Bad credit borrowers might think a down payment is necessary to seal a car loan with bad credit. But, there are ways to avoid the payment, not least steering clear of dealer financing.
Bad credit borrowers are no different to anyone else. They need to secure financing if they want to buy some of the important things needed for modern living for example a car. The problem is that getting an affordable car loan with bad credit is not always easy. But the good news is that there are options out there.
The most common route to car finance is the auto dealers themselves, who advertise special deals with established lending firms that are designed to make getting financing more convenient. But there are many problems with this route, and usually getting loan approval with no down payment is practically impossible.
So, what can be done to secure a car loan that is not only affordable but also does not require the down payment that dealers claim is necessary? Well, the first step is to know the truth about car dealers.
The Truth About Dealers
At first glance, when a dealer offers a financing package to a new customer, it seems like a good deal. There is a certain stress involved in applying for a car loan with bad credit, with approval not guaranteed. And besides, securing financing at the same time as buying the car is hitting two birds with one stone.
But if the loan is examined, the terms are actually quite bad. The interest rate is usually higher by as much as 3%. This is because the dealer will mark up the interest charged for the service so as to increase their own profits. What is more, getting loan approval with no down payment is usually not an option.
What this all means is that the cost of buying your new car is far greater due to interest repayments than it would have been had a car loan been secured through your local bank. And while their terms might not be ideal for bad credit borrowers, they at least offer a fairer deal.
Avoiding The Down Payment
So, the key to getting a fair deal is to steer clear of dealer financing offers. But what about avoiding having to make a down payment on the car? Coming up with a large lump sum can be a difficult thing to do when applying for a car loan with bad credit.
The fact is that a down payment is never a necessary element of any car purchase deal, though it does have its advantage in that the size of the required loan is reduced. But getting approval with no down payment is a matter of approaching the right lender.
The best loan source is online, where car loans, even as large as $20,000, are available without the pre-condition of a down payment. This can depend on agreeing a longer loan term, which means more interest paid over the lifetime of the loan, but also more affordable monthly repayments.
Get Pre-Approved Car Loans
There are also some advantages in securing pre-approved loans. The obvious one is that there is no wait to find out if your application for a car loan with bad credit is successful. But the less obvious is the stronger position it gives the buyer.
Car dealers tend to prey on the insecurities of bad credit borrowers by offering them a more assured lending option than banks. As already mentioned, there are catches to this situation with the lack of approval with no down payment one of them.
But getting pre-approved car loans removes the need to even discuss financing, and car buyers can walk in, find the car they want and agree a price in the knowledge the necessary funds are already in their bank account.