 TITLE: How to Qualify for a Car Loan CONTENT: Have a Down Payment or Trade-In\n-------------------------------\nMaking a down payment or trading in your current car reduces how much you have to borrow and can make it easier to get approved at a lower interest rate. Here's what you need to know about each option.\n### Down Payment\nA down payment is cash that you give to the dealer or seller to help cover a portion of the sales price of the vehicle. Lenders tend to view borrowers with down payments more favorably because it means they have skin in the game and are less likely to default.\nBecause a down payment reduces how much you have to borrow, it also lowers your monthly payment and the total amount you pay in interest.\n### Trade-In\nA trade-in is any vehicle with value that you offer a dealer in exchange for credit to go toward the sales price of the car you're buying. For example, if you're buying a $15,000 car and trade in your current car for $8,000, you only need to borrow $7,000 on the new vehicle—that is, if you don't have a loan on the original car that you need to pay off.\nIf you owe more on the car than what the dealer offers for trading it in, you have what's called negative equity, and you'll need to pay the difference immediately to your lender upon the sale of the car.\nTrading in a car is convenient, but you typically won't get as much from the sale than if you sell it to a private party. If you don't have time to sell the car on your own, though, and you don't have negative equity, the convenience may be worth it. END