Second Stimulus Check Could Help With a Car Loan

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Even with poor credit.

By

Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - January 11, 2021

If you’re like most bad credit borrowers, you may be worried about meeting a down payment requirement for an auto loan. Subprime lenders, or bad credit lenders, almost always require you to bring some cash to the table – and your second stimulus check could help out.

Down Payments and Bad Credit Car Loans

Simply put, a down payment improves your odds of getting approved for a car loan. With a lower credit score, lenders expect more risk and have borrowers meet a down payment requirement to offset it.

They're not just good for the lender, though. Down payments lower your monthly payment, decrease your overall interest charges, and show the lender that you’re financially stable enough to save up money for an auto loan. However, it can sometimes be difficult to save up enough money to meet a down payment requirement.

Most subprime lenders require at least $1,000 or 10% of the vehicle’s selling price down, sometimes allowing you to pay whichever is less. If saving at least $1,000 seems daunting, a second stimulus check could give you the boost in cash that you need to meet the requirements for vehicle financing.

Second Stimulus Check Amounts

The spread of the novel coronavirus has stifled the economy and created economic issues for many Americans. If you’re lucky enough to keep steady work, then the stimulus check may be extra income for you. Using this windfall could help you meet a down payment requirement, and in turn, secure vehicle financing. If you manage the auto loan well, it can also improve your credit score!

The stimulus checks are designed to help people who need financial assistance and serve as a way to stimulate the economy. Not everyone qualifies, but those that do can use that money for whatever they wish.

If you’re single, you can expect a maximum of $600 with this second stimulus check. If you’re married, you and your spouse can expect to see $1,200. Dependents under 17 also earn you an extra $600 per child. For a qualifying family of four, they could receive up to $2,400.

If you don’t need the stimulus checks for immediate bills and the rest of your finances are in good shape, this windfall could boost your savings to help you qualify for a car loan.

How Much Should I Put Down?

While subprime auto lenders typically require at least $1,000 or 10% of the car’s selling price, there’s no rule stating you have to max your down payment there. Having a large down payment is a great way to secure a lower car payment, and make it that much easier to manage and complete your loan successfully.

When you put cash down on an auto loan, that down payment gets applied directly to the vehicle’s selling price. If you want a vehicle for $10,000 with a 13% interest rate (our dealer network’s average interest rate), then your monthly payment is around $227 for 60 months. With a down payment of $2,000 with the same terms, that leaves you with a monthly payment of around $182. The more you put down, the more disposable income you have each month during the loan.

Interest charges are something to consider as well. As a bad credit borrower, you may be assigned a higher interest rate than you’d prefer. Interest charges are the cost of borrowing money. The more risk you are to a lender, the more they charge you to borrow the money to buy the vehicle. However, auto loans are simple interest loans, and charge you interest based on the remaining balance of the loan. The less you borrow, the less interest charges you accrue over the course of the loan.

That being said, strive to put down as much as you comfortably can.

What’s Next for You?

If you’ve decided to use your second stimulus check to help meet a down payment requirement of an auto lender, your next step is likely to find a lender that can work with your credit situation. However, that’s sometimes easier said than done – but we want to help get it done here at CarsDirect.

We’ve cultivated a network of dealerships all over the country that are signed up with subprime lenders. With our expansive dealer network and free auto loan request form, we can look for a dealership in your local area that has bad credit lending resources. Get started right now and get on the road to your next car loan!

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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