Stimulus Checks: A Good Start to Your Car Loan Down Payment

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - April 16, 2020

Most individuals have a stimulus check coming their way as a result of the coronavirus pandemic. If you have bad credit and you need a car, this stimulus check could be just what you need to start an auto loan off on the right foot by using it as a down payment.

Your Car Loan Down Payment

If you need a bad credit car loan, you need a lender that can work with your credit situation. Subprime lenders specialize in helping borrowers with less than perfect credit. They require you to meet several qualifications to finance a vehicle, and one of these is typically a down payment.

Generally, subprime lenders require a down payment of at least $1,000 or 10% of the car's selling price, sometimes whichever is less. If that's the down payment you're required to make, an economic stimulus check could be enough to help you qualify for a vehicle.

This is because most people with an annual income that’s less than $99,000 are slated to receive a stimulus check as a result of the coronavirus pandemic.

Should You Expect a Stimulus Check?

The IRS began rolling out the first batch of economic impact payments beginning on April 9. More stimulus checks are on their way every day. For millions of Americans, especially those that lost their jobs due to the economic impact of COVID-19, these checks are a welcome reprieve.

Economic stimulus checks aren't just coming to those who have lost their jobs. They're designed to boost the American economy by encouraging spending for those that can. If you're wondering about the details of the coming stimulus checks, here's what you should know:

  • Individuals who make $75,000 or less per year are eligible for $1,200.
  • Married couples who make under $150,000 annually are eligible for $2,400 ($1,200 each).
  • Dependent children qualify for an additional $500 per child under the age of 17.
  • Individuals who make $99,000 or more aren’t eligible for an economic impact payment.
  • Couples whose income exceeds $198,000 jointly are also ineligible.

These stimulus checks will automatically be deposited directly into the bank accounts of those who are eligible by the IRS, so you don't have to do anything! If you're unclear as to whether or not to expect a stimulus check, you can go to IRS.gov/coronavirus or visit our sister site Nolo.com to estimate how much you could receive.

Why Do I Need a Down Payment?

Many bad credit car buyers might view a down payment as just extra cash they have to shell out. In reality, a down payment is one of the best things you can do to help yourself qualify for an auto loan, and save money.

The bigger the down payment, the more money you can save over time. This is because when you make a down payment, you borrow less. Borrowing less gives you a lower monthly payment and saves you money in the long run because a lower loan balance means lower interest charges.

A large down payment can also help close the gap between the value of your vehicle and what you owe on your loan. When you owe more on your loan than your car is worth, it's known as having negative equity. This isn't a position borrowers want to be in for long, so making a large down payment can help. You can also use a trade-in with equity to help cover the down payment requirement.

When your vehicle is worth more than you owe on your loan, you have equity. Sometimes, there isn't enough equity to cover the minimum down payment you're asked to make when taking out a loan. In these cases, equity can be combined with cash in order to meet the money down requirement.

If there's already enough equity to cover the amount, additional money (say, from an economic impact payment) would be a good way to help you get the best loan terms possible. Plus, each on-time payment you make can help you improve your credit.

Ready to Find Your Next Car Loan?

Since your economic stimulus check is a good start to a down payment on an auto loan, your next step should be to find a dealership that's signed up with the kind of lenders that can help you get financed with bad credit. These lenders, called subprime lenders, only work with special finance dealers. At CarsDirect, we know just where to send you to find them.

We're teamed up with a nationwide network of special finance dealerships that have the lenders available to help people who are struggling with bad credit, no credit, and even bankruptcy. Get started toward your next car loan by filling out our fast and free auto loan request form. We'll get to work matching you with a dealer in your area after you do.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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