Most people do not fancy buying a car and being in no position to make a down payment. Nevertheless, you cannot overrule such a situation we have no control over in life. You might find yourself in a fix that compels you to get a vehicle with less than stellar credit and no money to put down. Even though buying a car with bad credit and no money down from a local lender sounds tempting, qualifying for a $0 down car loan with poor credit is nearly impossible.
The majority of lenders have strict requirements for bad credit buyers with a down payment being one of the essential qualifications. At the same time, shoppers should be aware that putting down some money could be a great move that helps them save more in the end. That notwithstanding, there are a few things you can do to improve your chances of qualifying for bad credit car loans without putting money down. The best thing to do is to make sure you have all the vital information to you through this process.
How To Buy A Car With No Money Down And A Struggling Credit
We have all come across the adverts touting “zero money down” auto loans. The advertisements seem to be everywhere and sound amazing. The issue is, if your credit is struggling, these offers may not apply to you. Looking at the fine print nearly always reveals that only those with solid credit scores, who meet other specific requirements will be eligible for these kinds of $0 down offers.
However, you can make yourself more presentable to the auto loan providers and end up buying a car with bad credit and no money down. We are going to show you how to buy a car with no money down and a poor credit score. When you get to a pre-approval with a car dealership for zero down payment and bad credit, they are going to review a few of your financial records, which may include:
- Amount of down payment
- Monthly income
- Credit scores
- Recent credit history
You can improve your monthly income and credit history to make yourself a better candidate with local lenders. Let’s discuss how you can work on these two elements to improve your chances of qualifying for bad credit auto loans with no down payment for the vehicle you need.
Your Recent Credit Records
If you are seeking to purchase a new or used car with zero money down and bad credit scores, you’ll want to avoid attracting new debts to your account. Opening up a new line of credit and walking to the local dealer for auto financing with poor credit, the next will make you look like a risk for doing business.
While there are some flexible finance car bad credit lenders, you should keep in mind that the weight of your recent credit activity informs the lenders’ decision. You need to work on keeping the records at an optimum level. You will probably want to avoid opening a new line of credit several months before seeking a pre-approval with a car dealership that accepts buyers with bad credit.
Your Monthly Income
If you still have some time before going for the car loan, you should start working towards improving your monthly income. When you get home from your primary job, look into the available weekend or night jobs. If currently, you do not have a job, it would be a good idea to start searching for employment. Your ability to pay is a significant element in getting approval for buying a car with bad credit and no money down. Therefore, you should want to work towards improving this financial aspect for your own security and protection before approaching an auto lender.
Finding a bad credit car loan with no money to put down might seem scary from the outset. You are in luck because lenders are going to focus on other factors of your financial situation, which means you can start working on making a better future.
Coming Up With Alternative Down Payment
You might be facing the two worst scenarios for buying a car:
- A low credit score
- No cash at hand to make a down payment
The two conditions are not ideal for car buyers, especially if you will be looking for financing. Consumers in this kind of situation can still move ahead with their car purchase if they know different alternatives that could make a bargain for their case.
Nearly all legitimate auto dealers will some minimum requirements to assist you in getting approval for a car loan, which may include:
- Proof of income
- Your proof of citizenship and age
- Evidence of active employment
- A down payment
Subprime lenders always have the final word on whether or not you are eligible for a bad credit auto loan. Every loan application is different, and individual lenders operate differently on individual cases. The current trend with the subprime lenders shows nearly all of them asking for a down payment. The money down minimum requirement is due to a history of down payment customers maintaining better payment habits. Investing money in a vehicle means you are unlikely to default on payments because of the stakes in the deal.
Even those in-house auto-financing dealerships, which generally do not check credit, and are an excellent place to seek financing with poor credit, often, need a down payment, though with varying minimum amounts. You must be asking the question, “Are there bad credit no money down car dealerships near me?”
A straightforward answer is no because it is nearly impossible to buy a vehicle with bad credit without paying some cash upfront. Since paying money down from your pocket isn’t one of the favorable options, there are three ways you could buy a car with bad credit and pay zero money down.
1. Using Trade-in Equity
Those who have a trade-in in their name might be in luck because if you have a car to trade, you can put the trade-in value of the vehicle towards your purchase, which will count as your down payment. The move does not need you to pay anything out of pocket. You will want to first confirm the trade-in value of your car with a site such as KBB.com. With this option, you can easily qualify for a used car zero down payment offer, even with an imperfect credit score.
- Working with Subprime Lenders on Your Trade-in
There are cases where your trade-in may not have equity. You will have to obtain the necessary cash to cover the negative equity before you make the trade-in. Alternatively, you should know your auto loan options to make sure that the trade-in has sufficient capital to cover the down payment.
The amount of money to put down will depend on the lender with whom you are working. Subprime lenders often require at least 10% of the selling price of the car you want to finance or $1,000. The best part of choosing a subprime lender is that they go for the least amount of the two. Therefore, based on the price of the car you intend to finance, you could only be putting down a small down payment.
- Choose a Vehicle With the Least Selling Price for Your Trade-in
If, for example, you were financing a vehicle for $5,000, you would only need to pay $500 upfront, which is 10% of the $5,000 selling price. With this amount of down payment requirement, you are likely to put down more money with the trade in than the minimum $500 specification, which will save on the overall cost of the vehicle loan.
While personal finance experts recommend putting down at least 20% of your auto loan, consider using the trade in to put down the highest amount you can afford. To put down the as much cash as possible using a trade-in car, ensure you finance a vehicle with a lower selling price, which should translate into a small down payment at a subprime lender.
2. Getting A Cosigner
Another option for buying a car with bad credit and no money down is to get a friend or family member with a healthy credit score to cosign the auto financing deal. The person you choose to cosign will share the payment and ownership responsibility. In-house car dealerships and auto financing lenders will overlook your bad credit scores on account of the cosigner’s substantial credit.
Some lenders may lower the interest and still demand a down payment if they realize the vehicle is for the person with a weaker score. The result would be a median annual percentage rate, with a minimum down payment requirement. Depending on how much you trust the cosigner, you can choose to have them entirely signing for the car purchase deal, and later transfer the title to your name after you complete making the loan payments.
Either way, you do not want to miss a payment if you are using a cosigner to buy a car with $0 down because of the limits in your poor credit score. Missed payments will lower the credit score of the cosigner, which might result in an ownership disagreement.
3. Use a Combination of Trade-in with a Cosigner
If your trade-in does not cover the up-front payment, or the lender insists you make a down payment with a lower APR because you are the car owner, you can get a cosigner and use the trade-in equity to lower the overall loan cost. Combining the two methods will make a strong appeal to any subprime lender or in-house financing car dealership to let you walk away with the car you need to finance without paying cash out of pocket.
Why You Should Pay Down Payment On A Car Loan
Beyond improving the odds of qualifying for auto-financing with bad credit, here are the benefits of putting down money on a car loan:
- The down payment lowers your monthly installments by reducing the overall loan amount
- Putting money down can help to shorten your loan term, which eventually enables you to put some money away due to reduced interest charges as you pay off the loan faster.
- Paying some money upfront will reduce your duration in negative equity, which is when you owe the loan more than your vehicle’s worth. You should work to come out of this situation because it makes it difficult to refinance, sell, or trade-in the car.
- Down payment will lessen your annual percentage rates as it reduces the principal balance of the loan from the start. Borrowers with imperfect credit should take advantage of this benefit to avoid incurring higher interest rates for bad credit car loans.
The more you put down, the more significant these benefits will increase. Therefore, making a down payment for an auto loan is a worthy initiative in the end.
The Bottom Line
While it is almost apparent you will have to put money down when securing a new or used car with imperfect credit there different approaches to buying a car with bad credit and no money down. Getting a cosigner might help to improve your credit score qualify for an auto loan with no payment down. Alternatively, you could use trade-in equity and have the cash go towards paying the up-front fees or use a combination of the two methods to qualify for the least costly of a car loan with imperfect credit.