Are you dreaming of being behind the wheel? Unfortunately, it does not seem possible to come true when you do not have a hefty payment to make upfront. Most of the lenders will require you to pay about 10% of the sticker price of the car. In the absence of a down payment, you might be refused a car loan. Fortunately, there are some car finance providers who provide zero-deposit car finance deals.
Such offers are quite tempting as you do not have to pay any amount upfront, but is zero deposit car finance in Ireland the right choice? Is it a legitimate deal or is it provided by some loan sharks? It might be too good to be true because a lender would not feel inclined to take on a high risk.
Is zero deposit car finance too good to be true?
A zero deposit car finance deal allows you to purchase a car without making any initial payment. This involves financing the whole value of a car, on which you pay down interest. It is possible to obtain such kinds of deals from a few car financers. Not all financiers and car dealers provide these kinds of deals. You will have to do proper research first if you are looking for these deals.
- Zero-deposit car finance will be way to expensive
It is absolutely clear from the name of the deal that you do not have to make any initial payment. It means you will be borrowing 100% value of the car. The loan size will be bigger. Of course, this will make it complicated for you to adhere to payments. Your lender will find you a risky borrower.
When the risk of default is too high, your lender will charge very high interest rates. Undoubtedly, it will cost you a lot more money than it would if you put down a deposit. If you manage to arrange a larger deposit of up to 20% or 30%, the loan-to-value will reduce, and you would be able to qualify for lower interest rates.
- Zero-deposit car finance can trap you into debt
Zero deposit car finance is exorbitant. Lenders will undoubtedly charge very high interest rates. Unfortunately, most of the ethical and legitimate lenders do not provide such deals. Upfront payment is a must so as not to put a lot of burden on your pocket.
But there are some loan sharks and illegitimate lenders who would be willing to lend you money with no upfront payment. This will give them an opportunity to earn a lot of money from you. They will impose very high interest rates with the intent to tie you to an endless cycle of debt. As a result, you will fall into debt. The ongoing cycle of debt will not impair your credit score, but it will also ruin your finances.
This will make it challenging for you to meet other essential expenses. As a result, you will be forced to take on more debt to meet them. Eventually, this will lead to a significantly high amount of debt. You will never be able to get out of it.
- Zero deposit car finance will lead to higher monthly payments
Zero deposit car finance is not just expensive in terms of monthly interest rates, but it is also expensive because it increases the size of the instalment. If you are to pay down a large amount of money every month, you will be left with little or no money at all for your essential expenses.
Further, the repayment term of these loans might still be longer. This means you will end up paying a lot more money in total. Zero deposit car finance deals cost too much money, not just in terms of the interest you will pay down.
There is no doubt that these deals can impair your credit score. In addition, they can also affect your finances. You will find it hard to meet your essential expenses. Your whole budget will be ruined.
- Some lenders may put restrictions
Not all lenders are in favour of providing zero deposit car finance deals. This is because it is too risky to approbate your loan application. Some lenders will feel that you will not be able to repay the debt, especially if the monthly instalment size is quite large. As this involves too risk, they will likely impose some restrictions on the loan size.
It means you will not be able to purchase expensive cars. The price is too high. Of course, lenders will hesitate to lend you this much money. As a result, you will be forced to buy a secondhand car or a less expensive car.
Another restriction they will most likely impose is on your credit score. If your credit rating is not stellar, they will not likely sign off on your application. Most of the lenders are strict about a credit rating when it comes to qualifying for a zero-deposit finance deal.
However, there are still one or two lenders who might be willing to approve car finance in Ireland with bad credit. Since lenders will obviously charge high interest rates, make sure that you have analysed your repayment capacity, so you do not struggle to repay the debt. Falling behind on the payment will cost you a lot more money because interest penalties and late payment fees will be charged.
Is a zero-deposit car finance deal a bad idea?
Zero deposit car finance deals are provided by some lenders. It is always suggested that you carefully look for such deals. A golden rule of thumb says that you should use these deals only when you are completely certain about your repayment capacity. You will be able to qualify for competitive interest rates only when your credit rating is perfect and you are not borrowing a large amount of money.
Try to purchase a less expensive car. This will reduce the burden of debt on your pocket. You should compare deals before you apply to a lender. Although zero deposit car finance is available from a few lenders, it is always recommended that you improve your credit score and arrange a down payment. This will increase your chances of getting money at the best possible interest rate.
