No money down means that you are not required to make an initial down payment in cash on the price of the car that you are buying. These car loans are usually only available to customers with good credit scores, but you might still be able to get one even with bad credit if you are willing to do your research and shoulder the costs. The easiest search method available to you is to use an online car loan broker that can give you almost instantaneous decisions on your car loan application from lenders across the country.
Costs and Consequences
Before taking out a bad credit car loan with no down payment, you should consider these costs and consequences:
- Bad credit car loans with no money down tend to charge higher interest rates and impose harsher conditions than even other bad credit loans. If your finances are already in a precarious state, taking on such a loan can make a bad situation worse.
- Lenders are hesitant to lend in the current economy. Anyone who refuses to make a down payment in cash is considered unwilling to commit to the car loan and thus more likely to default on the loan.
- If you ever change your mind about your newly purchased car, you’re stuck paying off your bad credit car loan even if you sell the car to repay your debt. Your car’s value drops quickly once it is sold and reselling it won’t recoup anything close to its sales price.
Alternatives to No Money Down
You might still be able to get approved with no money down if you are willing to substitute something in place of the down payment. Here are a couple of common alternatives to down payments made in cash:
- Car dealerships that offer in-house financing sometimes accept vehicle trade-ins in exchange for waiving the down payments. You may be able to convince a dealership to take your car as a trade-in even if it is old and broken down. However, if you do this successfully, the dealership will likely raise the price on your new car and thus the principal of your car loan to compensate.
- Some bad credit lenders also take new car rebates in place of down payments. You cannot actually get the rebate value listed as a down payment, but some car dealerships are willing to deduct the rebate value from the price of your new car. Of course, this alternative only works if the rebate is to be paid in cash.
In short, customers with bad credit scores are likely better off if they avoided bad credit loans with no money down. High costs and harsh consequences make these loans undesirable unless their customers are desperate and have no better options. If you must get one of these loans, your best hope of finding one with bearable terms and conditions lies with an online broker that can match your financial information against the lending criteria of bad credit auto lenders across the country.