wait until those funds are available before taking delivery.
One more thing: Auto Credit Express matches consumers with tarnished credit to dealers that can offer them their best chances for car loan approvals.
So if you're ready to either establish or reestablish your credit, you can begin now by filling out our online car loan application.