When it comes to buying finance here, pay here (BHPH), you will need a down payment to get approved for a car loan.
Down payments and bad credit
If you are struggling with a tarnished credit rating and need a car, a BHPH dealership could be your solution. However, you will need to have a large down payment ready.
You can generally expect a down payment requirement of around 20% or more of the vehicle’s selling price. BHPH dealers only sell used cars, so the selling price of the vehicle you choose, and therefore your down payment requirement, can vary wildly.
These dealerships want to see that you are invested in the car loan because they normally don’t do a credit check to consider you financing.
Bigger down payments mean savings in your pocket
Even if a BHPH dealer may require a large deposit, you can always pay more than the minimum amount required. In fact, saving as much as you can is a good idea for borrowers with bad credit. Plus, a larger down payment means a lower monthly payment.
It’s no secret that bad credit borrowers may not get the best interest rates available – lenders usually offer the best rates for the best credit scores. While you may be facing a higher interest rate than you would like, saving money can help you during the life of the loan.
Putting money aside means you finance less, which means you pay less interest. Auto loans are almost always simple interest loans, where the interest charges are based on what you owe, not how much you originally financed. Therefore, the larger your down payment, the less you pay overall due to lower interest charges.
Should I finance through a BHPH dealer?
If you’ve recently suffered major damage to your credit reports, such as a repossession, a BHPH dealership may be your best way to finance a car loan. Most lenders will not approve a borrower whose repo is less than a year old.
BHPH auto loans usually have higher interest rates because dealerships don’t do credit checks. This is one of the compromises of internal financing. Internal financing simply means that your dealership is also your lender and not dependent on a third party lender to approve and fund the loan.
However, if you were looking to improve your credit score with a car loan, this might not happen with a BHPH dealership. Some don’t report your car loan to the credit bureaus, so your loan and on-time payments won’t show up on your credit reports. Most, however, report missed and late payments to bureaus, so your credit score can be further damaged even if the loan is not initially reported.
Other auto loan options for bad credit borrowers
If you are looking to rebuild your credit and get into a reliable vehicle, there is another type of bad credit lender you can look into: a subprime lender. These lenders work through the special financial department of a dealership and assess more than your score and credit reports to consider you financing.
Subprime auto loans are reported to the credit bureaus, so your loan and timely payments can improve your credit score over time. A better credit rating means better interest rates and more credit opportunities, as well as the ability to qualify for better deals in the future.
Subprime lenders look at your credit reports, but they also look at your monthly income, as well as your work and life stability. However, they also require a deposit. Typically, you can expect a subprime lender to charge at least $ 1,000 or 10% of the car’s selling price (sometimes the lesser of the two).
Finding a Bad Credit Dealer
Locating one of these lenders means finding a bad credit dealer, which is not always easy. But we want to help with that! Here has Auto Express Credit, we have created a network of resellers specializing in finance and BHPH which stretches across the country.
Using our auto loan application formWe connect borrowers with all types of credit situations to the dealers near them with bad credit loan options. Our form is completely free, secure and there is no obligation to purchase. Once completed, we’ll immediately get to work for you!