Bad Credit Auto Loans with No Money Down

Every day you see articles on the internet that suggest that all bad credit car loan buyers can finance a vehicle with no money down. Nothing could be further from the truth.

What is truly frustrating is seeing blog articles written about bad credit auto loans with no money down where the authors clearly have no idea how bad credit lending really works. Here are some excerpts from a recent article as well as a dose of reality:

Fiction: Here is a direct quote from the article:

First, there are only two reasons that a dealer would want a down payment.
The most common reason is because it adds profit to the sale. The other less common reason is because it’s needed to lower the total amount financed for approval by the lender. Trying to figure out which is the real motivation to pressuring you for cash is a little difficult so long as, you are depending on the dealer to get you approved.

Fact: Lenders have strict requirements concerning vehicle pricing. In most cases, lenders will only allow dealers to sell a car for 120% of trade value plus taxes and fees. As a car buyer, you should know that these trade values are published on the internet and you should base your purchase on them, especially if you’re considering a bad credit auto loan.

Secondly, the lender is asking for a down payment in order for the buyer to have some cash equity in the car. There is a higher risk for default on bad credit car loans and, not surprisingly, it has been proven that buyers that have made substantial down payments are less likely to allow their vehicles to be repossessed than those buyers who have been given bad credit auto loans with no money down.

Fiction: Here is another quote from the article: “Most people think that if they have bad credit, they have to use the financing offered through the car dealership. After all, the local bank won’t give you a loan right? This is a common mistake that can cost you thousands of dollars in outrageous finance charges.”

Fact: It’s true that even if you have bad credit, you should probably check with your bank or credit union first to see if they’ll finance you. Unfortunately, if your credit is truly bad and/or you don’t have a good history with these lenders, your only choice is going to be a bad credit car lender. A majority of these lenders only do indirect lending through car dealers – you can’t go online or walk into a branch office and apply for a loan with them, especially bad credit auto loans with no money down.

The bottom line is that customers looking for bad credit auto loans with no money down need to know how the process works in order to make sound financial decisions about reestablishing their credit. The loan process has to be looked at as a series of steps with each one taking you a step closer to better credit.

Tags: auto loan, bad credit, bad credit auto loan, canada, in house financing, special finance