Getting a Car Loan without Down Payment
If you have ever had the thought or desire to own a car, and for any reason, this desire has remained a dream, there’s no need to worry because even with bad credit, you can secure a car loan. One significant effect of getting a car loan with bad credit or no down payment is that the interest rate will be much higher than that of someone with a down payment or better credit.
Do not let bad credit or no down payment stop you from getting that car that you have always dreamt of having. Although having no down payment when you want to purchase a car may disqualify you from some car loans, there are financing companies out there that can give you a loan without requesting for a down payment. A buyer, first of all, needs to qualify before any lender can provide him/her a no down payment loan. Upon meeting the eligibility criteria for making down payments, credit score is also taken into consideration. The higher the credit score, the higher the chance you stand.
If you as a borrower have a credit score below 660, you are viewed as a credit risk. These borrowers can also be grouped into any of the following categories based on their credit scores.
- Non prime borrowers- their credit scores fall between 601 and 660.
- Subprime borrowers- their credit scores fall between 501 and 600.
- Deep subprime borrowers- their credit scores fall below 500.
Borrowers with a credit score above 660 are considered to have good credit. While those with credit scores below 660 are considered more of credit risk. A good credit score which is one above 660 can be persuasive in waiving down payments and reducing interest rates. Scores between 570- 680 are considered subprime. Scores within this range are quite sensitive in that the lender can choose to accept down payment or reject it.
When getting a car loan, it is essential to get a lender who offers cheap car payments because some of these sellers charge at a very high rate. Before you qualify for a loan, you need to have a high credit score and a good loan history. When you apply for no down payment, the lender looks at your job history, income and credit score.
Paying Off a No Down Payment Loan
Most lousy credit lenders require that any bankruptcies be discharged through the court before making the application. Even when you have been approved for a loan, subprime lenders would usually want to see a history of steady employment. This history of jobs goes to show that you can be trusted to make payments.
Maintaining one job for a long makes it look better to the banks. Regularly changing your job may raise a red flag. Staying in one address for an extended period makes the applicant for the loan look more reliable. A subsequent change in address should always be included in a credit report to make you liable for payment.
Open and Maintain a Personal Bank Account
One of the most important criteria that makes you eligible for virtually every loan is to have opened and over time maintained a bank account. In managing this account, you have to ensure that there are no overdrafts and that you continually deposit into it. This shows that you prioritize the account and helps create a track record of your financial strength. It is on the financial strength that lenders will want to invest in you by offering you a car loan.
Generally, lenders and loan companies always consider individuals who have an active job, citizens of the country, and individuals who have been able to build a good credit score over time. They do this because they feel more assured giving out loans to these individuals because the risk in payment default is low with them.
Get a Partner to Cosign
In the absence of a good credit score or any of the requirements needed to get the car loan, you can get a family member who possesses all the criteria and is eligible to cosign with you. This person puts his/her credibility on the line by assuring the loan company or lender that you will pay up the loan. In the case of a default in payment, the cosigner becomes liable, but the credit score of both of you is affected. So to avoid any liability, it is essential that loan you get via the help of a cosigner is paid up on time, and the title in the car is shared with the cosigner.
Get Online Lenders
In the absence of a credible partner who can help you cosign for a loan, you can still employ the services of online lenders. These online lenders are professional lenders who offer car loans, don’t request for down payments, and offer low interest rates.
Besides all the options mentioned above, if you have a car that is in good working condition, you can trade your present car as collateral to secure a car loan. This option is less popular because many people think that it will be better to sell the car since it is still working well, and get a new one.
In conclusion, it is vital that you note that it is possible for you to get a car loan without down payment. The most important thing is that you should make sure you meet all the criteria of the loan. In the absence of one or any of the requirements, you can either get a family member who is likely to cosign.