Is It Possible To Get A Car Loan With Bad Credit And Zero Down Payment?

A reliable vehicle is essential for most American families. However, in the current economy, many car buyers find themselves unable to qualify for traditional vehicle financing, especially when a substantial down payment is required.

Fortunately, there are lenders that’ll let you apply for car loans with bad credit and no money down. Let’s take a closer look at these lending products and how you can apply for one.

What Kind Of FICO Score Puts You In The Bad Credit Category?         

The most important factor that’ll determine whether you can get vehicle financing is your credit score. 

• Most lenders will refer to your FICO score, a number between 300 and 850, when assessing your financing application. The higher your score, the better your chances of being approved, and the less you’ll pay in interest 
• There are four categories of ratings and knowing which one you’re currently in is essential

The table below shows the various FICO score categories along with the numbers corresponding to each one.

Lenders generally consider scores below 580 to be within the bad credit category. If yours is in this range, don’t give up hope quite yet. There are some simple strategies you can employ to secure vehicle financing with bad credit.

The Importance Of Down Payments              

Vehicle financing can be especially challenging because this type of borrowing usually requires good financial standing and a substantial amount of cash available to use as a down payment.

• Some car dealerships require a down payment of 10% or more, but this figure isn’t set in stone. Smaller dealerships may be more flexible in terms of their financing requirements. You may even be able to find one that’s willing to waive the down payment requirement altogether
• As with all financing products, the key to finding a car loan and vehicle that suits your needs is to shop around and not settle for the first deal that comes your way

Considering the cost of down payments and the monthly expense that you’ll be responsible for when you finance a vehicle, you’ll want to make sure that the lending product is affordable before you proceed.

Using A Trade-In As A Down Payment           

If you already have a car and are looking to upgrade or change the model, consider using the trade-in value as a deposit when you’re financing.

• Most dealers are willing to consider a trade-in on a vehicle that’s not too old and is in good condition
• If your current car is paid off, you’ll be able to get the full trade-in value and use that as a down payment. Depending on how much your current vehicle is worth, this down payment amount could reduce the amount you must borrow to pay for your new vehicle substantially

Dealer Financing: Read The Fine Print           

It can be tempting to let your auto dealer arrange the financing for your vehicle. However, you’ll want to shop around first to make sure you’re getting the best deal possible.

Dealer financing often comes with higher than average APRs. Additionally, it often features lending terms and conditions that aren’t as favorable as those that you could secure by arranging your financing with another lender. An excellent alternative to consider is a bad credit car loan.

Bad Credit Car Loans 

Having a low FICO score shouldn’t stop you from applying for vehicle financing. In fact, there are many bad credit loans specifically designed for car buyers.

• These loans are made with low credit score customers in mind. That means your creditworthiness won’t be held against you during the application process. To increase your chances of being approved, make sure that you’ve sufficient income and don’t have too many existing debts weighing on your monthly budget 
• With quick approval times and the online process offered by most bad credit lenders, you could be done with your application in a matter of minutes. You’ll likely receive the results of your application within the same day. Some lenders even transfer funds to successful applicants’ bank accounts within 24 hours

The Bottom Line    

Buying a vehicle is a necessity for most families. You shouldn’t let bad credit stop you from owning one. 

Knowing your FICO score, shopping around for bad credit loans with reasonable APRs, and seeking out a dealer that doesn’t require large down payments can help you secure the vehicle of your choice. Moreover, following these steps will give you a better chance of finding a loan with affordable monthly payments.