The hard reality is, not everyone has good credit or tons of money to make a large down payment when buying a car. There comes a time when we need a car for one reason or the other but we do not know where to start from especially with bad credit. Lucky for you, this article will take you through all you need to know when you want to buy cars for 500 down no credit check.
While still trying to improve on your credit score, situations may arise when you need to buy a car. Some instances include;
- Your existing car has broken down many times and will eventually be too expensive to maintain
- Your current vehicle is too old and is no longer road-worthy
- The lease of the current vehicle is soon coming to an end
- You lost your vehicle after a bankruptcy or divorce proceeding
- You have moved to an area where public transport is inaccessible or inefficient
- You have never owned a car before and wish to have one now
Whether you have these or whichever other reasons, there is always a way around for you to own your next car. There are plenty of subprime lenders who will finance your car at only $500 down. While sometimes you may not have the deposit money, you will still get the car but you will have a bigger price to pay. Majority of these auto lenders always advise their buyers to make a down payment. The following are reasons why you need to make a down payment when purchasing a car.
Why need down payment important?
Many lenders do not take a long time while trying to approve car financing request for people with good credit and no down payment. However, if you have bad credit and willing to get car financing, it is advisable to make a down payment to show the lender how serious you are about buying the car. It will also show the lender that you will, in the future, repay the entire loan installments as agreed. Apart from the security, the lender gets from the down payment, it also helps you in a number of ways including;
- Lowers your overall costs
Making a down payment greatly reduces the amount of money you will be required to pay as installments in the long run. You will then pay lower monthly charges as compared to when you did not pay the deposit.
- Lowers your monthly interest charges
The more money you pay upfront, the less the monthly charges you will incur. This comes down to you being charged a lower interest rate on your monthly payments. Another reason as to why your interest rates will go down significantly is because of the loan-to-value ratio (the amount of you borrow in comparison to the value of the car). This has a great impact on how your interest rates will look like in the long run.
- You have the ability to offset depreciation
The depreciation rates of a car are usually around 15% to 20% every year. New cars are more affected as their depreciation rates are much faster. These new cars can incur depreciation rates of up to 25% in the first year. Failure to make a substantial down payment can get you on the upside down of your loan. This means that you may owe the dealership or the lenders more than the actual value of the car at the end of it all. Being caught up in this situation can be harming to your finances as you may not get to trade in or sell your car at a profitable margin.
- You may qualify for special programs
Some auto lenders have certain special programs to their clients with lower rates or other incentives. However, even after qualifying for such program, you should keenly look at both sides of the coin and keenly go through what those ‘special offers’ are.
What happens when you have no down payment?
A down payment is arguably the safest and easiest ticket to get a good car. As mentioned earlier, not all people can manage to make a substantive down payment for their cars. There are other options you may want to explore while still keeping your dreams of a new car alive!
1. Get a loan from an auto dealership
One of the recommended steps to undertake is to seek out a loan from car dealerships which sell cars to people with bad no credit history and to those who may not have down payment. These Car Dealerships with No Credit Check and No Down Payment have special auto financing options which you can take advantage of. Some of these dealerships, often referred to as ‘Buy Here Pay Here (BHPH) lots’, can approve your loan request. Nevertheless, be prepared to pay hefty interest rates.
Finding an auto financer with such offers is easy but to a desperate person, it is very easy to fall to scammers. You may want to start off by calling them on phone or inquiring your eligibility over their websites. No need to travel all the way to the dealership yet you probably will not qualify for a loan. The good thing with such places is that they are many and are all in the competition so if one rejects you, another might approve.
2. Seek out a loan from subprime lenders
Subprime lenders specialize in loaning money to people with damaged credits. Contacting subprime lenders is quite easy as a simple internet search will get you a number of results. Go through their terms and conditions before reaching out to them. In most cases, you are likely to receive a reply within minutes. Loan approval is almost instantaneous. After getting the loan approval, you will be referred to an auto dealership which will directly deal with the subprime lenders. Again, be prepared for high-interest rates.
3. Get a co-signer
Getting a co-signer can increase your chances of getting an auto loan approved. You can get a colleague, friend or family member to co-sign for you. This means that the lender will consider your credit score alongside that for the person who co-signs with you while determining yours. The co-signer will have to provide verification documents online or appear to sign the paperwork in person.
Requirements: Getting cars with $500 down payment no credit check
If you search on the internet for cars for 500 down payment near me, quite a number of options will appear. One of the most popular places to find cars for 500 down payment is craigslist. The requirements to qualify for this offer varies from one place to another. In as much there is no standard requirement in place, there are some factors which have to be taken into consideration before one gets approved.
1. Down payment
In order to access such offers, you ought to make a down payment of $500 or it’s equivalent in terms of trade-in. The benefits of making a down payment have already been highlighted earlier on in the article.
2. Legal requirements
One should abide by the legal requirements such as the minimum age which is mostly 18 or 21 in other states.
3. Credit profile
It is always advisable to check your credit score before setting out car shopping. Despite the fact that subprime moneylenders for the most part fund borrowers with poor credit by seeing elements past credit, there is a minimum credit score you have to have in order to qualify. This changes by the moneylender. Your financial assessment(s) and by and large credit profile decide whether you qualify, and the terms you’ll be offered, if endorsed. Getting a car with $500 down and no credit check is also available when buying a car from buy here pay here auto dealerships.
4. Stable employment and income
In order to qualify, you have to be in a specific income bracket. Data analysis points to the minimum income requirement for most subprime lenders at well over $1,000 a month before taxes. The pay also needs to originate from a single source. Also, loan specialists require this salary to be reliable, and as a result would like to know your job stability. They expect you to have at least 6 months on your current job and further employment history of over a year.
A person who wishes to be approved of the loan should have a permanent residence and should not be planning to move out at any time. Proof of residence should be provided. A record of the payments of utility bills can be used as proof.
6. DTI – Debt obligation to Income Ratio
This is achieved by adding all your monthly costs together, counting expected car costs and insurance premiums before further dividing by your net monthly salary or income. This ratio should not exceed 50%.
7. PTI – Payment/Installment to Income Ratio
Lenders do not need your car credit to take up a lot of your salary, so they take into account the monthly installment to income (PTI) proportion. This is found by including your assessed month to month car note and insurance installment and dividing the whole by your month to month net pay. As a rule, your PTI should not exceed 20 percent of your gross earnings.
8. Have a valid email and phone address
The lenders will want to contact you at any time and you should have a valid e-mail and phone address registered under your name. Lacking a phone will make it hard for them to contact you hence making you seem irresponsible and not serious.
Tips on how to buy a car with only $500 down payment
- Fix your credit score
In as much as you are going for a no credit check offer, you are more likely to receive better offers when you have your bad credit worked on. Always strive to make it good. It is possible to get approved for a loan if you go for the no credit check option but you stand to get a better offer with good credit. You should check your credit report before going shopping for a car, even if it is months or years before. After getting your report, you should discredit any errors and have it looked at.
- Do your research on different interest rates
Before settling down on one dealership or offer, it is good to conduct extensive research on the different rates as you look for the best. Be cautious not to be duped to take up very expensive rates.
- Do not overburden your finances
Always go for what you can afford. Add all your utility bills, car costs, and other miscellaneous deductions you will have every month before knowing how much you really have. A car with a good offer can lure you to hop into a much better and more expensive vehicle.
- Read the paperwork keenly before signing
Before committing to any arrangement, ensure to go through the paperwork well. This should be taken into much consideration especially when dealing with Buy Here Pay Here car lots which might dupe buyers. Before agreeing on a vehicle, ensure you take it out for a test drive and even after doing so, ensure to read the paperwork you are provided with even after you had read it before. When you have bad credit and would like it to improve, make sure the dealership reports your payments to the credit bureaus.
- Watch out for scams
Finally, be watchful of predatory loans which await desperate buyers. No matter how soon you want a car, take your time to review all the offers with rational expectations.
Whereas bad credit results in even costlier access to services, at least there are workarounds to get the most out of such situations. This may come in handy in situations whereby one is desperate. Ideally, it would be better, in the long run, to fix one’s credit before taking up the expensive and risky no credit check low down payment option. With the options laid out, it is up to each individual to weigh the pros and cons on their own and to decide.