Learning finance

Does a large down payment make up for bad credit?

Generally, the higher the down payment, the better off you will be. While a large down payment can help your loan, it doesn’t necessarily make up for your bad credit. Lenders always look at your credit history and credit score, regardless of the amount you have invested.

How much down payment for a car with bad credit?

When you have bad credit, lenders generally require at least $1,000 down payment or 10% of the sale price of the vehicle, The smallest. Without this amount, it can be difficult to qualify for a car loan with less than perfect credit. In this sense, a down payment somehow compensates for bad credit.

That’s just the typical minimum requirement with a subprime lender, so you’re more than welcome to put in more money if you can. In fact, it is highly recommended to put more than the minimum amount down. A down payment can help you save money by reducing the amount you need to borrow. It can also lower the interest charges you pay, which can make a big difference considering the higher than average interest rates on bad credit car loans.

What if I want to put 50% less?

When you put 50% on a car, the loan to value ratio will be extremely low. Basically, this means that the car will always be worth more than the loan balance. Most lenders will accept a 50% down payment, provided the loan balance still meets their minimum amount to be financed. But they will also check further to make sure you can actually afford the monthly payment.

Indeed, eligibility for a car loan is not limited to your credit score and your down payment. The lender will also verify that you meet their basic requirements, including income, residence stability and ability to pay. So even if you are able to deposit 50%, it may take longer than that to be approved.

The essential

If you have bad credit and need a car loan, turn to Auto Express Credit. We help car buyers solve their credit problems by connecting them with local dealers who specialize in financing. Dealers in our nationwide network know what it takes to help consumers obtain financing, even when faced with unique credit situations. Start the process by filling out our secure and free form car loan application form today.