It's not an ideal financial situation, but you might yourself needing an auto loan with no down payment. Many people will tell you that it will be impossible for you secure an auto loan - but this is not always the case. There are ways you can secure a no money down auto loan and even repair your credit score at the same time. It's a win-win situation. So how do you go about it? Here are 5 steps to getting no money down auto loans.
1. Find out your credit score
This is an obvious starting point, but it's an essential one. If you've got no capital for a down payment, then having a good credit score is a good way to keep the repayments down and the loan affordable. It may be worthwhile trying to repair your credit score before you apply, just to make it a more manageable loan. However, if you don't have the time or means to do this, you can still apply and see what the interest and repayments would be like. If they're going to be too much, you can always not proceed with the application and spend some time rebuilding your credit before reapplying for your no money down loan.
2. Be able to demonstrate consistent employment
If you have no down payment, you need to able to show you can afford the (probably) large repayments. The best way to do this is to provide evidence of stable and consistent income from employment. Gather as many documents as you can to demonstrate this: paychecks, bank statements and tax documents are good examples and will show creditors that can afford the repayments and are taking the process seriously. Getting this sorted out beforehand will be a great help to your application, and can speed up the process.
3. Pay off any outstanding auto loans
If you have any outstanding auto loans, either no money down or with a down payment, get them paid off or near to completion. This will only enhance your reputation with creditors and dealers, and will show that you are capable of completing your terms on an auto loan agreement.
4. Be wary of split payment deals
Sometimes dealers offering no money down auto loans for people with bad credit are actually offering split payment deals. This means your loan and financing is taken out with one dealer, but the repayments and management of the loan actually go elsewhere. This is not a good situation and is definitely one to avoid. These third-party loan dealers often have hard-line repossession processes and can make your financial situation untenable.
5. Arrange a co-signer
Depending on your situation, this step may not be necessary. But if you're not sure whether not you will need one, it's best to plan for it just in case. You don't want to get all the way through an application and find you need a co-signer for your no money down auto loan. A co-signer is essentially someone to add weight to your application: for example, it may be someone with a better credit score or income. You will remain the title holder, but they will also be responsible for the repayments.