A down payment is a set or negotiated amount of money paid in advance to a lender or financial institution. For example, you pay 5% to 15% of the entire value for the vehicle you want and the lender loans you the rest of the money at the interest rate you qualify for. While making a down payment is not always necessary, doing so can drastically decrease the amount of money you must borrow and the amount of interest you pay over time.
Talk to the team at PrimeLoans to determine how much down payment you should pay. You should always do your math and examine your personal budget before making a decision about how much to pay down on a vehicle. Some dealerships have a set amount that they expect for down payment. You can always try to negotiate this amount according to what you can realistically afford.
What You Should Know Before Making a Down Payment
Putting money down for a purchase is a great way to show lender that you are capable of coming up with a large quantity of money, therefore presenting a lower risk to that institution. However, paying out a large amount of money might affect your finances—even your ability to make monthly payments. As a consequence, your credit score could sink. This is why many people choose to pay more in interest rates than make a down payment. It all depends on where you stand financially.
What you pay as a down payment does not affect your credit score directly, so paying more won’t increase your rating. However, your down payment will serve as part of the quantity that you are liable for paying. By making your monthly payments on time, your credit score should rise.
At the same time, if you put some money down, but start making late payments (or no payments), your down payment won’t have helped you at all. This is why we always recommend knowing exactly where you stand financially. If you are short on cash, but still have just enough to make monthly payments on a car, look for deals that require no money down. Such deals usually show up around holidays. As a matter of fact, these offers have been advertised more often than ever now, given the country’s current economic situation. Auto dealerships have been competing more and more among themselves. Take advantage of this.
Contact our team to find out more about down payments and how they work. We are proud to serve clients nationwide.