Most lenders who work with borrowers with poor credit scores will require a down payment for a car loan. These down payments can be in the form of cash or real trade equity (in other words, the vehicle must either be paid off or the value of the trade-in must be more than the amount owed on the loan).
Down payments for car loans
When it comes to down payments, each lender has its own set of guidelines, so it’s usually difficult to say how much money will be required. Still, there are a number of generalizations that can be made:
- As a rule, lower the credit score, the higher the down payment that will be required
- Deals with lower vehicle loan to values (or LTV – the ratio of the loan amount to the value of the vehicle) generally require lower down payments than deals with higher LTVs
- Everything else being equal, borrowers with more stable employment and residency backgrounds will qualify for lower down payments than buyers with shorter work and residency histories
- Borrowers with situational (temporary) bad credit usually qualify for lower down payments than those with habitual (continuous) credit issues.
- Depending upon the lender and the credit tier, borrowers with credit problems can typically expect down payment requirements ranging from $0 to $1,000, based upon these criteria
The Bottom Line
Since down payment requirements for credit-challenged buyers vary by lender and no two consumers are alike, it can be difficult determining, beforehand, the down payment needed. Most borrowers should plan on putting down at least $500 but no more than $1,000.
Here at Suburban Auto Finance, we have worked with those who have no down payment as well as those who have some cash set aside for their auto purchase. All you need to do in order to see what we can do for you is complete the simple and fast online financing application. From there, we can help you get the car financing you need. Start today!