With poor credit, how does downpayment size affect the interest rate?

Question

on a car loan?
For instance, what might the interest rate difference be:

$500 down payment on a $30,000 car (about 2%)
$7,500 down payment on a $30,000 car (25%)

I'm interested in negotiating a lower interest rate.
The ability to save $7500 cash over a year's time doesnt end up on my credit rating(as do my mistakes, most of which came about from things I had no control over), but it's still an indicator of my ability to improve my financial discipline.

So I ask again, who will consider lowering an interest rate based on 25% downpayment.

Specific answers only.

Answer 1

Yes, it should. Interest is the cost of borrowing money. If you borrow $100 and pay back $105, then it cost you $5 to borrow the money. The interest rate will be higher if the lender thinks you're a poor risk, because they want more assurances of making more money on this deal. If you're a good risk, they'll give you a lower interest rate.

When you put a substantial amount of money down, you're reducing the lender's risk in two ways - first, you're not borrowing as much, so you should be able to better afford the monthly payment, and second, you have less incentive to default, because if you do, you're losing a good chunk of your own money.

Answer 2

The % rate shouldnt be all that much of a difference with an auto loan, it really depends on how many years you take it out, and with bad credit you may not qualify for 60 month pay ment at 500downpayment

With only oweing 22,500 on the car, about 400 a month after intrest for 5 years, sounds okay

But if you only put a down payment of 500, considering you have bad credit, the bank wont approve of a 5 year loan, since that would be nearly 550 a month ( not to reseable, since credit lines are usally 500 for people with bad credit) So the bank would either refuse it, or offer a 6 year loan, at 72 payments with higher intrest

I think the best bet is to tell them you only got $500 down, see what the numbers are, later on insist that if you use your 7,500 in savings, and pay that for downpayment, that way, since theres more cash involved, should be a better rate

If you offer the 7.5k up front, with bad credit they may not take chances and offer you same rate as if you put 500 down.... Yet if you 1st offer your 500, then say well i can do better ( put 7k more down ( thats 1500% more of a downpayment!) .... maybe they will do you better and know a couple 0.1% 's off

Answer 3

Because your interest rate is based upon your Credit Rating, the amount of money you give as a down payment will not matter.

What WILL matter is how much interest you will have paid by the time the loan ends in x number of months.

I think you are asking the wrong question.

Answer 4

I agree with Ralfcoder on this except that sometimes putting a down payment is not worth it because it may not significantly reduce the payment per month. For about every $1,000.00 you put down the payment only reduces about $20.00 or so.

Answer 5

It probably is not going to affect your rate, just their willingness to give you a loan.
Your credit rating determines your rate; all the down payment in the world won't change your rating.