Are you in serious need of a car, but have bad credit and no money down?
We know that your credit history is a huge factor when it comes to getting approved for a car loan. Asides from it being a potential hindrance to getting the car of your dreams, it will also affect the interest cost you will pay to finance your purchase.
The fact is that if you have bad credit, it will be more difficult for you to get approved for a car loan. That does not have to be your story!
Is it possible to get a car loan with bad credit?
Long gone are the days when you deprive yourself of driving a car because you have bad credit or no money at all. There are new opportunities that you can take advantage of.
Before we walk you through how you can easily buy a car with bad credit and no money down, we will like to show you some quick facts about buying a car with bad credit and no money down:
Quick facts about buying a car with bad credit and no money down
- Your credit score regularly decides whether or not you get approved for a loan.
- Lenders use credit scores to estimate the likelihood you’ll pay back your loan.
- having a history of high debt, bankruptcy or repossession gives lenders a sign that you are at risk of defaulting in your repayment.
No matter how unfavourable the facts are, having no money down or bad credit should not stand between you and your dream ride.
I have good news for you!
You can own a car without having to pay high interest rates for years because your credit is bad. This article will guide you on all you need to know about buying a car with bad credit and no money down.
Reasons why you struggle to get approved with a bad credit
Have you ever wondered why it has been challenging for you to get approved for a car loan because of your bad credit?
People don’t get denied a car loan approval for the fun of it. There are certain reasons why people get denied a car loan approval. We will look at a few reasons why you may be denied approval for a car loan:
a. Your credit score
Credit score refers to the number of points that commonly ranges from 300 to 850 that shows a customer’s creditworthiness.
Credit scores are usually calculated in points based on your region and country. For example, the credit points in Canada range from 300 points to 900 points.
According to statistics, a good credit score (in Canada) of 660 will likely qualify you for a loan. However, any score of less than 660 might make it challenging to get approved for new credit.
Having a great credit score means you can simply walk into a bank or dealership and get approved for an auto loan without any stress. However, for a Canadian with a low or no credit history, it gets a bit challenging.
b. Your income
The money that you make on a regular basis determines whether or not you will be approved for a car loan.
If you have bad credit, you can still get a car loan to get the car of your dreams if you have a regular income of $1800 on a monthly basis. Most dealers will require you to have a minimum income of $1,800 every month before taxes or other deductions.
Below is a breakdown of the income requirement for a car/auto loan
You need to have at least $10.50 per hour for 40 hours per week or equivalent
You should make at least $420 per week (before any deductions)
You must earn at least $845 every two weeks (before deductions)
Twice per month
You should earn at least $900 twice per month (before deductions)
You need to earn at least $1800 per month (before deductions)
When it comes to buying a car with bad credit and no money down, then you might need to consider getting stable employment. Buying a car with bad credit and no money down is a battle half won when you have stable employment.
How to get a car loan with bad credit
Having bad credit does not put a halt to your dreams of riding a cool car. You just need to know a few things that will help you secure approval for a car loan with bad credit.
10 tips to buying a car with bad credit
Define your budget
If you are looking at how you can buy a car with bad credit, then you need to define your budget. To know the car that fits your budget, you have to take a look at how much you can afford every month.
It is important that you know the amount that will be deducted from your account on a monthly basis. Knowing what to expect helps you plan better.
You should also decide whether you want to trade in an old car to reduce your monthly repayment deductions. make sure you figure out these factors before taking a car loan.
Consider buying used vehicles
One of the ways that you can get approved for a car loan is to consider venturing into the used car market.
The used car market is quite popular, you can find a car that suits your need and style. Whether you want an SUV or a truck.
Buying a used car is not as scary as people make it sound. You can get almost all the benefits that you need in a new car when you decide to buy a used car.
Decide on a down payment
It is important you decide whether or not you want to make a down payment, and how much you want to make for the down payment.
The down payment is a percentage of the purchase price paid upfront. Deciding on the down payment that you want to make will increase your chances of getting approval for a car loan.
Check out different lenders
Don’t conclude that your credit is too bad to get you a car loan. You can check out different lenders to know their rates.
You never know what a particular lender considers as bad credit. Their definition of bad credit may be different from yours.
See the different lenders options:
Online lenders: Some online lenders and lending platforms specialize in providing car loans for people with bad credit.
Some allow you to apply for prequalification directly on their websites. If you’re prequalified, you’ll be able to see the estimated loan rate and terms you may qualify for.
Car dealerships: Many car dealers have connections with a number of banks and finance companies, which makes it easier for them to help you find a lender that will approve a loan for you.
Check your credit report
You are allowed to perform a free credit report check once every year. Know what your score is, what activity has affected your score and if there is any suspicious activity on your report. Bring your credit report with you when you meet with potential lenders so that you come to an agreement when discussing the loan.
Check With Nonprofit Agencies
Before you settle for an expensive car loan, it is good you check if your state has any non-profit agency that provides loans or vehicles to low-income consumers.
This kind of opportunity is not in every state, but you don’t have to worry. You can get a quick loan with an interest rate that will suit your income here in Canada to buy your dream car.
Read All the documents
Loan documents can be long and not so easy to understand. You have to bear the boredom of reading the pages of a loan document because your car and money is on the line.
It is important to take time to understand the terms of the loan. Make sure the document matches everything the dealer verbally agreed to. Ensure you are comfortable with the terms before signing the loan documents and driving the car off the lot.
How to buy a car with no money down?
Many first-time or new car buyers are usually curious about how they can buy a car with no money down.
Yes, it is possible for you to buy a car with no money down if you decide to take a car loan with a no money down policy. Even if you don’t necessarily need a down payment to get a car loan, you may have to pay more in the long run.
Putting some small money down can help you reduce the amount that you are going to pay and your interest rate.
Benefits and disadvantages of no money down car loans
If you are considering taking a $0 down car loan to buy the car of your dreams, then you need to know the benefits and disadvantages of taking a no money down car loan.
Benefits of no money down car loans
- Helps you to save cash up front. The number one benefit of going with a no money down car loan is getting access to a loan without having any money. A no money down car loan can help you get a car if you don’t have the cash to make lump-sum payment upfront.
- Builds up your credit. If you have a good credit score and you don’t have the money for a down payment, a no money down car loan can help you solve both problems.
- Trade-ins accepted. Many lenders are happy to work with trade-ins, even if you still owe money on your vehicle. You can also use your trade-in as a down payment to help lower your monthly payments on your new loan.
- Getting a loan with no money down can allow you to lock in a term lasting up to seven years to help you reduce your monthly repayments.
Disadvantages of no money down car loans
- You will have to pay higher monthly payments: When you don’t make a down payment for your car loan, you will end up paying back a high-interest rate. That is why you should factor in your lender’s interest rate before taking a loan with no money down.
- Possibility for additional fees: You may encounter additional fees and more costs as you continue with the loans process with your lender, depending on which dealer you decide to work with. Check for origination fees, title and registration fees, prepayment penalties and late payment fees.
While the eligibility requirements for no money down car loans differ by lender, you generally need to meet these criteria:
- Be up to 19 years
- Be a citizen of Canada or have a permanent resident.
- Have a good credit history.
- Have a steady source of income ($1,500-$1,800 is the minimum requirement)
You would have to provide the following during your application process:
- Your name, personal details, and contact information
- Valid government-issued identification documents such as a driver’s license or a passport
- Your income details
- Information about your outstanding loans.
Based on the information that you provide, the lender will consider the following:
- How much you can afford to borrow and payback based on your income
- How trustworthy you are with a loan based on your credit history
- What kind of car you’re looking to buy
It is good you know that many lenders will take your credit history seriously before giving you approval for a no money down loan.
Lenders want to ensure you can religiously make your repayments at the right time. They want to be sure you don’t have a history of the bad debt or going delinquent with your accounts.
Always ensure your credit history is clean and you have a high credit score before applying for a no money down car loan.
It does not matter if you don’t have cash at hand. You can still buy the car of your dreams if you have bad credit or no money down.
You can start a stress-free loan application process here.