Liberty Auto Loan: Know the facts before signing off on a bad credit auto loan with no money down!
If your credit is in bad shape and you’re in need of a car to replace the piece of junk that just died in your driveway, you might be considering going after one those auto financing deals you’ve seen on TV that advertises no money down auto loans – bad credit, no credit, no problem! But, have you asked yourself how these car loan companies can do this for someone who has bad credit? There are a number of ways that a lender can make these deals, most of which are legitimate discounts made especially for people with less-than-perfect credit – then, there are the other kind of deals. Getting bad credit auto loans with no money down, demands that you be on your toes before signing on the dotted line.
No one is going to offer a car, or a car loan, for free. Likewise, no one is going to make a deal on a car, or auto loan, that doesn’t generate enough profit to stay in business. No-money-down car deals are a prime example of how you can get yourself into trouble if you aren’t completely aware of what the conditions of such a loan are. Though it’s not a scam to advertise a no-money-down car sale, it can become a very expensive proposition since the cost of making no down payment has to be recovered somehow. If you have bad credit, auto loans that feature a no-money-down hook can be a good deal since it lightens the load of the initial cost of buying a car, which usually is in the thousands of dollars.
Bad credit auto loans with no money down allow the down payment to be rolled into the balance. This forces you to pay interest on that money since it is now part of the principal. This adds to the cost of the loan and can increase monthly payments if your loan’s term falls into the usual 36-month or 48-month auto loan. If you have the income to support higher monthly payments, then spreading your initial payment over the entire loan is a good idea. If those higher monthly payments don’t fit into your budget, then you have to make some other adjustments, which can stretch out the duration of the loan. Again, this increases the cost of the auto loan, which is not the best thing to do if you’re having financial problems.
Having bad credit, your interest rates on an auto loan will be higher. This is due to the increased risk your present to your lender as bad credit indicates that you haven’t had a great record of repaying your debts. Since your paying more for an auto loan right out of the gate, why would you want to add to your costs by attempting to negotiate a no-money-down auto loan? The illusion of savings disappears very fast as you watch your balance grow with the interest you’re paying.
The total costs of the loan are easily demonstrated:
Say you’re going to get an auto loan for $20,000 at an interest rate of 7.25% (remember, you have bad credit). Your local sales tax rate is 6.25% and you want a 48-month term (a common loan term). By making a 20% down payment of $4000, your total payments would add up to $19,923.67 with interest paid being $2,673.67. Your monthly payments would be $415.08.
With the same loan conditions on an auto loan with no money down, your total payments would add up to $24,543.65 with $3,293.65 of that paid in interest and monthly payments of $511.33. The cost of such a loan is glaring by not making that initial upfront payment.
The best way to prevent a chain reaction of car loan related debt is to buy a car when you can afford it. If the need for a replacement vehicle leaves with no choice but to purchase a car, then do so with a little care. While it takes a long time to fix bad credit, a car loan is not impossible to find and getting that loan for no money down is very possible. Just make sure you have the income to handle the costs over the term of the loan and stay within a four-year time frame to pay off that loan to stay ahead of your car’s depreciation. No money down doesn’t mean no money ever. But, it can put a car within reach if you remember that you will pay that cost in the end.
If finding the right lender or car dealership seems like an overwhelming task, and you want to avoid the auto loan gimmicks, there is help in making the job go a little easier. LibertyAutoLoan.com can take the confusion out of it by giving you access to a nationwide network of lenders and car dealerships. When shopping is made easier, the consumer is more likely to spend money wisely. That’s the goal of LibertyAutoLoan.com – easy choices, wise decisions.