Unlike home loans, you don’t always need to have a down payment for a car loan. However, if you put down a deposit, it can make your approval process easier and reduce your refunds.
Most lenders offer a loan equal to the full value of the car, but you may come across some lenders who ask for a small deposit.
Here are some cases where this could happen:
- You don’t have or have a bad credit history
- You owe a lot of money on other loans
- There is a specific policy by the lender which requires a deposit from you.
Why is a car loan deposit beneficial?
On any loan, the less you borrow, the less interest you will pay in the long run. It’s better to take out a $20,000 loan than a $30,000 loan simply because you’ll pay it off faster and pay less interest over the life of the loan.
Here are some benefits of having a car loan security deposit:
- It increases your chances of approval
- You can potentially get a lower interest rate
- This can make it easier to manage your refunds.
While it’s beneficial to have a down payment for your car loan, it can take a while to save up and it’s not always doable. There are many car loans that require no down payment. So if you can’t pay a deposit, don’t worry – there are usually other options you can consider.
If you’re planning on buying a car soon, check out Mozo’s car loan repayment calculator to figure out how much you can afford within your budget.
^ See Mozo Experts Choice Personal Loan Awards information
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