I Have Bad Credit, How Much Should My Car Down Payment Be?

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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.


, Contributing Writer - February 15, 2018

Lenders typically require bad credit car buyers to have a down payment, but how much are they looking for?

Bad Credit Car Loan Down Payment Requirements

Subprime lenders will finance consumers with bad credit, but there are stricter requirements to account for the added risk. A down payment is almost always one of these requirements.

Most commonly, subprime lenders look for a down payment of at least $1,000 or 10 percent of the car's selling price, whichever is lower. Lenders may require more or less, depending on their loan programs and a borrower's overall credit profile, but this is the typical subprime requirement.

In addition to their own cash, buyers can use trade-in equity as all or part of their down payment, as long as the trade is in the borrower's name.

Regardless of the size of the down payment requirement, lenders want borrowers to invest their own money into the purchase. Lenders believe borrowers are more likely to successfully complete a loan when their money is on the line, making a down payment an important factor in determining approval.

The Advantages of a Down Payment

A down payment offers borrowers many benefits, especially if they're facing the higher interest rates that come with borrowing with poor credit. Here are a few of the advantages of having money to put down:

  • Getting Approved: For borrowers with bad credit, having the required down payment amount (or more) can improve their chances of getting approved.
  • Saving Money: The more a borrower can put down, the less they'll need to finance. A smaller loan amount leads to smaller monthly payments and lower interest charges over the loan term.
  • Avoiding Negative Equity: A down payment can reduce or even eliminate the amount of time a borrower is upside down (owing more than the vehicle's worth).

The larger the down payment a borrower can make, the more noticeable these benefits become.

The Bottom Line

When it comes to car down payments for borrowers with bad credit, bigger is better. In addition to meeting the lender's requirement, having money to put down works in the borrower's favor in many ways.

If you're dealing with less than perfect credit and need a car loan, CarsDirect wants to help. We connect car buyers with local dealerships that specialize in helping consumers in unique credit situations. Get the process started by submitting our free and secure auto loan request form today.

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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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