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.

Where is the Best Place to Get a Car Loan With Bad Credit

So where exactly is the best place to get a car loan when you've got bad credit?

First of all, you certainly want to avoid the following...

Avoid Buy Here Pay Here Dealerships. These types of establishments that offer in-house financing charge extremely high interest rates, price their cars at retail or above, and generally always want a down payment. This is not the best place to get a car loan and certainly not if you're wanting to save money. Buy a car from one of these places and you'll be paying not hundreds, but thousands of dollars more for finance charges than you have to.

Avoid Dealer to Dealer Hopping. Don't go hopping from one dealership to another trying to get approved. So many people with bad credit do this and it leaves large numbers of credit inquiries on your credit report. Those inquiries stay on your credit report for two years and they show that you're having a hard time getting approved. When you go to a second or third dealership trying to get approved, the dealer can see the banks and loan companies that you've been sent to already and have been turned down. So, if you're doing the dealer to dealer hop, stop now!

Online Lenders Save the Day. If you have bad credit, the best place to get approved for a car loan is online. Now don't go entering your information into 15 websites. There are a couple legitimate sources on the internet that allow you to either search through a database of lenders. There are also sources online that will pair your credit history with lenders that are guaranteed to approved you. In my opinion, online sources are the best place to get a car loan if you have bad credit.

Where Can I Get a Car Loan

Many people ask, "Where can I get a car loan"? The answer depends on whether or not you have good or bad credit. Let's look at options for both.

If you have good credit...

Car Dealerships

Local banks

Credit Unions

Online Lenders If you have bad credit, then the best option for you is to use an online lender, as well. There are companies now on the internet that have special finance programs that base your car payments on your monthly income. It's very simple to get approved and a down payment is not needed unless the amount financed exceeds the loan value of the car. If you don't understand that, don't worry. They'll provide you with all of the information that you need. Sources are available online now, that were unheard of a few years ago. In fact, many people that have a bad credit rating, don't even know that these lending sources are available for everyone.

If you have bad credit, you would appreciate...

No money down

Great interest rates

Low monthly payments, based on your income

Being able to buy your car wherever you want to

Getting approved in minutes That's what some online sources provide you with, when you take action and ask for a loan. It should be clear to you, by now, that car dealerships are not the answer if you have troubled credit. Car lots are no more than middlemen that take your application along with the price of the car that you're wanting to buy and simply submit it to lenders. You can save money and time by doing this yourself, online. You'll also get approved, much easier.

Where Can I Find a Car Loan If I Have Bad Credit

Have you been told that your credit isn't good enough for a car loan and that you'll have to wait until your credit gets better? You're probably wondering if there is somewhere that you can go to get a car loan without having to fool with a car dealership finance department. There are places that you can go to get approved and it's much quicker and simpler than you may think.

Online lending services that are legitimate and reputable will allow you to find a lender that will give you a bad credit car loan. There is no hocus-pocus involved and it's not anything that's too good to be true. There simply are more lenders than there are car dealers for most communities and finding the right lender is what you should do.

You wouldn't go to a plumber if you had an electrical problem, would you? Of course you wouldn't. So why would you rely on a dealership that is geared towards helping people with good credit, get you an auto loan? Until your credit gets repaired and improved over the next few years, you need to find a good lender that specializes in helping people with bad credit, not good credit.

When looking on the internet, make sure that the lending source that you choose has a secure website, so none of your personal information can be compromised. You also should look for a site that has a high approval rating. Some get 99% of their applicants approved for an auto loan.

When You Can't Get Approved For a Car Loan Locally

When you can't get approved for car loan locally, it can feel like there is just know where to turn. This is common, so don't worry about it. There are lenders that can help you to overcome this. Without smoke and mirrors, legitimate online car loan companies can help you and actually do a lot more for you then you may be thinking.

With thousands of lenders in the United States, it should be easy to fathom that there are bad credit car loan companies that can help just about anyone, get a real car loan with reasonable terms. Finding them, can be a challenge if you don't know where to look or where to go.

Let's clear something up, ok?

If you have had a bankruptcy, yes... you can get approved. However, all of your court proceedings relating to the bankruptcy need to be completed. The meeting of creditors and the final discharge or dismissal needs to be taken care of, prior to your applying for auto credit through these lending sources.

Also, if you have had a repossession within the last year... it needs to have been included as a part of a bankruptcy. If it was outside of a bankruptcy, and was within the last 12 months, then you will not qualify.

Your income needs to be a solid $1700.00 a month or more, per month. This is your GROSS income before taxes, including all wages, tips, etc.

It's easy to qualify and you if you're used to dealing with typical car lots and such, you'll be pleasantly surprised at the interest rates as well as, the payment terms that can be worked out for you.