The down payment is an essential element of your auto loan that determines the loan terms and interest rates. You may have come across dealership ads that suggest you can get an auto loan with little or no down payment. However, is it possible to get a car loan with a minimum down payment of $500? Understanding the importance of certain items can help you answer whether or not $500 can work as a down payment.
$500 or more: How much down payment is enough for your new car?
The following factors will give you a fair idea about the down payment and whether or not $500 is enough to put money down.
1) Credit score
Lenders and dealers play an important role in determining the amount of the down payment. Many dealerships want to help you build a good credit score. Bad credit auto loans are a great way to build good credit, especially when your credit score isn’t perfect. Therefore, you will find dealerships that will provide you with bad credit car loans with a down payment of $500. However, if you want to get a car loan from a dealership, you may have to go for captive financing and you may lose other attractive offers in the market. Therefore, it is essential that you review the car loan agreement in detail to know if it suits your needs or not.
2) Bad Credit Car Buyers
A low down payment amount is risky for car buyers with bad credit. You should aim for a high down payment if your FICO score is below 670. Lenders view a down payment as a means of testing your creditworthiness. In addition, plus the initial payment, less the negative capital that it carries. As the loan amount is reduced with a large down payment, your monthly payments will be affordable. This will ensure regular payments and therefore improve your credit score.
3) The right amount
Putting in $500 of seed money may get you approved, but it won’t get you very far. You will face a large amount of loan. The appropriate down payment amount will differ from lender to lender. However, you must at least pay $1000 or 20% of the value of the car. A decent credit history can make a $500 down payment work. However, if you have credit problems, it is best to try to get more. If there’s no way you can make a big down payment, you can opt for no down payment auto loans. The auto finance program will allow you to seek loan approval without a down payment. Before you submit your loan application, make sure your lender doesn’t offer down payment financing options.
Down payment on your next car: do the best you can
A large down payment will reduce the total amount you borrow from the lender. This will help you make lower monthly payments and you can enjoy a reduced loan term. Also, interest rates will drop due to your creditworthiness. Save money for a couple of months so you can easily deposit money. There are many benefits to making a down payment, but if you can’t manage it, don’t worry. There is no point in making a down payment putting your financial situation at risk. Don’t look for a car loan with no down payment and buy your new car.