Can You Get a Bad Credit Auto Loan with No Down Payment?

Get Car Financing
Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - October 10, 2016

We have all seen the advertisements touting "no money down" car loans. They seem to be everywhere, and they sound great, don't they? The problem is, if you are dealing with bad credit, these offers almost certainly do no apply to you.

A look at the fine print will almost always reveal that only people with the best of credit who meet specific requirements will qualify for these kinds of no money down offers.

The truth of the matter is that any legitimate loan provider or car dealer who can help get you approved for an auto loan is going to have minimum requirements. When you have bad credit, these typically include proof of income, proof of age and citizenship, proof of employment, and, yes, a down payment.

A subprime lender will always have the final say on whether or not an application for a bad credit auto loan will be approved. Each loan is different, every lender operates differently, and they work on a case-by-case basis. However, in our experience, almost every subprime lender these days has a down payment requirement.

This is the case because, over the years, it's been shown that customers with down payments have better payment habits. Those who have their own money invested in a vehicle tend to keep up with their payments because they have "skin in the game", so to speak.

The Subprime Down Payment Standard

Every subprime lender has different requirements, but the standard when it comes to down payments is typically 10% of the car's selling price or $1,000, whichever is less. Your down payment can come in the form of:

  • Customer cash - Paying money down out of pocket as a cash down payment is always an option. Try to save up what you can before applying for auto financing.
  • Trade-in equity - You can trade in your existing vehicle as long as it's paid off or you have equity in it. Remember, the trade must be in your name. You can also combine cash and trade-in equity to use as a down payment.
  • Rebates offered on new cars - If you qualify for a new vehicle loan, it is possible that you may be able to use any rebate being offered. You can add this incentive to your down payment, but it will not count toward the lender's original down payment requirement.

Down Payment Advantages

We get it. Who doesn't want to receive a no money down offer? Unfortunately, borrowers with poor credit rarely, if ever, are able to qualify for them. However, there are many advantages to making a down payment that you should consider.

First of all, having one could end up being the difference between approval and denial. Second, a down payment reduces the amount of the loan, which works in your favor in many ways. Borrowing less means paying less in interest, and it also makes shortening the loan term more doable, which can lead to further interest savings. Finally, paying money down can reduce the likelihood of you having negative equity in the vehicle.

Basically, when financing a car with bad credit, the more money you are able to put down, the more you are helping yourself out.

But if you are struggling to find a dealership that can help you get approved for a bad credit auto loan, we know who can help. CarsDirect helps those dealing with credit problems find car loans, and you can get started today just by filling out our simple online application.

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


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