If your credit score is worse for wear and tear, then having cash on hand is a great way to increase your chances of being approved for auto financing. Meeting a down payment requirement can be difficult for many borrowers, but with tax season approaching and the third round of federal stimulus checks on the horizon, it may be easier than ever to get your hands on. the vehicle you need in the coming months.
Upcoming deals might help with down payments
Saving money to meet a down payment requirement may be easier if you qualify for the latest stimulus checks and use your next tax refund if you’re expecting one.
The third round of federal stimulus controls negotiations passed by the Senate on Saturday. On March 6, but so far the latest information indicates that couples earning less than $ 160,000 and people earning less than $ 80,000 are expected to receive $ 1,400. The goal is to have the bill signed by President Joe Biden by March 14, when the current extension of unemployment benefits will end.
If you qualify for the next round of stimulus checks and are about to receive a tax refund this tax season, these deals could be the way to increase your chances of being approved for tax financing. ‘a vehicle. The average tax refund for filers was approximately $ 2,535 in 2019.
As a bonus for California residents, the state is rolling out its own Golden State Stimulus checks. Eligible residents are expected to receive a one-time payment of $ 600 after they file their 2020 income tax returns and meet the income requirements.
Any extra windfall of money you receive, like the federal stimulus check, can help you with a down payment. You just need to meet an auto lender’s minimum down payment requirement, but you can always put more money aside to further reduce interest charges and the amount you have to borrow to get into a vehicle. .
Why down payments are required with bad credit
Having bad credit can make financing a bit more difficult, as most lenders use your credit score as a way to quickly judge your ability to repay loans (i.e. creditworthiness).
If you have a tarnished credit history or haven’t started one yet, an auto lender will likely need some skin in the game to approve you for financing. The skin in the game simply means a down payment, and it shows the lender that you are able and willing to invest in the loan.
However, down payments don’t just prove that you can afford a car loan. They also offer a multitude of advantages:
- Reduces the risk of default on your loan
- Decreases loan capital
- Helps you avoid negative equity
- Saves you money in interest charges
- Can open vehicle financing options
- May allow you to benefit from a better interest rate
- Could allow you to choose a shorter loan term
Making the effort to put money aside on a car loan can provide you with many benefits, save you money in the long run, and overall increase your chances of getting approved for financing. when you have credit problems.
How Much Money Should I Deposit With Bad Credit?
The amount of money you should put on a bad credit auto loan can depend on a lot of things, but in general lenders have a minimum requirement. If you are applying for vehicle financing from a subprime lender who is equipped to handle many difficult credit situations, you can generally expect to need at least $ 1,000 or 10% of the sale price. vehicle – in some cases, whichever is less.
Most sub-prime lenders don’t approve loans under $ 5,000, which is another thing to consider when budgeting for a savings goal. As a safe starting point, it is recommended that you save at least $ 1,000. The condition of your credit history can also influence the lender’s minimum requirements. The lower your credit score, the more the lender may ask you to pay to qualify for the auto loan.
In our dealer network, borrowers who use our Dealer Matching service make an average down payment of approximately 13%. If you are looking to buy a car for $ 10,000, you may have to shell out between $ 1,000 and $ 1,300. The more expensive the vehicle, the higher the down payment requirement is likely to be.
One of the biggest benefits of a down payment is getting a smaller car payment. If you want a specific make / model, but the loan terms put your monthly payment above what you’re entitled to, then a large down payment expands your vehicle options. You can use our car loan payment calculator to see the impact your down payment amount can have on your monthly payment.
Down payment planned: what’s next?
Having a down payment plan is one thing – finding a dealer who has signed up with lenders who can help with bad credit is another task at hand. Many dealerships are associated with lending institutions, but special finance dealers are those who have signed up with subprime lenders.
With Auto Express Credit by your side, you don’t have to waste time looking for a dealer who can help you with bad credit. Through our nationwide network, we’ll find a dealership in your area who can help bad credit borrowers get the auto loans they need. Start by filling out our free auto loan application form. There are never any fees or obligations, our form is secure and we’ll get to work right away.