Tips for Getting Car Finance with No Deposit
Amara walker February 12, 2022

Buying a car can be expensive, especially if you are looking to buy a used car. Paying for the cost of the car outright is challenging for a lot of people as the unexpected outbreak of the pandemic has hit the buying power.

Thanks to online lending, car finance is still an alternative if you do not have enough money to pay outright. However, you will have to arrange a deposit size for all online borrowing. Regardless of the finance option, you need to arrange at least 10% of the market value of the car.

Being unable to have stashed away the down payment, some buyers seek car finance with no deposit. You must have seen lenders advertise it with no deposit facility. This raises the question of whether it is a stratagem to attract credible customers or it is actually a sort of a genuine deal.

Well, no deposit car finance is a kind of deal that a couple of lenders offer, but there are certain conditions to meet to qualify for it.

How car finance with no deposit works

Although car finance deals include hiring purchases and personal contract purchases, car dealers offer these financing options. If you seek to have your car financed from an online lender, the personal loan is the only option you are left with, also called an auto loan.

The title of the car will stay with the lender until you make the full and final settlement. When you take out a car loan, you need to pay cash upfront to cover a portion of the market value of your car, and the rest value will be met by the borrowing money that you pay down over an extended period.

If you cannot arrange the down payment, you will use car finance with no deposit. However, you will have to meet the following conditions to qualify for it:

  • Your credit score must be good. You may not be eligible for these loans even if your credit score falls under the fair category.
  • Your repaying capacity must be very strong. If you prove your income source has been stable for a long time and it is enough to keep up with monthly payments, you will be eligible.
  • Your credit report must show that you have been meeting all of your obligations on time.

Getting car finance without a deposit means you do not have to put down a deposit size but it does mean that:

  • Your monthly payments will be higher because you are borrowing up to the full market value.
  • The interest rate will be high because it increases the risk of the lender. If you make a default, the lender does not have a down payment to take money back.

Tips for getting car finance with no deposit at affordable interest rates

Getting a car loan without a deposit is quite tricky. Even if your credit score is good, you will likely earn money at high-interest rates.

Further, lenders may not be easily convinced to lend you money. Here is how you can get money smoothly and at affordable interest rates:

Do research

First off, a couple of lenders offer these loans. Most of the lenders will not entertain your application if you do not have the deposit size. Do research to know which lender is offering this kind of deal. Visit their websites and contact them to get an idea of the interest rate.

They vary by the lender, so make sure you apply to the lender that offers these loans at the lowest possible interest rates.

Do your homework

Research is just one aspect of ensuring that you can get these loans at affordable interest rates without any hassle. Remember that your repaying capacity must be very strong to qualify for these loans.

Even if your income source is stable and you have been meeting all of your financial obligations on time, it makes sense to get an idea of how much it will likely cost you. You should use an online loan calculator to get the estimate.

Note that you will end up paying more than the estimate because of the other factors often ignored using an online loan calculator.

Avoid having any current loan

As you know that you must have a good credit score and a strong repaying capacity, you should try not to have any other debts. If the lender finds that you have recently taken out a 24-hour loan in Ireland after checking your credit file, for instance, you will struggle to have it signed off on.

This is because the lender will suspect your repaying capacity. The monthly payments are going to be big, and it can be challenging for you to meet them along with the payments of other debts. Whether it is a small loan or a large debt, it can make it quite complicated for you to qualify for this loan.

Does it make sense to qualify for these loans?

If you cannot arrange a deposit size for your car, these loans may be an alternative. However, you will end up paying a high-interest rate. Monthly payments will be more prominent. If you fail to keep up your debt, you will naturally lose your car, and it will make it all but impossible for qualifying for new loans.

This is why you should try to arrange a down payment. When you do so, the borrow size will be smaller. It means you will have a chance to pay less in total. The interest rate will also be lower. You cannot qualify for no deposit car finance in case of a poor credit rating, but you can do so when you have a down payment. Some people try to fund the down payment as well.

They make a query, “How can I get bad credit loans to fund a car” but it is suggested that you should never fund the down payment even if you have less than 10% of the market value of the car. Your loan to value ratio will be more than 90%, but managing both car loans and bad credit loans can be very difficult. Here are some tips you must follow:

  • You should have a good credit rating regardless of the type of loan. Even if you have a down payment, try to make it up to scratch.
  • You must be free from all kinds of financial obligations. Even a small loan can make it challenging for you to qualify for a car loan. If you qualify, the interest rate will likely be high.
  • Your credit file must not show any recent defaults.
  • If you are arranging a down payment, try to live off a lean budget.

By following these tips, you will be able to get a car loan at affordable interest rates.

The bottom line

Car finance without deposit is possible, but very few lenders provide these loans. You must have a good credit rating and a substantial income source.

It is always suggested that you arrange a down payment because it can help you borrow money at affordable interest rates.

No deposit means you are financing the 100% market value of the car, and of course, this will increase the burden on your pocket.

Do not forget that life can throw you a curveball at any time. You cannot be so sure about your financial condition. For instance, you can lose your job. It can be not very easy for you to keep up with such significant monthly payments.

This is why it is crucial to analyze every possible scenario if you want to finance your car. You can also consider buying a used car if you cannot arrange enough money for a new car as a down payment.