Down Payment Options for Bad Credit

If you’re financing a vehicle with a bad credit car loan, you usually have to make a down payment. However, putting money down doesn’t always mean handing a dealer thousands of dollars in cash. Even as a bad credit borrower, you have options when making your down payment.

Why Down Payments Are Required

Down Payment Options for Bad CreditDown payments are generally needed with bad credit financing, and serve a dual purpose. For the lender, putting money down shows them you’re willing to invest in your loan; willingness is one key factor lenders use in determining loan approval.

For the borrower, a down payment lowers the amount of the auto loan; a smaller loan has numerous benefits, including saving on interest charges over time, and helping to reduce negative equity.

How Much Is a Down Payment?

Down payment requirement amounts vary depending on your credit situation, the car you’re financing, and the lender you’re working with, among other things.

As a bad credit borrower, the minimum amount you’re typically required to make is $1,000 or 10% of the vehicle’s selling price. If these are your options, you typically have to pay the lower of the two amounts.

Options for Making a Down Payment

In many cases, it’s difficult for someone to come up with $1,000 in cash to hand over to a lender. This is especially true if you’re in a financial bind, or have credit issues to begin with, and lenders know it. This is why there are options for putting money down that allow you to use different forms of currency.

The four main options you have for making a down payment are:

  1. Cash – If you can come up with the required amount of money down in cash, it’s certainly an option you can use.
  2. Trade-in equity – If there’s equity in a car you plan to trade in, you can use it as all or part of a down payment on another vehicle.
  3. Credit card (maybe) – In some cases, a lender may allow a certain portion of a down payment to be put on a credit card. This is a rare option, and it doesn’t always make sense, especially as a bad credit borrower, as it likely costs more in the long run due to credit card interest charges.
  4. Combination – For the most part, lenders allow borrowers to combine two or more of these methods when they need to put money down. So, depending on your situation, there may be multiple combinations of cash, credit, and trade-in equity that could be used to satisfy a down payment requirement.

It’s important that you shouldn’t (and typically can’t) use a personal loan as a down payment. Not only are you not investing your own money, but you’re going to have two loans to repay. Often, a fresh loan on your credit reports can lower your chances for an auto loan approval when you have bad credit.

Ready to Get Started on Your Next Car Loan?

Even though there’s no getting out of making a down payment as a bad credit borrower, now you know your options, and you can prepare for your next car loan. When that time comes, think of us first. At The Car Connection, we can help you find the vehicle you’re looking for, and point you in the right direction to go out and get it.

We work with a nationwide network of special finance dealerships that have lenders who are ready to work with credit-challenged consumers. Stop driving from dealer to dealer getting turned down for financing due to your credit, and get started right here instead.

When you fill out our quick and easy auto loan request form, we’ll begin the process of connecting you to a local dealership, and you can stay stress free by saving time and money. There’s never any obligation, so what are you waiting for?


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