Borrowers with less than perfect credit will find it difficult, in most cases, to use a post-dated check for the down payment on a car loan.
Down payments with bad credit
At Auto Credit Express, we recently received this question from a potential candidate, who we suspect had credit issues, regarding down payments: “Is a post-dated check acceptable for a down payment?” “
The answer to this question, in most cases, is no.
People with credit problems in the past need subprime auto loans which are considered riskier than traditional auto loans. In order to reduce this risk, lenders require borrowers to “participate” in the loan with a down payment in cash or real business value. As with any loan, the larger the down payment relative to the value of the title (a car), the less risk the lender takes.
Since postdating a check usually means that there is currently no funds in the account to cover it, the check has no real value and can hardly be considered a “cash” down payment – in fact. in other words, no deposit, no car. Lenders also view the delivery of a vehicle without the required down payment as fraud and may cancel the agreement as well as terminate their contract with the dealership.
Bypass a post-dated check
But there is a scenario where a post-dated check might be accepted as a down payment for a bad credit auto loan: if the dealership is willing to keep the car until the check is deposited and the funds clear the account.
Even then, however, the delivery of the vehicle will have to be delayed until the dealership receives the deposit amount from the bank.
The bottom line
A post-dated check is not an acceptable down payment on a car loan and may cause the lender to terminate the agreement and cancel a dealer’s contract. The only way to avoid this, if the dealer agrees, is to wait until these funds are available before taking delivery.
One more thing: Auto Credit Express connects consumers with tarnished credit with dealers who can offer them their best chance for auto loan approval.
So, if you are ready to build or restore your credit, you can get started now by completing our online car loan application.