Common requirements for 0% auto loans

As interest rates of most car loans are in constant rise, dealerships began promoting 0% auto loans to attract customers to buy their cars. This type of loan has literally zero interest rates attached to it. These loans are attractive since car buyers have the chance to buy their cars through loans with payment terms similar to buying vehicles on cash basis. However, this type of loan has stricter requirements such as the following:

Higher credit score

While most average loans requires a credit score of 650 or higher, a 0% auto loan applicant needs to have a credit score higher than this. Most lenders require a loan applicant to possess a credit score of at least 680 to qualify for 0% auto loans. For luxury car buyers, the credit score requirement for 0% auto loans is at least 700 or 720 making this type of loan out of average car buyers reach.

Larger down payment

Since these loans don’t have interest rates payments, larger down payments are placed on the vehicles. The down payment is usually equivalent to the 25% of the car’s purchase price. For example the purchase price of a car is $40,000, 0% auto loan requires the car buyer to provide a down payment of $ 10,000.

Besides the higher down payment, car manufacturers also limit their offer of 0% auto loans to selected models. They usually offer this type of loan to luxury car models making the down payment requirement extremely high.

Shorter loan terms

The loan terms involved in 0% auto loans are shorter compared to average rate loans and usually requires early repayments. This type of loan is most of the time offered by lenders with terms ranging from 24 to 36 months. The shorter loan term of 0% auto loan makes the monthly payments higher.

Although 0% auto loans as a whole involves stricter requirements, car buyers who qualified for this type of loan actually enjoys other incentives and rebates from car manufacturers. Given these privileges, the actual purchase price of the cars offered for 0% auto loans are eventually reduced.

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