How to Get a Car in Arlington With a Low Down Payment
- April 13, 2021
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For those who need a car but are somewhat low on disposable funds, this situation can be a bit of a challenge. A typical car purchase and car loan situation will involve a down payment that covers some portion of the final price, and while it’s possible to obtain a car loan with a low down payment or even without a down payment at all, doing so will require trade-offs in other areas that you have to evaluate.
At Adonis Auto Group, we’re proud to offer a wide range of used cars in Arlington and other parts of Texas, including low down payment cars – and we also offer assistance with financing, low-credit approvals and many related elements. If you’re in a position like the one we described above, where you’re low on funds but need a vehicle, do not fret: We’ve assisted numerous clients just like you and helped them find a car loan and vehicle to meet their budget and needs. Here’s a primer on how to proceed with obtaining a used car even if you have low or no funds for a down payment.
Importance of Credit Score
We talked about trade-offs briefly above, and the primary one is in the realm of credit score. For those who have a reasonable score, not only are you generally eligible for lower interest rates, you also are likely to have much more luck with securing a loan despite low or no funds available for the down payment.
When you really break it down, the down payment and credit score are both forms of risk management for the lender. By securing a lump sump from the borrower at the outset of the loan, the lender confirms there’s a financial interest from the buyer and also is able to see their ability to generate funds; on the flip side, a good credit score shows a lender that you have a history of creditworthiness and repaying your debts on time, which mitigates their risk when loaning to.
Put the pieces together, and the simplest method for obtaining a great used car with a low or nonexistent down payment is this: Raise your credit score as high as you can. If you can get your score up to 680 or especially over 700, you’ll have a much higher chance of convincing a lender to work with you despite limited down payment funds. If your score is between 580 and 669, meanwhile, you may be approved for no or low down payment – but in exchange, the lender will hit you with a higher interest rate for the entire loan. Meanwhile, if your score is below 580, you might be rejected from receiving a car loan entirely.
First and foremost here, check your credit report and confirm it’s accurate. If it’s not, dispute errors with the relevant credit bureaus. From here, take the steps to improve your score however you can before applying for a car loan, including paying bills on-time, keeping balances low, and not closing any older accounts just before applying.
Checking Out Options
Unlike mortgages, which are a bit more conformed, car loans can vary pretty widely. The rates and options you find from one lender might vary significantly from another. You should spend time shopping around for multiple options to get an idea of the lay of the land, plus to evaluate the best choices available. Be prepared as you do this research: Know the general market rates and some of the basic terms you’ll need, as this will allow you to hold your own in conversations with lenders who are already experts in the field.
For those who have evaluated their options and looked to up their credit score but are still having issues, you might consider speaking to a family member or a close friend who would cosign a purchase with you. It’s vital that you pick someone you trust here, and vice versa: If something were to go wrong with repayment of the loan, your cosigner would be on the hook as well as you.
If you’re able to arrange such an agreement with someone close to you, this will often allow you enough purchasing power to avoid a down payment. However, do be aware that lenders may still require somewhat higher interest rates for these kinds of loans than for those you qualified for on your own – this is because they know that the car is likely for the person with the weaker credit score, and this will be factored in. However, this is still easily worth it for many buyers simply for the removal of the high down payment requirement.
Some Better Than None
We’ve gone over strategies that may be effective for both a low down payment and no down payment at all here, but there’s one theme that applies almost universally here: Some is better than none. Vehicles are known for how quickly they depreciate, and making no down payment whatsoever may lead to a situation where, if you aren’t careful, you’re upside-down and unable to get out from under the debt burden of the car. If the outstanding balance of your loan exceeds the resale value of the car, you might even have to come out of pocket for a significant sum.
In addition, numerous lenders are much more flexible with down payments today than in previous generations. You don’t necessarily have to have 20% of the purchase price to put down – there are many situations where you can come up with far less and still obtain a good loan. If it’s possible to delay your purchase by even a few months to raise some funds for even a small down payment, we recommend this.
For more on obtaining a car with a low or no down payment, or to learn about any of our auto dealer services, speak to the staff at Adonis Auto Group today.