Understanding Zero-Down Auto Loans

When the Great Recession hit a lot of Americans and turned them into subprime consumers, auto loans and even mortgages that require no down payment have become popular. In the auto industry, zero-down auto loans give hope to people with bad credit who are having a difficult time getting approved for financing. They couldn’t purchase a car until they are able to borrow money.

But there are also those with excellent credit that consider getting a no money down auto loan. In any case, you should first understand what these loans are and how they can affect you financially before taking an offer.

Where to Find
Zero-down auto loans are almost everywhere. You can find a lot of them online and in local car dealerships. Some banks and credit unions also offer these loans often as incentive to qualified borrowers.

Be wary of bogus lenders who just want to steal your money. Rip-off artists usually target people with problematic credit. Do make sure that the lender you will be dealing with is legitimate.

Zero down auto loans require an excellent credit. A less-than-perfect credit would certainly not qualify. This is how it is with big lenders like banks and some credit unions.

But for some lenders, their zero-down programs are offered to people with bad credit. They may still need to evaluate the credit but they have to see and prove that a borrower has sufficient income before they give him or her a loan. Thus, you need to present your most recent pay stubs as proofs of verifiable income. Other requirements are standard like proof of residence, references and driver’s license.

Vehicle to Purchase
As much as possible, choose an affordable car. You can get bankrupt trying to pay up a very expensive car with a zero-down auto loan that costs a lot (explained below). Other would suggest that you buy a used car because it is generally cheaper than a brand new car. But regardless of the vehicle type, remember that you shouldn’t buy beyond what you’ve calculated your income can afford.

What to Expect
Zero-down auto loans cost higher than regular auto loans. Skipping the down payment may look like you are saving money but you are going to pay a lot of interest in return.

Let’s say you got approved for $25,000 loan amount. Paying a down payment of 20%, the ideal amount, will make your monthly payment $451.58. Over 48 months, the total amount you would pay is $21,675.89. The 4% APR will translate into $1,675.89 total interest paid. Without the down payment, your monthly payment will become $564.48. The total amount you will pay at the end of the term will be $27,094.87. You will also pay $2,094.87 total interest, over $400 more than paying 20% down payment.

Consider the numbers carefully before making a decision. Do some of the math yourself. Auto loan calculators are available online for free. They are very easy to use and really helpful in determining the best loan offer for you.


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Auto Approval Center is a lead provider to lenders around the US. Average APR rates range from 3.2% to 24% depending on credit. Some dealers/lenders may have implications for non-payment or late payments, please see your specific terms for more information. By applying with Auto Approval Center, you agree to have your credit pulled for lending purposes and this could have an impact to your credit score. Thank You for your business!

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