What if I’ve got a high-rate auto loan that I can’t afford?

It can often help your application if you offer to make even a small down payment, say 10%. Increasing your down payment to 20% is even more convincing, since few people make a down payment that large on a car purchase anymore.

The trade-in on your current vehicle can also represent a down payment. So can a cash rebate from the dealer.

According to a recent report on Cars, the average rebate on easy payday loans in Silver City a new car as of was $3,563. If you’re purchasing a new car with a $30,000 purchase price, a rebate of that size would represent nearly 12% of the purchase price. A trade-in or any cash that you want to put down will make the overall down payment even larger.

Unfortunately, cash incentive rebates are not available on used cars. However, you can still use either a trade-in or good old-fashioned cash for a down payment.

When a co-signer can help

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If either your credit or your income are insufficient to qualify you for an auto loan, you can always offer to bring in a qualified co-signer. Naturally, your co-signer will have to have strong credit and a generous income.

Though auto lenders don’t generally require co-signers, they can help to strengthen a weak application. This is particularly important if you have little or no credit history. You may need to rely entirely on the credit of your co-signer in order to qualify for the loan.

Buying a car with less-than-perfect credit can be expensive. You’ll pay a higher interest rate, which means your monthly payment will be higher and you could end up paying thousands in interest over the life of the loan.

If you find that you can’t qualify for an auto loan rate under 9.99%, we strongly recommend you reconsider your car-buying strategy. You can use our car affordability calculator to see how much car you should really be buying, or our auto loan calculator to see how different scenarios will affect your monthly payment.

In the event you’re already stuck in a high-rate loan, you do have some options. Of course, you can sell the car and pay off the loan. While that might be the smartest financial move, it’s hardly realistic if you still need the car for transportation. The good news is that you can refinance your auto loan. If, for example, your didn’t know better and accepted a bad loan deal, or, your credit score has improved since you took out the loan, you may be able to get a lower auto loan rate (and payment) when you refinance.

Where should you shop for an auto loan?

Even with all of the information that is available in regard to car loans, it’s important to understand that these are only averages. The auto loan market is much more decentralized than other loan types, particularly mortgages and student loans. As there are thousands of banks, credit unions, and finance companies making auto loans, the guidelines are specific to each lender. For example, my own credit union will do 100% financing with a minimum credit score of 650. Your bank might require a higher credit score.

Of course, car dealerships want you to finance through them. And in some cases, you should. Dealerships have relationships with multiple large auto lenders and are able to instantly shop your credit application among competing banks. For buyers with excellent credit, this may result in getting a better deal. For buyers with less-than-perfect credit, a dealership may be able to offer an approval, but at a very high interest rate.