Do you need to buy a car but lack the cash or the required down payment? Say you have found a great deal on a car – excellent condition, low miles, and it’s got everything you need but don’t have the means to give an upfront down payment.
With a zero down payment car loan, it’s possible to buy a car with absolutely no down payment. Though this often carries a higher risk of being tagged with steeper interest rates (especially if you have a lower credit score), the advantage is you will be able to get behind the wheels as quickly as you can. Good budgeting can make the entire car ownership experience easier on your wallet.
How Important is a Down Payment?
A down payment is an initial payment that is paid at the time of your car’s purchase. It’s vital to a lender that a vehicle is worth more than what you borrow for it, and a down payment is a good way to cover the gap between the sale price of the vehicle and its value once it leaves the dealership. Down payments also save you money during your loan term. Most often, financers ask for an up-front payment of between 10% and 20% of the car’s value.
If you are planning to get a zero down payment car loan to buy your next vehicle, consider the following;
Do Your Research and Establish a Budget
Purchasing a car or truck is a huge decision usually made after a lot of research. Part of this is knowing how much you should spend. If you can budget for the total amount of the monthly car payments, you are a step ahead. Auto loan calculators are helpful tools to use when you are trying to determine an estimate of what you will be paying for the entire auto loan term, interest included.
Additionally, it’s always good to take a good look at your needs for your car and make sure you are getting behind the wheel of a vehicle that suits you for the length of time you plan to keep it.
Check Your Credit
Your credit score is an essential factor in determining the interest rate and credit financing you will receive for your auto loan. You’ll want to go into this process knowing your credit score and your options. If you have a bad credit rating, usually below 660, focus on improving your credit score by reducing your high-interest credit debts quickly to qualify for zero down car loans. Good credit scores give you the best chances of persuading a lender to offer a no-down-payment deal without high-interest rates.
Consider a Trade-in For Your Car
If you already have a vehicle, you could opt for a trade-in of the existing car, which could easily give you access to lower interest rates in the absence of a large amount of down payment.
Buy a Used Car
For many drivers needing to buy or upgrade a car now with zero down payment financing, buying a used car can widen their vehicle choices. That brand new $40,000 SUV may be tempting, but may not be a practical choice if you are struggling to raise a down payment. Remember, used cars have less depreciation after their sale, so obtaining a zero down loan would make even more sense, as there is less of a gap between the value of the car and the loan amount.
Consider Paying Extra
When making your monthly car payments, commit to adding an extra amount to the payments as often as possible. By doing this, you will be getting your loan paid off quickly, which means you can soon do away with interest payments. Your goal here should be to decrease interest charges over the length of your car loan.
Who is Eligible for a Zero Down Payment Car Loan?
The eligibility criteria will differ from one lending service provider to the other. Still, common factors that a lender will consider include your income, track record, existing loans, and the value of your car. A lender will be taking on higher financial risk than usual, so it’s expected that they will want to ensure that you can make your payments on time.
Can I Get Pre-approved for a Zero Down Payment Car Loan with Damaged or Bad Credit?
If you have some bumps in your credit history or bad credit, you can still get pre-approved for a zero down payment car loan. While a few lenders specialize in providing such types of car loan finances, you can still find car dealerships that specialize in no-credit or poor-credit buyers. We work with your credit history to get approval and successfully provide options to customers with various credit profiles.
If you’re in the market for a used car but don’t have the cash for a down payment, we can help you get a no-down car deal so that you can get the vehicle you’ve always wanted. Get in touch with us today, and let’s get started on finding the right and most affordable auto financing option for you.