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Is it Bad to Buy a Car Without a Down Payment?

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Saying that having no down payment is “bad” can be a little subjective. However, no one is likely to tell you that you shouldn’t have one, especially if you have bad credit. In fact, it’s likely to be a requirement with most bad credit auto lenders.

Your Credit and Down Payment Requirements

Is it Bad to Buy a Car With No Down Payment?If you’re looking at financing your next vehicle, then you’ve likely heard that you should have a down payment, and it’s good advice. But if you don’t have the cash for a down payment, is it bad? Maybe, but it can also depend on your credit situation.

If you have good credit, a down payment may not be required by the lender. Whether or not you need one can also depend on how much financing you qualify for. If the car you want is $12,000, but you only get approved for a $10,000 auto loan, then you need a $2,000 down payment to get into that specific vehicle.

If you have poor credit, though, odds are you’re required to have a down payment in order to be considered for a car loan. Bad credit auto lenders typically require at least $1,000 down or 10% of the vehicle’s selling price (sometimes whichever is less) if you want to be in the running for a car loan.

The biggest reason that lenders ask borrowers to have down payments is that they prove that you’re invested in the auto loan – aka skin in the game. Borrowers who put cash down have a better track record of completing their car loans successfully, which is great for the lender and for you.

When you have less than perfect credit, a lender may be hesitant to approve you for an auto loan. With a down payment, however, it shows you’re willing to put your own cash on the line, which improves your chances of a car loan approval.

Why Having a Down Payment Is Smart

Down payments can protect you from negative equity, lower your monthly payment, and lower your interest charges over the course of your loan. In other words, having money to put down now can save you cash and headaches later.

Putting money down allows you to avoid negative equity by financing less right off the bat. Negative equity happens when you owe more on the vehicle than it’s worth. A few things can lead to negative equity, like having a high interest rate, or if the car loses value quickly (like new vehicles tend to do).

Down payments can also lower your car payments, since you’re financing less from an auto lender. Additionally, with a lower initial loan amount, there’s less to be charged interest on. Nearly every car loan nowadays uses simple interest, meaning you’re charged interest on what your remaining balance. The less you owe to the lender, the less you pay in interest charges.

For borrowers with bad credit, high interest rates are often a concern. Those with lower credit scores are typically assigned higher rates, but a down payment can help combat those extra interest charges.

How Much Should I Put Down?

When it comes to how much you should put down, a good rule of thumb is to strive for at least 10% of the vehicle’s selling price. If you’re looking at purchasing a brand-new car, aim for around 20%. New vehicles have a much higher risk of being in a negative equity position at the beginning of the auto loan, since they depreciate very quickly in the first few years of ownership.

You also don’t need to have your down payment in just cold, hard cash. If you have a trade-in, it can help cover a down payment requirement or knock some cash off on what you pay for your next car.

If you still owe on your trade-in, you need to pay off the remaining balance of your loan first. Then, you can use any leftover cash to put toward your next vehicle. If you own the trade-in free and clear, then the entire value can go toward your next auto loan.

Where Can I Find Bad Credit Car Loans?

Having no down payment and bad credit can mean bad news if you’re looking to take on a car loan. A down payment is great for any borrower, since it saves you cash over time and increases your chances of getting into an auto loan. However, even with a down payment and the income to pay for a car loan, lenders still may turn you away for financing if your credit score isn’t quite up to par.

There are auto lenders that work with borrowers in all sorts of unique credit situations, called subprime lenders. They’re signed up with special finance dealerships, which are located all over the country. Pinning one down, though, can be a little bit of a challenge, but that’s where we come in.

Here at Auto Credit Express, we’ve already located the dealers that have bad credit lending resources. To get matched to a dealership near you that works with subprime lenders, fill out our free car loan request form.

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Evicted California renters at greater risk of getting COVID-19

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After 70 years in Monterey County, 87-year-old Mary Martinez moved in the middle of a pandemic, evicted from her modest one-bedroom, second-floor apartment at 1118 Parkside St. in north Salinas.

According to her former landlord, Martinez was evicted because she allowed a “violent man” to live with her, violating the conditions of her lease. Martinez said the man is her epileptic nephew.

Advocates say that while evictions like Martinez’s are rarer during the pandemic, landlords are feeling the financial squeeze. Some have sold rental properties to make up for lack of income. That can leave renters out in the cold when their new landlord raises the rent by hundreds of dollars or requires all renters move out before they take over the building.

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New program to help Black-owned online businesses | Technology

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ATLANTA _ Many Black entrepreneurs struggle to get bank loans and professional help to launch new businesses. A new program aims to remove those stumbling blocks.

An Atlanta nonprofit and another business have committed $150 million to the 1 Million Black Businesses effort, which will make loans and provide financial and business advice to Black-owned startups and established small businesses. Atlanta-based nonprofit Operation Hope, which helps consumers improve credit scores, is kicking in $20 million, and Shopify, the online e-commerce is adding another $130 million for the loans and website-hosting services.

Other services firms providing expertise or help include Aprio, an Atlanta-based accounting firm, and First Horizon Bank.

It’s a package of products that many Black entrepreneurs couldn’t get through a bank or credit union, said John Hope Bryant, CEO of Operation Hope.

“A bank won’t lend you money unless you can prove that you don’t need it,” Bryant said. “That’s especially true with minority-owned small businesses.”

Small businesses with Black owners were half as likely to obtain business loans as whites, according to a Federal Reserve survey published earlier this year.

The initiative is the latest effort to help Black consumers and businesses enter the financial mainstream. Earlier this month, a group that includes rapper Killer Mike opened a digital bank aimed at Black and Latino consumers.

Banks and credit unions have tried for years to help Black consumers open checking and savings accounts. The efforts helped, as the number of U.S. households without bank accounts fell to 5.4% in 2019 from 6.5% in 2017, the Federal Deposit Insurance Corp. said Monday.

Consumers who own checking and savings accounts typically have access loans with better rates and a wider variety of financial services.

The federal government’s $660 billion loan initiative for businesses hit by COVID-19, the Paycheck Protection Program, also helped few Black-owned businesses, Bryant said. PPP loans were based on a company’s number of employees and its rent obligations. many Black-owned small businesses typically didn’t have enough workers to qualify and are based out of the owner’s residence.

Bryant said a bad credit history may not prevent applicants from receiving a loan.

He hopes more companies will contribute services such as insurance advice or software typically available only to well-established businesses.

Bryant noted that 1MBB is not a charitable organization, as participating companies like Shopify will likely get a pipeline of new business customers through the program.

“This is not pure philanthropy,” he said. “Shopify believes that Black-owned businesses are good businesses if they’re properly supported.”

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This Week’s Top Car Deals & Analysis – October 30, 2020

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The final days of October offer a chance to take advantage of outstanding model year-end deals. Most offers end November 2, which means there isn’t much time left to enjoy this month’s best lease deals and deepest new car discounts. We even found incentives that can help those with bad credit buy a new or used car.

2021 car deals. Interestingly, 2021 new car incentives are showing some surprises. For example, Audi is already offering up to $12,000 in savings when leasing the 2021 e-tron all-electric crossover. We even learned that the new Genesis GV80 SUV will debut with a $589/month lease deal plus special financing rates.

Believe it or not, the 2021 Hyundai Veloster N could prove to be a great value despite a nearly $4,700 price increase compared to the previous year. That’s because our analysis finds that better incentives can make it just $10/month more expensive to lease than the 2020 model. Talk about getting more for your money.

Why are small cars bad to lease? Even though smaller cars typically come with lower price tags, that isn’t always the case when leasing. A mix of lower discounts, worse residual values, and smaller discounts can actually make a Nissan Altima cheaper than a Versa despite having an almost $10,000 difference in MSRP.

Shorter-mileage leases. More brands are offering shorter mileage allowances on car leases. Although this is typically used to offer consumers more flexibility, we’ve found cases in which you can end up getting less for your money. If you don’t read all the fine print, this could make comparison-shopping difficult.

Bad credit car deals. If you have subprime credit, you may find it harder to get financed. However, some manufacturers are offering special incentives to help make cars & trucks more affordable. For example, Chevy is offering $2,000 in down payment assistance plus 9.9% APR for 72 months on the 2020 Trax.

$0 down leases. If you’re adamant about now putting down any money on a lease, you’ll love Sign & Drive leases. In addition to requiring no money down, $0 down lease deals can cover your first month’s payment. Even hot sellers like the Honda CR-V Hybrid offer $0 down and as little as $330/month on a lease.

The high cost of safety? Even though most major automakers are offering more safety features than ever before, our analysis finds that the highest IIHS safety ratings still require costly options in 2020. That’s starting to change, but the cost of buying a car with the most bragging rights is still very high.

Disaster relief. Those affected by some of this year’s natural disasters should be aware that automakers are offering assistance. California wildfire assistance programs like Ford Employee Pricing can save thousands when replacing a car. Similarly, a 2020 hurricane relief program from GM offers $1,000 in savings.

Spooky loan situations. There are some scary scenarios you can avoid when getting a car loan. However, boosting your credit score is possible with some determination because negative items on your credit report fall off after 7 years. Our network of dealers is specially equipped to help those with bad credit.

Upcoming vehicles. Genesis finally revealed the new GV70, a small luxury crossover based on the highly-rated G70 sedan. Whether it’s a redesigned car, truck, or SUV, odds are you’ll find it on our Previews page. That said, as we reported last week, discounts ahead of a redesign can result in substantial savings.

This Month’s Cheapest Lease Deals »



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