How to Qualify for Car Loans with Bad Credit No Money Down

Written By : on October 15, 2018

Have you already spent a huge amount of money on car repairs and maintenance or you simply just need a car?

You’ve shopped around only to be declined by multiple dealerships because you have bad credit or no credit and were not approved?

This can be frustrating, especially when you need a car to get to and from work or perform daily errands that are required.

If you find yourself in a situation where you have bad credit and at the same time no cash on hand to buy a car, then read on. There are options for consumers like you.

There are car dealerships out there that offer Buy Here, Pay Here loans with the option of putting No Money Down.

Here are some things you should know about how to protect yourself from falling prey to overpriced car payments and interest rates.

What Is a No Money Down Car Loan?

Zero Down (No Money Down) car loans are when a buyer applies for a loan without putting an initial down payment.

This is usually offered to clients who have an above 700 credit score on the FICO score scale.

This means that a person has a good credit rating, and they are most likely to be approved for any kind of loan from financial institutions.

A down payment is your first payment in cash, trade-in, or both. It is in the best interest of a car buyer to put a high down payment.

This offers a lot of benefits like having lower monthly payments because the down payment can help reduce the total amount as well as the overall interest rate of the loan itself.

If you put a down payment of say, 20% for a car loan, you are implying to lenders that you are serious about paying for the remaining balance of the car.

However, if you don’t have any cash on hand for a down payment AND you have bad credit, you cannot qualify for a Zero Down Loan unless you go to a Buy Here, Pay Here dealership that offers this type of loan.

Applying for a Bad Credit No Money Down Loan

Before applying for a Bad Credit No Money Down Loan, you will need to provide certain documentation and know what to look for when reviewing the loan documents.

Present Your Proof of Income

Having a document or proof to show that you have a stable source of income like a job, business or property is necessary for you to be approved of car loans with bad credit.

To be more specific, bring your past and latest pay stubs to show that you can pay off both your monthly installment and utility bills with your salary.

You should also present character references to prove that you are not a credit risk, and you are worthy of approval. They will most likely ask you for references to verify your employment.

Understand Financial Agreements

For you to fully know what you are getting into, you should carefully read the financial agreement and contract as well as the fine print before you sign anything.

Without knowledge of the paper you are signing, you might bind yourself of finances that are beyond your means. Sometimes there can be hidden fees and penalties that you should be aware of.

Double check the principal interest, the car loan amount, the value of the car, registration fees, and other important information.

Look at the personal information too if the data provided in the contract is true. Identify if the loan term corresponds with what you agreed upon.

Do not disregard the terms and conditions stated in the car loan contract.

In addition, you find that the value of repayment is higher than the car’s worth, do not accept and sign the transaction.

You should understand what you are paying and see to it that you have already look into possible options before joining into an agreement. Avoid an overpriced car which is not in your agreement and which does not make any sense to you.

There are a network of lenders and car dealers who are experts in providing car loans with no down payment for people with poor credit profiles.

Perhaps you can ask their opinion about what financing option to take. Read reviews online and do your research on the dealerships and lenders you plan on working with.

Consider Trade-Ins

If you have an old car, you might want to trade it in. The value of the car you have traded in can be turned into your down payment.

It is important, however, that your old or existing car has a paid equity so as not to create more confusion.

If you have not paid off your current car, you will want to know how much is left on the existing loan vs. how much equity you have in the car to apply towards your down payment.

Open a Checking Account

To boost your chances of getting approved for bad credit no money car loans, it is recommended that you open a checking account or even a personal account in a local bank, save money, maintain its balance and have a good record so that you can create a good impression to the lenders.

They may ask for bank statements and some may even require that payments are automatically pulled from said bank account.

Acquire Small Lines of Credit

The purpose of this strategy is to show financial firms that you have previous records of paying debts.

If possible, borrow money at certain periods and make sure that you you pay these debts off on time. This will help you grow your credit giving you better lending options in the future.

Be sure that the Buy Here Pay Here lender reports to the credit bureaus, not all of them do.

Have a Permanent Residence

Banks, lenders or other finance company always require anyone who applies for a loan to prove their residency, and usually, they want you to show an address where you lived for at least six months.

To prove that you have a permanent address, provide them with bills or documents showing your printed name and address or a sketch of where you lived.

Prepare to Pay Extra Fees

Expect to pay some extra charges or processing fees for your Buy Here Pay Here No Down Payment car loan. If you want to know the difference, utilize an auto loan calculator that you can find online.

Compare the overall payment you have to make if you put up a down payment or none at all. You can see that not putting up a down payment increases the entire cost of your loan.

To make up for the non-payment of down, the car lender’s way is to raise the interest rates or add processing fees. When this is added up every month, you can see that you are paying even more for the loan.

Do Your Research

It is best to do your due diligence in research prior to choosing a Buy Here Pay Here No Down Payment dealership to get a loan through. This will ensure that you are actually getting what you were told.

Because this situation involves credit, you should be extra cautious when making a financial decision. To aid you in your research, you can also check online to find reviews about the dealership, tips and advice about acquiring a loan with no down payment for bad credit. Read frequently asked questions or issues about loan with bad credit or utilize an auto loan calculator to fully compute all the fees and charges you have to make when shopping for a new car. Knowing the ins and outs of car loans is a smart move to stay well informed and possibly lead you to gain a deal that is perfect for your needs.

How to Qualify for Car Loans with Bad Credit No Money DownBuy Here Pay Here as Your Last Choice

There are people who lost hope in finding a dealer that accepts their current financial situation, so they go for the buy here pay here arrangement. This kind of dealership makes a lot of money because they tend to negotiate on loans that are overly expensive, have higher interest rates and no flexible terms. It helps reduce their risk for lending to consumers who have defaulted on loans previously and have bad credit. As much as possible, sign up for this loan only if you have no other choice.

Applying for car loans with bad credit no money down can be a better solution to some people who are in need of a vehicle as long as they are equipped with know-how between putting up a low down payment car loan and no money down auto financing. Make sure that the loan amount is realistic to your budget so that you can pay it back on time.

Michael O'hare

Author: Michael O'hare

Michael is a Experience Auto Financing Specialist that Prides himself on Providing a Full Scope of Options for all His Clients and Customers. Not only does he provide guidance and assistance for those looking into getting a Car Loan, but helps those who have challenging credit scores to get approved for the lowest rates possible!