With poor credit, how does downpayment size affect the interest rate?
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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%)
With poor credit, how does downpayment size affect the interest rate?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.
With poor credit, how does downpayment size affect the interest rate?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.
With poor credit, how does downpayment size affect the interest rate?It probably is not going to affect your rate, just their willingness to give you a loan.
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