Why Do Car Dealers Want a Down Payment For a Car Loan When You Have Bad Credit

When you have bad credit, car dealers frequently want down payments for car loans for a number of reasons. Sometimes it's the lender that wants a down payment as part of what is called a 'stipulation'.

I'll explain to you how this works and give you a practical example.

When you fill out a credit application and to try to get approved for a car, the finance manager (at one time was me) would then fill out the rest of the credit application with the information about the car that you wanted to buy. This would include the vin number, make, model, mileage and all that jazz.

What happens then, is that the credit application is received by the lender. In some cases, the application may be submitted to numerous lenders to not only see what you could get approved for, but also how much money can be made on your car loan with each particular lender. (This is why when you have even good credit, your application gets sent to multiple lenders by the dealer.) Each lender then replies with a response.

Based on a vehicle that you have taken a look at or wanting to buy, the lender may approve you for financing for that particular vehicle, but add the stipulation that they will only finance a particular amount for that particular vehicle. This then places the burden on the dealership of doing one of two things... either lower the price of the car to the amount that the lender will allow or the dealer has to request that you make up the difference.

While supply and demand can dictate that some vehicles will require them to be sold at a higher price and far above loan value, there are a lot of great deals on both used cars and new cars right now. Finding a good price on a vehicle is the key to eliminating the need for a down payment.

One of the easiest ways to get approved and get the best deal on secondary financing (bad credit car loans) is to compare offers online. There are a few good sources that allow you to do this.

Why Buy Here, Pay Here Programs Are a Bad Option For Bad Credit Car Buying

For people with bad credit, the appeal of guaranteed auto financing is hard to resist. Buy here, pay here programs advertise no credit checks which appears to be very promising. However, like many other situations in life, this offer is often revealed to be too good to be true. The thing that most people fail to see is the disadvantages far outweigh the benefits in this type of offer.

"Buy here, pay here" programs do not have to report to any of the major credit bureaus 99 percent of the time. As a result, your credit is not improved when you make timely payments. This is not the best option if you are trying to get a loan and repair your bad credit at the same time.

If you are short on funding and have bad credit or no credit at all, you may resort to a "buy here, pay here" program. Since many people like yourself do this out of desperation, dealerships of this nature get away with charging you up to two hundred percent more than you would pay if you had gone through a good online secondary lender.

No one with good sense would be willing to pay 20 to 30 percent interest on any loan, let alone a loan for a car. These establishments play on the desperation of customers which makes the reason for their continued existence quite clear.

Reputable online secondary lending companies or sub-prime lenders are more than willing to provide loan approvals, even after disastrous credit situations such as repossessions or bankruptcies. Some secondary lending companies have applications online which allow you to instantly know whether or not you have been approved and for how much.

No matter where you decide to finance your next car, make a careful decision. Educate yourself thoroughly about your options and only consider the use of "buy here, pay here" programs a last resort.

Where's the Best Place For Getting Approved For a Car Loan When You Have a Really Bad Credit Rating

When you have a really bad credit rating, it can leave you feeling a little down in the dumps about getting approved. So many different lenders have so many different guidelines and the car dealerships, well... they just don't seem to make things clear when it comes to auto finance. It can seem like a losing battle and that you'll have to wait for years in order to be able to have your credit rating repaired enough to qualify for a nice car.

Do you have to wait years in order to qualify for a car loan?

Although you most likely will not qualify for a very expensive vehicle, you can obtain auto financing while you're still waiting for your credit rating to improve. Specialized lenders that help people with bad credit ratings can make the difference between your being approved for a nice vehicle with reasonable terms, or not being approved at all.

What type of down payment will be expected?

There is a myth that if you have bad credit, you always have to have a down payment. That's simply not true. The loan value of the vehicle being in-line with a reasonably priced auto is what makes the difference. If you're required to have a substantially large down payment, that doesn't help your finances, does it? It's better if the financing can be worked in sync with your choice of car based on your approval amount.

Where is the best place to get approved with really bad credit?

Although it's new to many people, lending services that are available online can help you to be paired with a specialized lender that is in the business of helping people just like you, to overcome their credit challenges with a good car loan. It's easier than most people think, although many are more comfortable with the traditional car dealer routine.