When tax time rolls around, it can be a great time to look for auto loan deals. If you're shopping with bad credit, there are a few requirements you need to meet to qualify for a car loan though – including a down payment. A tax refund could be just what you need to meet that requirement.

Down Payment Requirements

As a borrower with less than perfect credit, chances are you need to work with a lender that specializes in helping people in tough credit situations. They're called subprime lenders and they understand that people with poor credit scores still need car loans. Subprime lenders have additional qualifications borrowers must meet to help offset the risk that poor credit can bring.

One way they offset their initial risk is by requiring an auto loan down payment. Though down payment amounts do vary, subprime lenders typically require you to put at least $1,000 or 10% of the vehicle’s selling price down. Down payments don't only benefit the lender, though.

Studies have shown that borrowers who use a significant down payment are more likely to complete their loans. Additionally, the more money you can put down, the more you save in interest charges throughout your loan. You also reduce or eliminate the time your car spends with negative equity and may open up more loan options depending on the amount of your down payment.

Tax Refunds and Down Payment Options

Using Your Tax Refund As A Car Loan Down PaymentTax time is a good time to look for a vehicle. Not only can you take advantage of the specials that many automakers run, but you also have the option to take advantage of any extra money that comes back to you in your refund, too. Many Americans use their tax refund to help with large purchases since saving up a large down payment can be difficult.

If your tax refund isn’t enough to meet a down payment requirement, you’re not out of the running just yet. Luckily, down payments don't have to consist of cash alone. You can usually combine cash with the equity in your car to meet or exceed the amount you're required to put down.

If you plan on using the equity in your current car along with your tax refund, you need to make sure that you know what the value of your trade-in is. You can find an estimated sale or trade-in value for it by visiting a valuation site such as Kelley Blue Book or NADAguides.

To see if there is equity in your car, compare the estimate to the 10-day payoff amount for your auto loan. If you owe more on the loan than your vehicle is worth, you don't have any equity to add to your down payment – called being in a negative equity position. If you own it outright, the entire value is equity and can be put toward your next loan.

Finding Bad Credit Car Loans

Besides a down payment requirement, bad credit lenders use many factors to see if you're in a position to take on an auto loan. They look mainly to ensure you're in a stable living and financial situation, and that you make enough to cover your car payments and auto insurance.

These things, along with a few others, show lenders your ability, stability, and willingness to take on a car loan. The subprime lenders that look to lend to poor credit borrowers know that you're more than a credit score, and aim to get you into a car loan you can comfortably afford.

However, not all dealerships work with these lenders, and they don't always stand out from the crowd. Here at Drivers Lane, we have amassed a nationwide network of special finance dealerships over the last 20-plus years, and we want to get you in touch with one in your area. The process is simple, fast, free, and there's never any obligation. Don't hesitate any longer and get on the road to the car loan you need right now by filling out our auto loan request form.