What’s the Minimum Down Payment I Can Make for a Bad Credit Car Loan?

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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.


, - October 21, 2019

The minimum down payment you can make for a bad credit car loan depends on the lender you’re working with, your credit, and your individual situation. When it comes to getting an auto loan with less than perfect credit, there are a number of requirements you need to meet, which typically includes a down payment. However, you may not have to put down as much as you think.

Minimum Down Payment Amounts by Lender

There are lenders that specialize in helping bad credit borrowers, called subprime lenders, and they know that a large down payment may not be in the cards for some people.

Whether it’s because of poor credit or financial struggles, these lenders recognize the difficulties a down payment can mean, so they typically ask for a down payment of $1,000 or 10% of the vehicle’s selling price, whichever is less. This means if you finance a car that’s $5,000, you may only need a $500 down payment.

If you’re not using a subprime lender, another option for bad credit car buying is a buy here pay here dealer. This is a type of in-house dealership, which means they're also lenders.

It's often easier to get a vehicle with poor credit at one of these dealers. However, because the dealerships don’t always run credit checks, they rely on your income and a down payment for an approval. Here, your down payment requirement is based on the price of the car you’re financing, but it's typical for their standards to be higher than subprime lenders.

Why Make a Down Payment?

Since these types of lenders know it can be a struggle for a bad credit borrower, why even bother having anyone make a down payment? There are a few reasons to consider if you find yourself frustrated when facing the down payment dilemma.

Let’s look at these items, and how they relate to the down payment requirement on a bad credit auto loan.

  • Car price – Consider this: how expensive is the vehicle you’re financing? Is it $10,000? $14,000? $20,000? Even if it’s only $5,000, that’s a lot of money. When you’re financing a car, someone is lending you the money you need to get it. The manufacturer isn’t waiting around for you to make a payment each month so that a lender can pay them. The lender holds the title to that vehicle until you pay it off, and they’re not going to let you drive their car without some form of security. This is where the down payment comes in.
  • Creditworthiness – This comes into play because one of the things lenders require in a bad credit borrower is willingness. Instead of basing approvals solely on credit, subprime lenders use your income to see if you can afford the loan, and your employment and residence history to look for stability. Finally, they consider your willingness to invest in your own success with a down payment.
  • Lowers your loan amount – From a personal standpoint, a down payment is a good thing. Any money you put down is money you don’t need to borrow, which means that your loan amount is lower. Therefore, the amount you pay in interest charges over your loan term is lower.
  • Decreases time in negative equity – When you make a down payment, it kick-starts your loan, and helps to reduce the time your vehicle spends upside down. Negative equity is when you owe more on your loan than your car is worth. Most borrowers spend at least some time in this situation, especially if they’re financing a new vehicle. It’s perfectly OK to make the minimum down payment, but the larger the down payment you make, the less time you spend with negative equity.

Now that you know why a lender needs a down payment from you as a bad credit car buyer – and why it’s in your best interest to make one – you need to know the options you have for making a down payment.

Ways to Make a Down Payment

Down payments don’t have to mean saving up all your pennies and breaking the piggy bank in order to have enough cash to hand the lender. Sometimes, pulling together a down payment in cash is necessary, but it’s far from your only option.

Let’s look at the ways you can come up with a down payment:

  • Cash – Cash is a great option for a down payment. After all, cash is king.
  • Trade-in equity – If you can’t come up with the cold hard greenbacks, you can trade in your current vehicle and use its equity to cover the down payment requirement.
  • Combination – Not enough of either one to make a down payment in straight cash or trade-in equity? Combine the two to take care of the lender requirement, or to make a larger down payment and save more money.
  • Credit card – This is extremely rare when it comes to bad credit car buying, but every once in a while, you may find a lender that lets you put at least a small portion of your down payment on a credit card. Beware, though, because you end up paying interest on your credit card, so you may be costing yourself more money.

Finding a Dealer to Work With

Making a minimum down payment is almost always a requirement when it comes to bad credit auto loans, but just what the minimum amount is varies by lender, and your situation. In order to get the right down payment amount for you, you need to find the right vehicle and lender to work with. This is where CarsDirect comes in.

We work with a nationwide network of special finance dealers that have the lending options you need, even with bad credit, no credit, or bankruptcy on your credit reports. Let us help you take the next steps in your car financing journey. Just fill out our no-obligation auto loan request form, and we’ll get to work connecting you to a local dealership.

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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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