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The Down Payment Requirements On a Bad Credit Auto Loan

Some time back, every lender used to approve only those loans which provided down payment or some other sort of collateral on the loan. However, the increase in lending competition and the introduction of bad credit auto loans meant that being stingy regarding the requirements and going the strict way can be very hard for the lending institution as applicants have a lot of other options. Due to this, many lenders are now advertising that they are ready to offer a bad credit auto loan without any down payment. This is seen as a big benefit by loan applicants as they believe that they are going to save a lot of money on the financing.

However, it is seen that down payment shouldn’t be seen as a requirement and should be seen instead as a help to the applicant. There are several reasons why it should be required to give down payment on bad credit auto loan. It is quite popular that the interest rate charged on bad credit auto loan provisions is quite high which means that the monthly installments are going to be also high. However, if no down payment is provided, then some lenders charge a few percent higher and many applicants feel that it is alright as they are saving good money.

But, they forget the fact that this few percent on the finance amount every month count as a lot of money when looked over the time of the loan term which means that a lot of money is being actually wasted by the applicant. Moreover, the high interest and no reduction in the loan amount make the monthly installments astronomical and quite difficult to pay. This means that the borrower and his/her family have to cut back on their needs and desires in order to keep their car and their family member’s credit score intact.

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