If you have bad credit, you may have been told that you need some money down to get your auto loan. The need for money down may be for several reasons.
First, the lenders may approve you for less money than if you have perfect credit. If you have perfect credit and can barrow $15,000 on a $15,000 car you may only be able to barrow $14,000 on a $15,000 car. Assuming you need to add tax title and license, you may need to put down $2,000.
Second, many times, lenders will want to have you, as the buyer personally invested in your car right of the bat. They often call this participation. Even if they will barrow you most of the cost of the vehicle they may want some money down to get you personally invested so that they feel more secure in getting all of the payments. People that have put some money down are more likely to continue making payment because they have already paid some of the car off.
Don’t worry, all of the money you use as a down payment will go toward paying down your loan. Even for people with perfect credit, it is a good idea to put money down; money down will lower your monthly payment, reduce the total of your loan, and lower the total amount of interest you pay. Sometimes putting more money down will also give you better finance terms or open up a new program that you otherwise may not have qualified for.
