Does a Large Down Payment Offset Bad Credit?

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Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


, Contributing Writer - June 4, 2018

When car buyers with bad credit provide a large down payment, it doesn’t eliminate the effects of bad credit, but it can help their approval chances.

How a Large Down Payment Helps Bad Credit Car Buyers

If a consumer with a low credit score finances a vehicle, putting a substantial amount of cash down probably won’t earn them a competitive interest rate. However, this strategy can increase their chances at auto loan approval, prevent them from having negative equity, and possibly save them money on interest charges down the road.

A large down payment increases bad credit buyers’ approval odds by lowering the risk for the lender. Every dollar put down decreases the financed amount, and borrowing less makes a lender more likely to approve an applicant with bad credit.

A large down payment also offsets depreciation and helps the buyer avoid negative equity – or becoming “upside down” in the loan. Then, if something happens that makes the buyer need to sell or trade in the car, they’ll have an easier time doing so because (hopefully) they won’t owe more than the value of the vehicle.

Finally, if a car buyer with less than perfect credit accepts a higher interest rate, providing a substantial down payment can save them a lot of money. This is because the money paid upfront reduces the total loan amount, and they don’t have to pay heavy interest charges on the portion of the selling price that isn’t financed.

How Car Buyers Can Save for a Down Payment

If they don’t need a vehicle right away, car buyers with damaged credit should do everything they can to save up for a down payment. If they have received a decent tax return, they can use all or most of this windfall toward their vehicle purchase. Or, they can take a good look at their budget and eliminate unnecessary spending to meet their goal.

Even after purchasing the car, consumers should continue the saving habit. This way, they can build up emergency funds to use toward vehicle repairs or other unexpected expenses. Fortunately, individuals with cash set aside can often manage sudden bills without undoing their credit repair efforts by charging emergency costs to high interest credit cards. These emergency funds can also help consumers make their car payments if they lose their jobs or experience extended illnesses or injuries that cause them to miss work.

How Bad Credit Car Loans are Faster with CarsDirect

If consumers with bad credit use CarsDirect, we get to work immediately. We'll look for a car dealership in their area that can give these buyers better chances at loan approval. Once they’re matched with a dealer, they meet with the finance manager. There, it’s determined what kind of monthly payment they can comfortably afford. If approved, buyers can select a vehicle that falls within the acceptable price range.

Also, the faster consumers get started, the faster they can get approved for bad credit car loans. So, for anyone who’s ready to get behind the wheel of their next vehicle, CarsDirect is ready to help. Just take a few minutes to fill out our simple and secure auto loan request form to get started today.

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, Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


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