Saving for a down payment is a great idea for anyone looking to take out a car loan – and an even better one if you’re struggling with bad credit.

Benefits of a Down Payment for Bad Credit Borrowers

When your credit score is low, it’s easy to feel down in dumps. Your credit score plays a big part in your ability to get new credit, including car loans.

Many traditional auto lenders, such as banks, credit unions, or captive lenders, typically only approve customers with good credit scores. Luckily, there are lenders willing to work with credit-challenged customers – although you’re typically going to need a down payment to be able to finance a vehicle.

Bad credit car lenders, also called subprime lenders, usually require borrowers to have a down payment of at least $1,000 or 10% of the vehicle’s selling price. Depending on the lender and your situation, it may be whichever is less.

Not only does a down payment increase your chances of approval for an auto loan, it lowers the amount you’re financing, your monthly payment, and can help you complete your loan quicker. While it's generally a requirement of subprime lenders, it really is in any borrower’s best interest to save as much as they can for a down payment on an auto loan.

Meeting a Car Loan Down Payment Requirement

For many borrowers, with bad or good credit, saving for a down payment can be difficult. Good news though – you can also use trade-in equity to help meet the money down requirement.

A down payment doesn’t need to be cold, hard cash. It can just be a trade-in, or a combination of both. If you have a vehicle that you're considering trading in for your next loan, you need to know about how much your car is worth, and getting an estimate online is a good place to start.

You can estimate its value on sites such as Kelley Blue Book and NADAguides. On these sites, you simply enter in the make, model, year, mileage, and overall condition of your vehicle to get an estimated value. Be honest about your car’s condition, since dealers inspect vehicles closely before assigning an actual cash value.

If you don't own your car outright, and you find it's worth less than what you owe on it, you’re in a negative equity position or upside down. Unfortunately, a vehicle with negative equity won’t help you meet a subprime lender’s down payment requirement.

However, learning where your car stands, and knowing how much you need to save is half the battle of getting financed. When you know where you’re going, it’s easier to get there.

Finding a Bad Credit Auto Loan

Meeting a down payment requirement is only one of the typical stipulations of subprime lenders. Additional requirements generally include proving your income, residence, and identity; having a working phone; and supplying a list of personal references. All of these come rather easily, and can be proven with a check stub, utility bill, phone bill, and a driver’s license.

Another large part of getting financed as a bad credit borrower is finding a dealership that works with subprime lenders, and Auto Credit Express can help with that. We want to help you get the financing you need for your next car loan.

We match borrowers to dealers with special finance departments that work with bad credit lenders. To get started and get connected with a dealership in your area, fill out our completely free and secure auto loan request form. There’s never an obligation to buy, and we’ll get to work immediately!