April 2009 ~ Managing a Car Loan

Wednesday, April 29, 2009

Why Do I Need a Lien Release to Sell a Car?

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If you have a lien listed on the title to your automobile, then you do not fully own your vehicle; a bank is listed as a lien holder when it has partial ownership. Even if you paid off the loan, you must prove it by providing the lien release. If you cannot provide the release, your potential buyer faces risks for any money you owe on the vehicle.

Your title lists a bank as a lien holder on it. This means that a bank has financial interest in the vehicle and that you do not fully own it, unless you can provide a lien release that clears the title. The lien release officially proves that the debt is satisfied and allows transfer of ownership to the buyer. In the event you sell your vehicle, providing the original lien release allows the new owner to title the car in his name without the lien holder present, as it is on your current title. Some states allow title transfers when a lien exists and some do not.

A lien release is an official letter from the titled lender that states the vehicle loan is paid in full. It is printed on bank letterhead and is signed by a bank representative. Also, the titled borrower's name and address is listed on the letter, as well as all vehicle information. This includes the car's year, make, model and the vehicle identification number (also known as the VIN). You must provide the original letter with a signed title to transfer ownership.

In states that do allow title transfers when a lien exits, purchasers usually will not purchase the car if the title is not clear. If you still owe money on the vehicle, it can be repossessed from the new owner. If you leased the car before buying it, the lien can signify that you never paid your taxes on the purchased car. To avoid liability for your debts, the buyer will likely request a lien release, even if your state does not require it.

Because your bank will send you a lien release once your loan is paid off, you can apply for a new title. If you bring your lien release and your current title to a motor vehicle office, you can have a new title issued in your name alone. Or, you can put the lien release in a safe place to include with your title for when you are ready to sell. Obtaining a new title eliminates the need to keep the lien release. If you are ready to sell your car and cannot locate the release, obtain a new one from the bank that is listed as the lien holder.

Comparison of Zero Percent & Cash Back in Auto Loans

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Car buyers can be faced with improbable advertisements and enticing deals every day of the week. Though only a small portion of the population is in the hunt for a new car at any given time, terms such as "zero percent financing" and "cash back allowances" seep into the general consciousness, and consumers look for those deals when they go car shopping. The question is which of these terms--if either--really means anything to the average shopper.

Almost every loan comes with interest. Interest is the bank's way of making money from lending people funds. It means that customers are going to be paying more than the cost of the item (in this case, a car), as they'll be paying back interest in addition to the principal. Zero percent financing simply means the finance company has agreed to give out car loans without charging a dime in interest. This could be for only a specified period (such as zero percent financing for six months--which means the customer has six months to pay only on the principal), or it could be for the entire life of the loan.

Zero percent financing is a big draw for car lots looking to hold a sale. Compared to loans found in the credit card industry, car loans typically have favorable APR rates to begin with. But to take it down to zero means the car buyer has only to worry about the principal when paying off the car--or at least until the initial promotional period is over.

For those individuals who have impeccable records when it comes to paying their monthly bills on time, zero percent financing can make a lot of sense. Unfortunately, no one is perfect. A missed payment or even a late payment can result in the zero percent terms being taken away and a rather steep APR rate being applied to the loan. This can be disastrous for someone budgeting for only a certain amount per month.

"Cash Back" deals are a favorite of car dealerships because it doesn't come out of their pocket. Manufacturers offer these rebates, so the dealership is reimbursed no matter what. Cash back is very simple for the customer--pay $18,000 for the car, accept the $1,500 cash back rebate, and there you have it. Instead of paying $18,000, the customer pays $16,500.

If a car buyer walks onto a dealer's lot with cash in hand, cash back deals are usually preferable to anything on the financing side. These people are looking to avoid a monthly payment and simply get the transaction over and done with in a single stroke. Cash back is simply icing on the cake. Cash back from a car dealer can make sense for those looking for a loan, too, especially if they know they can get better terms on a loan through a third party.

Cash back may not be the way to go if third-party financing can't beat the zero percent offered by the dealership. This sounds like a no-brainer (how can a finance company do better than zero percent?). But you have to look at the whole picture.

Zero percent on the entire cost of the car may still be a worse deal than a good cash back program combined with a low APR financing loan from a third party. Another drawback to paying cash up front is that the money could be better used for investment in the meantime. Giving it all to the car company may avoid a costly loan, but it doesn't do anything to make the money work for you, especially when considering what a poor investment a new car is in the first place.

Consumers have to be aware of bait and switch techniques commonly used by car lots to bring customers into the showroom. Often, the best financing rates, including zero percent, are only available on a select number of cars. They are there as a sort of loss leader, intended to lure shoppers into the hands of a competent salesman who can direct their attention to another deal.

In any case, customers should be careful to do the math on any purchase choice. Check with third-party finance companies and compare rates with what the dealership is offering. Don't allow limited time promotional periods (such as zero percent financing for the first six months) to sway your judgment.

Will Financing a Car Lower My Credit Score?

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Financing a new or used car usually requires a good credit score, according to the Lease Guide automotive website, although borrowers with some past problems can sometimes get high-interest loans. The vehicle loan itself affects a consumer's score once it is finalized. It has a mix of positive and negative influences depending on various factors.

Car financing means getting a loan to purchase a new or used vehicle. Cars are generally expensive, so consumers often borrow money instead of paying the full amount up front. Some people get their financing through the dealership, but Lease Guide explains that dealers themselves do not provide loans. They work with banks and finance companies, which actually provide the funds. Car buyers can also arrange their own financing through banks, credit unions and other lenders.

Car loans add a lot of debt to a person's credit records, especially when purchasing a new vehicle. FICO, the main credit score provider, explains that it considers outstanding debt in its calculations. If that person has high balances on other loans, credit cards and accounts, the car loan brings the credit score down. Skipping any payments or sending them in late also hurts the score.

Borrowers with good credit records can raise their credit scores with car loans. The payments show up on the credit reports, and Edmunds automotive site editor Warren Clarke advises that payment history accounts for more than one-third of the score. Prompt remittance on the car loan, along with any other accounts, is very favorable in a person's credit file.

The Experian, Equifax and TransUnion credit bureaus do not always report accurate data. A responsibly handled car loan could be unjustly hurting a person's credit score because the bureaus are reporting timely payments as late. The Federal Trade Commission explains that federal law entitles everyone to free yearly credit reports through annualcreditreport.com. This lets borrowers check their loan status and dispute errors. The bureaus or obligated by the Fair Credit Reporting Act to investigate such matters and correct or remove mistakes.

Consumers who overextend themselves with high car loans can destroy their credit ratings if their vehicles are repossessed. The FTC says most vehicle financing contracts give lenders the right to take back the car as soon as the loan goes into default. This means one late or missed payment is grounds for vehicle reclamation. A repossession seriously hurts a credit score and stays in a person's credit bureau files for seven years.

How to Cancel a Down Payment Check on a Purchased Car

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When purchasing a car, many car dealerships handle the arrangements for financing a vehicle on behalf of the customer. Often, a car dealership will allow the customer to take the car home before the financing is finalized. Because unexpected complications can occur, the customer may not be ultimately approved for a vehicle loan despite having made a down payment with a personal check. By the time the customer is alerted that she is not approved for vehicle financing, the customer has the option of contacting her financial institution and placing a stop on the check before the funds are debited from her account.

Instructions

Contact your financial institution. Provide the customer service representative with all information necessary to identify you as the account holder.

Ask the representative whether there is still time to place a stop on the check. Provide the check number. If there is still time, provide the amount of the check, who the check was made payable to and any other information the representative requires to process the stop payment.

Pay the fee for stopping the payment. Often, a financial institution will debit this fee directly from the account the check was drafted from.

Inform the dealership that you have placed a stop payment on the check. Depending on the laws of the state you did this in, you may be liable to the dealership to pay a fee. If this is the case, pay the fee.

The Depreciation of RVs

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Recreational vehicles, or RVs, give their owners the opportunity to vacation in a wide variety of destinations, relatively inexpensively. Traveling in an RV allows you to bring your own living space with you, and sites at campgrounds or RV parks cost far less than comparable hotel rooms. But buying an RV means you'll have to deal with depreciation, which refers to the value an RV loses as it ages.

RVs depreciate for many reasons, some of which they share with cars, which also depreciate at a generally high rate. Used RVs represent risk for new buyers, who don't know the service history or whether the prior owner made necessary repairs. The value of an RV also falls when new models with additional features come to market, driving down demand for models that lack those features. RVs consume fuel at a high rate, which can drive down their value when gas prices are high. Finally, mileage and general wear and tear mean that a used RV has a shorter life than a newer model.

The specific depreciation rate for a given RV depends on factors such as location, condition and features. According to The New York Times, RV Consumer Group Inc.'s J.D. Gallant estimates that a new RV loses between 25 and 40 percent of its value as soon as a buyer takes it home. This extends to an average depreciation of up to 50 percent after five years. After around 10 years, the majority of RVs are unsuitable for normal use and have very little value left.

RV owners can take steps to reduce the depreciation of their vehicles. This begins with the choice of which RV to buy. The Times cites the fact that desirable brands hold their value well, although some luxury RVs tend to depreciate more quickly than average, because buyers who can afford the most expensive models prefer new to used. Owners can also perform regular maintenance and keep all service records in an effort to persuade potential buyers to offer more for a used RV. Buying a used RV in the first place eliminates the high, early depreciation.

In most cases, depreciation is unavoidable with an RV. Shoppers should consider other options before buying. Leasing an RV is one alternative that allows vacationers to determine whether they enjoy it enough to justify buying one and dealing with depreciation. Traveling by car, train or plane are other options, with costs depending on ticket fares, the cost of fuel and the price of accommodations. Camping with a tent, which requires only enough gear to fill a car, van or SUV, is a simpler and more affordable alternative to RV ownership.

The Pros & Cons of Leasing a Low Mileage Car

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Low mileage leasing offers a lower lease payment. Leasing is based on expected depreciation, so if you choose to take a lower mileage option, the vehicle won't depreciate as fast. Before pursuing a low mileage lease, consider your driving habits, vehicle needs and the financial repercussions of going over your contracted mileage allowance.

A lower monthly payment is the ultimate benefit of a low mileage lease. Leasing is based on the vehicle's depreciation, which is affected by the term and mileage you choose. For example, a leasing bank might assume that a three-year old vehicle with 30,000 miles on it might depreciate by 48 percent during the lease term. The same vehicle with 36,000 miles on it depreciates more, so the depreciation percentage, or the amount you pay for during the lease, increases along with your monthly payment.

As long as your low mileage lease matches your driving habits, the option is beneficial. A low mileage lease may not suit someone with irregular driving habits. A lower mileage allowance, such as 10,000 miles per year, may prove hard to maintain, as it offers less than 1,000 miles per month. To benefit from the low-mileage option, your driving habits should be stable. If you commute to work, constantly drive your family around or are unsure about your future job or house location, you might want to increase your mileage to avoid potential penalties.

Because your lease is based on expected deprecation, going over your mileage allowance results in penalty fees. The amount a leasing bank might charge differs, but expect to pay anywhere from 10 to 18 cents per mile over your contracted mileage allowance. This can prove expensive if you go over your mileage substantially. For example, if you exceed your allowance by 6,000 miles, you may pay between $600 and $1,080 in penalty fees, based on 10 to 18 cents per mile charges. You must pay the leasing bank for the fees; otherwise, non-payment is reported to the credit bureaus.

If you question whether you can meet the mileage requirements for your lease, adjust the mileage to match your driving habits. Rather than limit your vehicle use to obtain a low monthly payment, check price differences for 12,000 or 15,000 miles per year. The cost to increase your mileage allowance is not substantial; it may cost you less than $10 a month to increase the leasing mileage allowance. Ask your dealer to show you the monthly payment for both.

How to Buy a Car With No Cosigner

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First-time car buyers and individuals who have a lack of credit history will often hear the same message from financial institutions when trying to take out a loan: "A cosigner may help get you approved." While a cosigner will help you get approved, you may not have someone who's willing to cosign a loan and therefore promise to make the loan payments if you cannot. You can get around the need for a cosigner by dealing in cash, purchasing a car from a different dealer or building your credit.

Instructions

Purchase the car with cash. Purchasing a vehicle outright allows you to bypass the need for a cosigner and having to pay extra money for interest. If you can't afford the cost of a new car, consider purchasing a used car. Many dealers have portions of their used inventory dedicated to $10,000 vehicles and under.

Visit a "buy here, pay here" dealer. "Buy here, pay here" refers to dealerships that approve you for loans via their own financing department. You pay off the loan by making payments at the dealership. These dealerships typically charge significantly higher interest rates than traditional financial institutions, because they often approve individuals with poor or nonexistent credit history. Because these dealerships are willing to work with risky individuals, you usually won't need a cosigner.

Build your credit. Applying for and using a credit card offers you the best opportunity to start building credit. Make your payments every month, and your credit will steadily increase. Once you have a strong credit score, such as 620 and above, financial institutions will begin seeing you as less of a risk and will probably not require a cosigner. If you are not approved for a standard credit card, apply for a secured credit card through your bank.

Things to Check When Returning a Leased Car

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After you return your vehicle to a dealership, the leasing bank takes the vehicle from the dealer. Once the bank receives the vehicle, it inspects the mileage, as well as checking for excessive wear-and-tear. You might avoid some lease-end fees by inspecting the vehicle yourself or allowing the leasing bank to provide a complimentary inspection.

Inspect your vehicle for damage. The cost of even minor vehicle damage is likely to exceed your wear-and-tear allowance. The wear-and-tear allowance differs by leasing bank, so review your contract to determine your allowance. This allowance covers light vehicle wear, such as light scratches in the paint, slight tire wear or seat wear. It does not cover body damage, ripped seats or stained carpets. If your vehicle has body damage, submit a claim to your insurance company and pay your deductible. Your deductible is probably less money than the leasing bank's repair cost, which you'll have to pay.

Rather than worry if your leasing bank will charge excess wear-and-tear fees, take advantage of your leasing bank's optional inspection. Most leasing banks allow lessees to arrange a free inspection of the leased vehicle. The inspector can usually meet you at your convenience, whether at a dealership, your home or place of employment. The inspector goes over the car and offers suggestions to help you avoid lease-end fees.

Review and complete your lease-end paperwork before returning the vehicle to expedite the return process. Expect to receive a lease-end packet, which includes the paperwork you'll provide to a dealer upon returning the lease. If you're over mileage, your leasing bank may expect payment at the time you return the lease. If you haven't received your paperwork, contact your bank. Otherwise, keep a copy of any lease-end paperwork you sign. Provide your returning dealer with copies (not originals) of the vehicle's service history or leave it in the glove box to avoid charges for maintenance fees.

Have your vehicle washed and detailed before you return it. The leasing bank won't detail the car to determine if its damaged or stained, but may charge you for excess wear-and-tear because of the vehicle's appearance. Return your vehicle with any accessories you received, such as extra keys, floor mats or removable parts, such as a roof rack or remote controls for a DVD system. Remove all of your personal information from the car, such as lease paperwork from the owner's manual, insurance cards and registration.

What Are the Benefits of an Auto Loan?

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Laying out a large sum of cash to purchase a car outright can place a huge burden on your checking or savings account. An auto loan will give you the advantage of buying a vehicle with monthly payments you can afford. Auto loans also help build your credit rating, provided that you make the payments on time, and give you the opportunity to buy a better vehicle that may have been too expensive if you were to pay cash.

With an auto loan, each monthly payment you make goes toward eventually owning the vehicle yourself. When the loan is paid off, you own a piece of property. In a lease agreement, you rent a car for a specific time. At the end of your lease contract, you have the option to buy the vehicle or return it to the dealer. Auto loans do not limit the amount of miles you can drive the car before incurring costly over-mileage charges, as is the case with a lease. Another consideration is auto insurance. If you finance through a loan, the amount an insurance company will pay for damage depends on the market value of the vehicle. When a leased vehicle is damaged, the dealer's repair costs often are greater than the insurance company will pay, leaving you responsible to cover the difference.

Many companies will be happy to loan you enough money to pay off your old loan at any time, leaving you with lower monthly payments. Refinancing can save you money if interest rates have dropped since you bought the vehicle, or if your original interest rate is higher due to a previously low credit score that has improved. If you can afford your original loan payment, refinancing at a lower interest rate gives you the opportunity to apply the extra money toward paying off the auto loan faster. Unlike home refinancing, which requires a determination of property value, auto refinancing is dependent only on the amount of money you need to pay off the previous loan.

Auto loans that do not charge penalties for early payoff give you the flexibility of ending the credit agreement ahead of schedule, thus saving you money on interest. An early payoff will help improve your credit score, making it easier to secure loans in the future. Completing auto loan payments ahead of time will free up money to pay for other priorities in your budget. Another advantage is to pay off an auto loan with money from another type of loan that has tax-deductible interest, such as a home equity line of credit. An auto loan company requires you to carry a certain amount of insurance coverage for the duration of the agreement. You can reduce the insurance coverage by paying off the loan early and adjusting the policy to more affordable terms.

Car Buying Tutorial

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Everyone needs reliable transportation, and this often involves trading in your older car for a newer model. Different factors determine whether you're able to buy a car. Lenders take different things into account, and knowing how the buying process works may help you qualify for a loan and buy the car you need.

Instructions

Stay with the same employer for a minimum of 6 months. Retain at least 6 months of paycheck stubs to show to auto loan lenders. Being employed for at least 6 consecutive months indicates stability, and you're more likely to get approved for a car loan.

Improve your credit score. Get a lower interest rate on the auto loan by establishing a high credit rating. On-time bill payments and low balances on credit cards help reverse bad credit and raise your rating.

Decrease the loan balance with a down payment. Plan to save between 10 and 20 percent for a down payment. Down payments help you negotiate a better interest rate, and you'll save money on the monthly payment.

Use a co-signer, if necessary. If you have no credit history or a bad credit rating, get approved with the help of a co-signer. To benefit from the co-signer arrangement, the person chosen must have a good credit score.

Check around for the best rate. Get auto loan rates from your personal bank, and then compare this rate with the interest rate offered by the dealership's finance department.

How to Figure Out the Interest on My Auto Loan

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If you want to calculate the interest on your auto loan, there are a couple of methods you can use. First you need all of the variables involved such as the interest rate, term of the loan, monthly payment and the amount financed. When you are able to calculate your interest, you will be able to determine the total amount of the loan. With a lower rate of interest you will pay less in interest charges. If you have a shorter loan term you will pay less in finance charges and longer terms generate more interest charges.

Instructions

Get an auto loan calculator. An auto loan calculator is a tool used to calculate figures such as payments and interest for loan financing. The figures used in this article are examples. Input the amount of the loan, $15,000, the loan term, 48 months, and the interest rate of 7 percent, and hit the calculate button to get a payment of $359.19. Once you have all the variables, take the monthly payment of $359.19 and multiply it by 48, the number of months in the term, and you will get the total amount of the loan, which is $17241.12. Subtract the amount financed of $15,000 from $17,241.12 and the difference is the interest charges of $2,241.12.

Take the annual percentage rate and divide it by 360 and multiply the result by the number of days in the billing cycle. The result of that calculation is multiplied by the outstanding balance, which provides the figure for interest for one month. Start with a balance of $15,000, monthly payment of $359.19, term of 48 months, and an annual percentage rate of 7 percent. Take .07 divided by 360 = .0001944 times 30 days in the billing cycle = .005832 times the outstanding balance of $15,000 = $87.48. The finance charges for the first month will be $87.48.

Deduct the interest of $87.48 from the monthly payment of $359.19, which equals $271.71. The result is the principal payment or the amount that will be subtracted from the balance of $15,000. The new balance is now $14,728.29. To calculate the interest charges for the second month you start the equation all over again, but this time you use the new balance in the equation. When you do the calculation, your interest charges for the second month will be $85.89. To get the total amount of interest charges for the entire term you can do this calculation for 48 months, which would be time consuming.

Use the auto loan calculator. Enter the amount financed, interest rate, term of the loan and hit calculate to get the payment. Click on the button that says, "show/recalculate amortization table," and the interest charges will be calculated for each month in the 48 month term. Notice that the interest charges will gradually decrease as payments are made. The amount of interest paid is always more at the beginning of the loan.

Make extra payments on the loan. If you make extra payments, the balance will be paid off faster and you will pay less interest over the remaining term of the loan. Determine how much extra you want to pay by inserting the amount in the calculator under the "extra payment section". Now hit the "show/recalculate amortization table" button to run the amortization schedule. Interest charges will be recalculated for the 48 month term.

How Does Buy Here, Pay Here Financing Work?

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When shopping for a car, you may come across a seller that promotes a "buy here, pay here" financing model. With this type of financing, you can usually qualify for a car loan even if you have bad credit. At the same time, this type of financing is typically not as attractive as regular financing if you have good credit.

As the name suggests, this method involves financing the car from the same place that you buy it from. With this method, you go to the dealer and pick out a car that you want to buy. Then you fill out some information with the auto dealer. At that point, the dealer approves you for a car loan that is provided directly from the dealer to you. You typically have to make payments every week or every other week to the dealer, according to AutoTrader.com.

The major draw of buy here, pay here financing is that it caters to those with bad credit. In fact, most of these dealers do not even require a credit check before they will approve you for a loan. This leads many who have had bankruptcies or other credit problems to come to these dealers to acquire a car. To qualify for this type of loan, you typically have to have a job and a regular income that would allow you to make your payment for the car.

To make this work, dealers that offer buy here, pay here financing must charge very high interest rates. With this type of financing, the lender knows that a certain number of people will default on the loans at some point. They factor this in when calculating the interest rate that they will charge to borrowers. If someone defaults on a loan, the lender still makes money because it charges enough interest to the other borrowers to make up for it.

If you have poor credit, this may be your only option to get a car. Even though you have to pay a very high interest rate, it is often better than having to do without a car. You can move forward and pay the interest rate while you build up your credit. That way, the next time you buy a car, you can do so at a more reasonable interest rate.

How to Transfer a Lease on a Mercedes GLK 350

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Unlike some leasing banks, Mercedes-Benz Financial Services (MBFS) allows you to completely transfer a lease; you do not need to stay on the contract to guarantee it. To transfer, your GLK 350 lease must be at least six months old and your account must be in good standing. Fees may exist for the lease transfer, payable by you or the person you transfer to. Also, your security deposit will not be returned to you; MBFS returns the lease security deposit to the lessee at the end of the term.

Instructions

Call MBFS to ensure you lease is eligible for transfer at 800-654-6222 (as of December 2010). If it is, ask if any fees exist for the lease transfer in your state.

Talk with the potential transferee about money down, if you require any. Because you will lose your security deposit, you can have the transferee pay you the amount you'll lose. Also, you must decide who will pay the transfer fee if one exists in your state.

Go to the MBFS website and log in to your account, or create an account if you haven't already. Go to the "Account" section and click on the "Lease Transfer" link. Fill out all required areas. You must have the intended transferee's email address, name, mailing address and phone number to submit the application offer and agree to the terms and conditions.

Wait during the transferee's application process. The person you are transferring to must submit her application and, upon approval, she must pay taxes, follow state motor vehicle requirments and provide proof of insurance for the vehicle to MBFS.

Call MBFS if you would like to know the status of the application. You can also contact the transferee during the process to find out where he is in the process. An MBFS representative will contact you upon the approval and transfer, at which time you can request payment for any money due from the person you are transferring to.

Send all of your original lease paperwork to MBFS. The bank representative will tell you where to mail your documents. Once MBFS receives all paperwork from you and the transferee, a representative will contact you after the paperwork has been processed and the lease is officially transferred.

Take your plates off of the GLK 350 and clean it out completely. Return your plates to a motor vehicle office promptly and remove the car from your insurance policy.

Is There Any Way Out If I Am Buried in My Car Loan?

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A car loan with a sky-high interest rate or a balance higher than the car's value can bury a consumer's finances. The loan can put a strain on making timely payments on other bills, and a consumer could be just one missed paycheck away from a serious financial problem. Fortunately, there are several strategies you can employ to help pay down the loan or get out the debt altogether.

If your awful car loan is symptomatic of a greater financial catastrophe, a way out may be bankruptcy. Chapter 13 bankruptcy can allow you to restructure your debts, pay them down over three to five years and retain your assets after completing the repayment plan. You must meet certain eligibility criteria for Chapter 13 bankruptcy, such as a steady source of income, full disclosure of your debts to the court, and successful completion of courses in credit management.

You may need to budget your money for a while to make timely payments on your car loan until your balance is on an even keel with the vehicle's fair market value. Once the loan balance equals the value of the vehicle, trade it in when purchasing a new car. The trade-in value should pay off the balance of your loan and give you a new set of wheels. Review the terms of your new car loan closely to make certain it won't put you in the same financial hole as before.

Refinancing your car loan may be a way to lower payments and make them more manageable for your budget. Before contacting your lender with a refinancing request, you should have a history of timely payments on the loan. This helps put your lender at ease because he knows you've been responsible with payments in the past and are likely to continue doing so in the future. Your lender isn't required to refinance your auto loan, and he may choose not to because of the profit gained from a higher-interest loan.

Your lender may be open to negotiating a new payment plan on your auto loan if you can carefully explain your financial situation. You must do more than simply claim you cannot make the current payments -- that will make your lender more inclined to send your loan to collections. Come prepared with your financial records and proof of other debts to show your lender that a new plan can help you make the payments and ensure full payment to your lender.

How to Buy Out an Automobile Lease Option

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If you are currently leasing a vehicle, and you realize your lease will mature soon, you are likely weighing your options. One option is to buy out the lease. This allows you to buy the car for its residual value or less so you can continue to drive it. Buying out a lease at maturity can be a confusing process, but it is one that can potentially get you a good deal on a car you are already accustomed to.

Instructions

Determine the residual market value of the vehicle. In most cases, the residual market value will be determined before a vehicle is leased, and will appear on your lease paperwork. This is not the price you should plan to pay--your goal should be to negotiate a price well below this amount.

Use a valuation service such as Edmunds or Kelley Blue Book to determine the wholesale price of the vehicle. Aim for a purchase price that is as close to the wholesale value as possible.

Contact the leasing company and tell the sales representative that you are interested in buying out the lease. Also tell the representative the price you want to pay. A leasing company typically loses money on a lease return, particularly if it auctions the returned vehicle, so most leasing companies will be happy to work with you.

Negotiate a fair price for the vehicle if the bank or leasing company does not accept your initial offer. A short negotiation can make the leasing companys decision-makers feel better about the transaction, while still saving you hundreds or thousands of dollars.

Arrange for payment of the negotiated price and sign any necessary paperwork. If you are paying for the car out of pocket, you will simply write the leasing company or bank a check, sign some paperwork and go on your way. If you plan to finance the buyout, you will need to fill out a loan application, allow the company to review your credit report and fill out paperwork related to your loan.

How to Break an Auto Lease Because of the Death of a Lessee

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Finance institutions generally don't care why a leaseholder may no longer be making his payments on an auto lease. They have a contract with him and that contract remains legally enforceable to some extent, even after his death. A deceased person's estate is responsible for paying obligations and bills. The estate can break the lease on behalf of the deceased but generally not without considerable cost.

Instructions

Locate the contract or agreement that the deceased signed. Read it over to determine the company's terms for ending the lease early. Most companies require that you return the vehicle, and then pay all outstanding amounts due on the lease. Some might always want an "early termination" fee. The company's policy for turning the car in early should appear somewhere on the lease.

Call the company. Find out what the remaining payments on the lease are, as well as what the "early termination" fee is, if applicable. Ask the company to send you a written statement for the total amount.

Provide the written statement to the executor of the deceased's will, if you are not the person named to oversee probate and the closure of her estate. As part of the probate process, the executor will give notice to the leasing company that its leaseholder is now deceased. Depending on your state's probate laws, the leasing company will have a period of about three months to make a claim against the estate for the outstanding balance on the automobile. The length of time varies somewhat from state to state.

Pay the leasing company's claim through estate funds, if you are the executor and if the company makes a claim. Once the claim is paid, call the company again to make arrangements to return the automobile. If the company does not make a claim within the time period allowed, it is barred from doing so and the estate won't have to pay anything.

The Advantages of Leasing vs. Buying a Car

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Leasing a vehicle requires you to pay for a term specified in the leasing contract for which you plan to drive the vehicle, subjecting you to mileage and term restrictions. If financing, you own the car and pay for the total price of the vehicle. Learn the benefits of leasing compared with financing.

Leasing is usually cheaper than financing. The bank purchases the vehicle from the dealership and leases it to you for around half of the vehicle's cost. The bank assumes the vehicle's future market value, which is what the bank hopes the car can sell for in the future. Because you are only paying for some of the car's cost, you can expect a significant monthly payment discount compared with financing. If you compare a 36-month lease to what you pay during 36 months of a longer term finance, the amount required down and the amount you pay over time is less if you lease.

If you finance a new car and do not plan to keep it for the duration of the finance, it might be difficult to trade it in or sell it on your own because of future market values. In a lease, the bank assumes the future market value, and if the projected value is incorrect, the bank loses money, not you. Economy, gas prices and manufacturer issues, such as a discontinued model or recalls, can affect your vehicle's resale value. Had you financed instead of leased under these conditions, you could lose money or have to keep a car you don't want until its equity levels with its value.

If you lease, you might be able to add extra options to your vehicle that you normally could not afford. Often, you can enjoy driving a better version of the model you choose or add more options, such as leather seating, a DVD player or a sunroof.

Most lease terms run for up to 39 months. So, it is likely you can enjoy a bumper-to-bumper warranty the entire time of your lease. In fact, you should lease during a time that the vehicle is under warranty, because you are responsible for all vehicle repairs before turning in a lease. Some manufacturers also offer a free maintenance package for one to three years. If you finance a vehicle and keep it for longer than three years, your out-of-pocket expenses to maintain and repair your car can add up. Leasing allows you to drive a vehicle under warranty and bring it back when the warranty is up, which allows for peace of mind.

If I Have a Steady Income, But No Job, Can I Lease a Car?

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Leasing a vehicle sometimes is better than buying a car because you can return the vehicle at the end of the lease period, typically have lower monthly payments and usually can get maintenance for free. However, as with regular auto loans, you may need a job to get a car lease, depending on where you go and what your credit score and debt-to-income ratio are like.

Like other auto financing companies, leasing companies look at several factors when you apply for a lease. The first thing a leasing company looks at is your debt-to-income ratio, or the amount of money you're paying out in debt compared to the amount of money you are earning or getting through retirement and similar funds. The next big thing considered is your credit score. If your credit score is too low -- 600 or lower -- the leasing company may see you as too high of a risk to approve your lease or they will charge you a higher rate of interest. Leasing companies do look at your employment, too, as a job means a steady income that typically results in consistent payments on the lease.

Whether you can get a car lease without a job depends largely on which leasing company you approach. Some companies make having a job part of their underwriting guidelines, which means that employment is a prerequisite for the financing approval. Others don't do this because they understand that a job isn't necessarily a condition for a good, steady income.

Getting a car lease without a job may be easier if you get a cosigner to help you. The cosigner assumes responsibility for payments if you default, which means the leasing company can depend on more than one person for payment -- that is, cosigners decrease the risk to the leasing company. Leasing companies sometimes want you to use a cosigner if you don't have a credit history or if your credit is poor, even if your income is good and your debt-to-income ratio is low.

Leasing companies are concerned primarily with your ability to repay the lease amount. Your employment is only one factor a leasing company uses to determine whether you can do this. You may be able to get a lease with no job, but you likely will need a larger down payment, get a higher rate of interest or need a cosigner. You also may need to shop around to find a company that doesn't include employment as part of the underwriting guidelines. These same guidelines apply to virtually any type of financing, including regular car purchase loans.

How to Refinance Commercial Trucks

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Refinancing commercial trucks can pose a unique and significant challenge to an owner. Unfortunately, during a down economy, it has become an all-too-common experience for many truck-owners. Loan rates and taxes are going to be more manageable, if the vehicle is not classified as a luxury item. But since most commercial trucks are also "work vehicles," you can often find incentives and benefits to help in refinancing. Another way to lighten your loan load is by changing your loan from an adjustable-rate loan to a fixed-rate loan. Fixed-rate loans are usually more manageable and can be easier to predict and pay off in a reasonable term.

Instructions

Research any incentives to refinance offered by the federal and state governments. In the last two years, both levels of government have moved to alleviate the pressure on many asset-holders. With these incentives, you can alleviate some of the pressure on you as a lender.

Review your credit report. Any mistakes on this report can hamper or impede your ability to acquire a better refinanced rate.

Improve your credit by closing lines of credit and meeting small debts. This will boost your score and make you a more favorable client to lenders.

Consult lending banks, credit unions and online lenders to see what offers they have for "fixed-rate" loans, as opposed to adjustable-rate.

Find a competitive rate among lenders. Make certain that the Better Business Bureau or other watchdog groups have not recorded fraud perpetuated by the lender.

Apply for a new loan, and pay off the first loan with the new, fixed-rate loan.

Meet all payments on the new loan by sending in payments at least seven days in advance.

How to Negotiate With the Lender of a Totaled Vehicle

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If your vehicle was worth less than you owed to your lender when it was declared a loss, you're responsible for the total balance due on the loan unless you have gap insurance. Gap insurance pays for the remaining loan balance when your insurance company does not. Otherwise, you can ask your lender to decrease your pay back amount, although some lenders will only compromise if you can pay the entire balance at once. Otherwise, negotiate a more affordable payment plan.

Instructions

Review your purchase paperwork before calling your lender. Find out if you purchased gap insurance without knowing it, as some lenders, insurance companies or dealers include gap insurance in a policy, lease or loan. Submit a claim to your gap insurance provider to pay off the remaining balance if you find you have it.

Examine your finances and determine if you can pay the total balance of your loan. Consider borrowing the amount from a friend or family member. This way, your credit report will state a satisfied loan balance and you can avoid interest payments.

Call your lender and explain your situation. Ask the lender to decrease your balance. If the lender refuses, ask if you can obtain a discount by paying the amount in full.

Pay the negotiated amount if your lender agreed to accept the lower payoff amount. If the lender still refuses, ask to rearrange your monthly payment amount and term. Otherwise, you'll pay your full payment every month until you satisfy the balance.

Sign a contract with your lender that reflects your new payment amount and term; don't accept a verbal agreement.

Why Lease a Car Vs. Purchasing It?

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You've had your eye on that car for a long time. You have studied it specs, meticulously researched the pros and cons and done everything to ensure it is the right car for you. Now it's time to walk in the dealership and talk to the salesman about buying it. But he throws something at you that you didn't think of -- you have the option of buying it outright or leasing it for a few years. You're leaning towards leasing it, but don't know if it's better than buying. Take your time. The car will be there tomorrow, but this decision will impact you for years to come.

Even if you researched the car extensively, took it for a test drive and liked the way it looks, you may realize after a while that it just isn't the right car. Well, you won't have to hang on to the car forever. Lease terms are typically anywhere from 36 months to 60 months --- three to five years. Leasing is a viable option for those who may get bored with their cars after a few years or those who may be planning to start a family in a few years and know a two-door sports car won't suit their needs down the road.

Leasing is an excellent way to drive that car you'd never be able to buy. For a few years, you can afford to dive that high-end car only more wealthy people can usually afford. Or, maybe you just don't have the money to buy the car. The price of leasing a car for a few years can be less expensive than buying the car outright, which makes it more appealing.

Over the long-term, the price of leasing cars can be quite expensive. If you are constantly leasing cars, you will have paid more money than actually buying the car over, say, six or seven years, depending on the cars you are leasing. For example, a car that would cost $16,000 to buy would cost $325 per month to lease for three years. With a down payment of $2,000, you would pay $11,700. But after the term, you would have to lease another car and perhaps spend the same amount of money on the second car. So over six years, you've paid over $23,000 for a car that probably would have lasted six years and been cheaper to buy. You may also have the option to buy the car after the lease is up, but the combined costs will likely be more than if you bought the car in the first place.

If you bought the car, it's yours. At the end of the leasing term, you are left with nothing. And when you own your own car, you can do what you please to it, be it bumper stickers or a new car stereo, or ignore that crack in the windshield. If you lease the car, you may be restricted from altering the vehicle. You may also owe extra money for any damage to the car, be it a dent in the door or that cracked windshield.

How Can I Refinance My Toyota?

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Refinancing your Toyota vehicle can save you money if you are able to qualify for a lower interest rate. Banks and other third-party lenders typically offer lower interest rates than what Toyota dealers offer through their own financing program. Through an auto refinance loan, you might be able to either lower your monthly payment or possibly pay off your loan amount sooner. There are other benefits of an auto refinance, such as the ability to extend your payment terms, add or remove a co-signer and even skip a few payments.

Instructions

Determine if your vehicle qualifies for auto refinancing. Certain lenders have restrictions depending on the type of vehicle (new, used), the mileage on the vehicle, the current market value of the vehicle and a minimum loan amount. If your vehicle does not qualify with one lender, try another lender or contact companies such LendingTree, RateGenius or Bankrate, which provide quotes from multiple lenders.

Review your credit file for any inaccuracies or negative items. Such items affect your credit scores and, in turn, can affect the interest rate on the auto refinance loan and your chances of getting approved. Dispute any erroneous information on your credit report with the three credit bureaus.

Contact local banks and credit unions to ask about their auto refinance programs. Compare different lenders before applying for the loan to get the best deal possible. Each lender will have different approval guidelines, and certain lenders might offer special perks.

Submit the auto refinance application and necessary documentation with a select lender. Wait for the approval from the lender.

Close on the loan and make sure your vehicle's title is updated with the new lien holder and is forwarded to your new lender. The lender will hold onto the title until all payments toward the loan have been made.

How Does Repossession Affect My Credit Rating?

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Falling behind on your car loan serves as a notice to the lender that you're in trouble financially. Most lenders will wait---either by law or by choice---before repossessing your vehicle. If you cannot begin paying on your loan, the lender will repossess your car. An auto repossession will have numerous negative effects on your credit report, and will prevent you from obtaining another auto loan for at least six months.

Most states stipulate that lenders must wait until a person is two months past due before attempting to repossess the person's vehicle. Although the lender has the legal right to repossess your car after two months, most elect to attempt to recover the funds before resorting to repossession. If they deem that fund collection is unlikely, they must repossess your vehicle in attempt to reclaim the money lost on the loan.

Auto loan lenders take a long look at your credit score before approving you for a loan. Having a negative mark, such as a late payment, doesn't necessarily mean the lender will deny you the loan. However, lenders look at repossessed cars in an entirely different manner than a typical late payment. Most lenders will refuse you for an auto loan after repossession. Regardless if you have a large down payment or a co-signer, most lenders will simply not risk taking you on immediately after repossession. Carsdirect.com suggests waiting one to two years after repossession before applying for another auto loan.

The history of a car repossession will stay on your credit report for seven years. The only way you can remove repossession from your credit report before it is automatically removed is by contesting the repossession. If you believe the lender made a mistake in repossessing your car, you can challenge the lender to show proof that your loan is delinquent. The good news is that repossessions have a diminishing effect; the older a repossession report, the less effect it can have on your credit, according to Experian. After seven years, your credit report will show no history of the repossession.

The negative effect of repossession is often compounded by late payments. Since repossession means that you were at least 30-days late on your loan, the lender probably reported you to the three major credit bureaus for a 30-day late payment. A 30-day late payment has far less repercussions than repossession, but it still shows up as a negative report in your credit report.

When your credit score goes down, lenders, especially credit card companies, may choose to increase your interest rate. A lender may not subject you to a rate increase for a 30-day late payment, but they almost certainly will if you lose your car to repossession. The interest rate applies to any existing and future outstanding balances.

Auto Loans for People With Little Credit History

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Your credit score depends on several factors, and one of those factors is how long you have had credit. According to FICO, an organization that tracks credit scoring, at least 15 percent of your score depends on the length of your credit history. If you have a short credit history, though, you do have options for auto loans.

When you use a co-signer, the lender can use the co-signer's credit to make a decision on your loan. If you are unable to make your auto loan payments, the co-signer would be held accountable. This option has drawbacks, however. If you always use a co-signer, your credit will not grow as quickly. Using a co-signer on only your first auto loan can help you build your credit to the point where you can obtain your next loan without a co-signer or refinance the current loan on your own.

Place 20 percent down on your new car. If you default, you will not recover this sum, making the loan riskier for you but less risky for the lender. By making a loan less risky to the lender, you can persuade that lender to extend your loan despite your short credit history.

You have the option of using additional collateral on your auto loan. For example, you can use stock certificates, a savings account or home equity to obtain a loan for an automobile. Most auto loans are secured with the car itself; if you default, the lender seizes the car. By adding additional collateral, you give the lender the option of seizing more assets in the case of your default. This makes the loan less risky for the lender. However, this is additional risk on your part, and you should not enter this type of agreement lightly.

Banks tend to be the most traditional lenders; this means they steer from very high-risk loans due to regulatory guidelines. Lenders outside of these standards can be more lax. Car dealers often have additional incentive to issue loans because they would like to profit on the sale of the vehicle. If your car dealer will not finance you, though, you still have more options. You can seek no-credit loans. Lenders offering these options engage in high-risk debts in order to charge higher interest and fees. While these loans are more costly, they can give you options when traditional financing will not work.

What Are Loan Terms for Used Cars?

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Buying a used car over a new car can save you money -- the Edmunds websites states that new cars depreciate about 20 percent once driven off the dealer's lot. Used-car loans also come with an interest rate, which is the amount the bank charges for lending you money. Zero-percent interest rates are usually advertised for new-car loans, not used.

Vehicle loans are available for a period of 24 months to 84 months. Obtaining a seven-year loan for a used car is uncommon, but if you are purchasing a high-priced item, at least $25,000 or more in most cases, you may find the term is an option. The lender usually has guidelines in place, such as price or credit requirements, to qualify borrowers for an 84-month loan. Some banks do not offer an 84-month term.

In addition, credit can affect loan term options. For example, someone with poor credit might be restricted to a lower loan term because, if the bank has to repossess the car, it wants to make sure it does not lose a significant amount of money. A poor credit borrower might also have a higher interest rate, up to 29 percent in some states. This can affect a borrower's budget and options significantly.

The term of the loan you establish will affect your interest rates. Rates up to 60 months are favorably advertised because they are the lowest and most competitive. For used-car loans over 60 months, expect to see an increase in the lowest qualifying rate. For example, if the best rates you can find are 5.9 percent, you are likely to see a one-point increase for 72 months and another point increase for 84 months.

All used car lenders follow their own value and lending guidelines. The guidelines usually don't allow you to borrow more than the vehicle's value, however, the lending ratio compared to value depends on your credit in addition to the vehicle you want to purchase. For example, you cannot take out a five-year loan on a 10-year-old vehicle with 100,000 miles on it. A loan-to-value ratio considers the amount you want to borrow in comparison to the vehicle's bank-determined worth. Newer vehicles with lesser mileage warrant a longer loan terms.

Someone with excellent credit is often afforded a higher loan-to-value ratio. For example, someone with excellent credit may borrow 120 percent of the vehicle's bank-determined worth, while someone with poor credit may only borrow 60 percent of the vehicle's value, meaning the borrower has to put down a good amount of money.

A variety of used car loan providers exist. On a local level, you should find various banks, from credit unions to national chains, such as HSBC or Bank of America, which exist in many towns throughout the United States. Subprime lenders, which lend to risky buyers at high interest rates, exist both locally and nationally, meaning you can apply online even if a branch does not exist in your area. Dealerships can also handle used car loans because they often work with a number of banks. The lender you decide on can affect your loan term and interest rate, as bank lending guidelines differ.

The term of your loan paired with interest rate can greatly impact the amount you pay back over time. In addition, a longer term will decrease your equity amount. For example, if you are making a minimum payment over a long term loan, such as 72 months, your car may depreciate faster than you make payments. Before deciding on a term, consider rates and overall payback costs. You can enter in your loan amount into an auto loan calculator and change the terms to view your overall payback amount over time. The Edmunds website offers an auto loan calculator that's free to use.

The Average Interest Rates on Auto Loans

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According to the Federal Reserve, the average interest rate for a four-year car loan from a commercial bank was 5.87 percent in November 2010. At the big auto finance companies, that average interest rate was 4.63 percent. Borrowers typically financed about $27,000.

Rates at the auto finance companies fell considerably during the U.S. financial crisis in 2008 and 2009. In the fourth quarter of 2009, rates stood at 3.47 percent. That was a pretty marked decline. In 2005, rates averaged about 6 percent. They fell fairly quickly to 4.99 percent in 2006.

Rates at commercial banks have traditionally been higher than those at auto finance companies. When rates were at their lowest at the auto finance companies, commercial banks lent at an average of 6.55 percent. That's more than 3 percentage points higher.

According to HSH Associates, a firm that compiles mortgage and lending data, average rates in the U.S. vary according to the city. For a $20,000 loan made to a borrower with good credit in December 2010, the average rate in Los Angeles was 6.9 percent. In Cleveland, it was 4.7 percent. Other cities hovered between the two.

Averages are computed by combining the high rates and the low rates. Not everyone gets the typical rates, or even a good rate. The rate you receive may be based on your credit score. You should shop around to find not only the best rate, but the best deal on credit. A high interest rate with a shorter term may mean that you end up paying more per month, but with a shorter number of months. A lower interest rate offered over more than five years may end up costing more money in the long run. Examine the truth-in-lending statement your lender offers to determine the true cost of credit.

What Are the Benefits of Used Car Leasing?

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Leasing a vehicle instead of taking out an auto loan gives drivers the opportunity to drive a new car with less expensive payments. While most consumers associate leasing with new cars, used car leases are also available for those who would rather avoid leasing a brand-new car. Used car leasing offers several benefits that can make getting a different car a more pleasant experience.

The total lease payments on a used car are much lower than those on a comparable new car. This is because cars depreciate the most during the first model year. When you lease a vehicle, you are paying for the amount the car depreciates in value during the time you drive it, so the biggest chunk of depreciation has already occurred when you lease a vehicle that is at least 1 year old.

After a vehicle manufacturer releases a new model year, it collects information to evaluate the quality and performance of its vehicles. When it receives information about a defect or safety issue, it sends out recall notices so that the vehicle owners or lessees can have the problems fixed. When you lease a used vehicle, some of these defects and safety issues will have already been taken care of. This means you spend more time driving your vehicle and less time in the dealership's repair shop.

Because a used vehicle is less valuable than a new car, some leasing companies are willing to approve lease agreements for customers with less than perfect credit. A few are even willing to lease vehicles to customers without a credit check at all. This gives credit challenged drivers the opportunity to lease a late model vehicle. It also gives them the opportunity to rebuild their credit by making timely payments.

How to Turn in a Leased Vehicle Early

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When signing a vehicle lease agreement, you may have every intention of fulfilling the contract and keeping the car until your lease agreement ends. However, life can take sudden turns, and you may find yourself unable to afford the vehicle, or perhaps your family expands and you need a larger automobile. Whatever the reason, there are techniques to help you get out of a car lease early.

Instructions

Take care of the car. Returning the automobile in good condition helps you negotiate an early termination. Perform any scheduled maintenance on the vehicle such as oil changes and tire rotations. Fix scratches or dents, and clean the interior and exterior.

Switch the leased car for a more suitable option. Leasing companies may agree to terminate your car lease early if you agree to lease another car. Choose a less expensive or larger car, and roll any fees and penalties into the new lease balance to reduce your out-of-pocket expense.

Sign the car over to someone else. Contact your leasing company to get information on lease transfers. If eligible, locate someone to take over the agreement and monthly payments. Requirements for lease transfers vary according to leasing company.

Use the payoff option and sell the car. Every leased car has a payoff amount. Talk with your leasing company and inquire about this amount. If unable to find someone to assume the payment, place classified ads and sell the vehicle outright. Forward money from the sale to your leasing company to pay off the lease.

The Things to Remember When Leasing a Car

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Car leasing has become as ubiquitous as fast food, with a barrage of newspaper, television and online ads proclaiming the low cost and advantages of signing on the dotted line. But leasing may not be more financially advantageous than buying, and consumers must take care to understand all key lease terms before closing the transaction. People often enter into leases to obtain a more expensive vehicle, but they must remain vigilant not to go over the allotted mileage, damage the vehicle or change their minds, as early terminations are typically expensive.

Advertisements for vehicle leases may entice consumers with low prices, yet with annual mileage limits generally in the 10,000-to-12,000 range, consumers must determine how many miles they typically drive in a given year. Penalty fees await those who exceed those limits. Also, most car leases are for a period of 36 months, and that time frame may be less than ideal. If a consumer leases a new European coupe and his children about to enter grade school, he will be stuck with his choice when his family could need an SUV or minivan.

Automobile manufacturers frequently make monthly lease payments unrealistically low by pricing the car for an amount that leaves little, if any, profit, coupled with below-market interest rates. While that may initially sound attractive, the result is that the vehicle's "residual value," or market price, at the end of the contract is high. Drivers who want to keep their vehicles, or decide that it no longer makes sense to continue making lease payments, can be left with a steep buyout cost.

Down payments can be particularly risky. Once paid, the driver has no equity in the car. Also, in the event of an accident, an insurance settlement goes right to the lessor or finance company. Lessees should seek out deals that require little or no upfront costs.

If for any reason the lessee no longer wants the vehicle or cannot afford to make the payments, getting rid of the vehicle is more complicated than just trading it in or selling it. Consumers considering a lease should be certain that the contract permits them to transfer possession of the vehicle so that someone else can legally assume the lease's obligations.

Is it Possible to Refinance a Car Loan?

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You can refinance your car loan. Refinancing offers the opportunity to lower your interest rate and save money over the term of your loan, which lowers your monthly payment. Reasons for wanting to refinance vary, but if rates have dropped or you believe you can obtain a better rate, apply to a lender of your choice.

If you took out a loan when rates were high or your credit did not warrant a low rate, you can take advantage of current offers by transferring your loan balance to another lender. To gauge the benefits of a possible refinance, use an auto loan calculator to compare your old loan's term and rate to those of a new one. By shortening your term and lowering your rates, you can save thousands of dollars. You may be able to keep your current level payment for a shorter term, or substantially lower your current level of payment.

If you just purchased your vehicle, you may not be able to refinance it immediately. Banks determine loan approvals based on loan-to-value ratios. If you purchased your vehicle brand-new, your original lender may have allowed up to 120 percent of the vehicle's MSRP (manufacturer's suggested retail price). When you try to refinance the vehicle, it is considered a used car. If you didn't put money down or failed to negotiate pricing, your loan application may be declined because of lack of equity. 120 percent of a used car's value may not be enough to cover your loan balance, so you may have to offer a down payment.

If you've experienced financial hardship and your credit score has dropped, you can apply for a refinance with a co-signer. A co-signer's information, such as credit and income, is used to secure your loan; your co-signer is equally responsible for your payment. You can take advantage of the same rates and approval terms that your co-signer qualifies for. Also, your car loan must be current in order to apply; you cannot transfer a loan if your payments are past due.

You can apply for a refinance at any bank you'd like. Be sure to call around to ask about rates and term options. Obtain your current loan's payoff balance from your current lender so you know how much to apply for. The application process is the same as you experienced when you first took out your loan. Expect to offer your credit information. You'll also have to provide your vehicle identification number (VIN), year, make, model and mileage. Once the refinance is approved, your new lender will satisfy your old loan and become the vehicle's new lien holder.

What Are Good Debt-to-Income Ratios for Auto Loans?

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Auto loans are similar to home loans in several ways, especially when it comes to the application process. While auto lenders that arrange financing may be willing to accept worse credit than mortgage lenders, it will still closely examine the borrower's financial status. A key part of the application process is the debt-to-income ratio, which shows the lender the borrower's potential for repayment.

The debt-to-income ratio shows all the money the borrower owes per month, compared to the income the borrower makes per month. On the debt side, the lender places all the debt expenses that the borrower has averaged out per month: costs like taxes and insurance are typical considerations as well. The lender then adds all the debt payments for other loans, like mortgages, that the debtor must make. On the income side, the lender places all funds received from jobs and investments. The amount of debt is typically expressed as a percentage of the income.

Ideally, borrowers will have a low debt-to-income ratio, which shows that a large amount of income is free to pay future debts---in other words, a new auto loan. Auto lenders like to see a total debt-to-income ratio of around 30 to 40 percent. Anything above 50 percent will usually result in a very unfavorable loan or a rejection. Anything below 36 percent is often seen as positive.

There are many variables that control what debt-to-income ratio auto lenders like to see. The market itself plays an important part. If the economy is in recession and many debts are being defaulted on, the lenders will try to decrease their risk and may require a debt-to-income ratio of 20 percent or less. The stronger an economy is, the more likely this limit will rise. The credit history of the borrower will also play an important part in the application process.

Borrowers that have a higher ratio than they would like for an auto loan should try to lower the debt side of their ratio, however possible. Some expenses, especially those associated with taxes and houses, are more or less permanent and difficult to change. However, borrowers can improve their ratios by paying off temporary debts, especially credit card debts and other short-term loans or lines of credit.

What Happens If I Was Denied for a Car Loan?

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When you submit an application for a car loan, your lender can approve or deny the application for a number of reasons ranging from your poor credit score to the condition of your car. Every lender has its own underwriting guidelines so you can shop around for a loan from another lender, but you should try and resolve the issues that caused the declination of your original application.

Your lender may decline you car loan application if your debt-to-income level exceeds acceptable levels. Lenders calculate DTI by dividing your monthly debt payments into your monthly income, and generally you can only qualify for a loan if your DTI level remains below 40 percent. To resolve this issue, you can reduce your existing debt load by paying off and closing other loans, or you can take on a new job to create an additional source of income.

If you lack the funds to pay down your debt and cannot generate additional monthly income, then you could ask a friend or relative to cosign on your loan. You need to find a cosigner with a high income level and minimal debt. If you were declined for a loan because you have a poor credit score, then a cosigner with good credit may enable you to qualify for a loan. However, many people are reluctant to cosign on loans because if you default on the debt, then it hurts the cosigner's credit score as well as your own. Therefore, make sure you explain the risks before asking someone to cosign on the loan.

If you cannot resolve your DTI or credit issues then you could consider applying for a loan from a so-called subprime lender. Such lenders specialize in writing high-risk loans for people with poor or subprime credit. These lenders mitigate the risk by charging high interest rates. Additionally, many subprime lenders include hefty fees and prepayment penalties that mean you cannot easily refinance the debt. Therefore, you should only use subprime lenders as a last resort if you have no other way of financing your vehicle.

When you apply for credit, your credit score drops by a few points. If a lender declines your application because you have poor credit, then you only make the situation worse by shopping around for loans from multiple lenders. While a small drop in score would not greatly impact someone with good credit, it could cause major issues for someone with a low score. You can improve your credit score by paying past-due debts and settling delinquent accounts. Resolving such matters before you re-apply for a car loan will greatly improve your chances of obtaining credit.

Indiana Auto Tax Lien Laws

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Indiana sells liens to repossessed vehicles at auction. Investors bid on the liens and the highest bidder purchases the lien. However, the sale does not become final until the original owner of the vehicle surrenders the vehicle or one year has passed. You must get a tax deed in addition to a lien before you can take possession of the vehicle.

If you have a lien outstanding on your vehicle, you cannot sell it without the lienholder's permission. When you go to the Indiana Department of Motor Vehicles to transfer the title, you must provide the lienholder's contact information. The DMV then contacts the lienholder to get a copy of the title and transfer it into the buyer's name. The lienholder can refuse to release the title if you have not made arrangements to transfer the lien.

Indiana does not automatically release liens when you pay them off. If there is a lien on your vehicle for past due auto tax or anything else, after you pay it off, you must apply for a new title in your name alone. Most lienholders take care of this for you -- once you pay back the loan, the lienholder contacts the DMV and files an application to get a new title in your name.

If you purchase an auto tax lien at an auction, you must pay the property taxes due on the auto that year. Indiana requires you to pay property taxes regardless of whether the original owner of the vehicle paid taxes before the lien was sold at auction. Pay property taxes to your county of residence when you purchase the lien.

Indiana gives the original owner of a vehicle one year to redeem the vehicle after if it is sold at auction. Thus, purchasing the lien does not guarantee you the right to possess the vehicle; you may not possess it until you get a tax deed from the register of deeds in your county. If a vehicle owner redeems a vehicle, meaning he repays what he owes on it, the lien buyer has the right to reimbursement of his purchase price as well as any attorney's fees associated with the lien.

How to Lease a Car Without Disclosing Your Employer

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There is a large difference between not having an employer and not having an income. People without employers can be contractors, entertainers, salespeople, consultants and retirees. Others may have earnings from interest or benefit payments. People with alternative sources of income often need to lease cars for business and personal use. Many lenders serve this demographic due to substantial demand and quality of borrower. Disclosing your employer on a car lease application is much less important than disclosing your source of income and your ability to pay your bills.

A car lease, also called a finance lease, is essentially a long-term rental agreement where you pay for the right to use a car. The lesser and the lessee form a contract containing terms, then sign the agreement when the terms are settled upon. Signing an auto lease agreement means that you agree to make regular monthly payments, pay all taxes and licensing fees, keep suitable car insurance and take good care of the vehicle. Additionally, you agree that you'll pay the lease for a specified number of months, typically 24 to 48, until the lease expires.

As a borrower without an employer, learning the state of your financial affairs will smooth conversations with car-leasing professionals. Lenders will look at your source of income like savings and reported 1099-MISC earnings. Client, benefit, interest and court-ordered payments also are considered. Your credit history is very important when applying for a car lease. Lenders will look closest at your FICO score and how long you have maintained residency in a single place because they are trying to gauge how stable you are and how likely it is you will fulfill the terms of the lease agreement.

If you are trying to source a lease without an employer, a good credit history goes a long way when negotiating the best lease terms possible. It is wise to be prepared with a copy of your credit report, a list of income sources and proof of income when meeting with lenders. Keep in mind, most car salespeople dont really know the details about the finance products they are selling, so hear out what they have to say and then schedule an appointment with the dealership's finance manager. He will provide you with calculations and terms of the leases available to you. Take the information home for review and make sure you understand all of the terms and calculations before returning to sign. Consumer advocate groups like The Federal Reserve Board have guides about auto leasing readily available on the Internet.

Although obtaining a lease at a dealership offers the convenience of signing a lease and driving away in a car, there are ways to get better deals if your dealership has a disappointing finance department. You can shop for a better deal through independent sources like your bank or credit union and bring it to the dealership. The car source will be the dealership, but the lender will be your chosen institution. Additionally, comparative shopping online is a way to get a great value. Websites that serve as auto lease intermediaries can cover a wide territory and will take your information, then match you with potential dealers.

Wednesday, April 29, 2009

Lien Reporting

Lien Release

Personal Liability

Handling Lien Releases in the Future

Tuesday, April 28, 2009

Zero Percent Financing

Zero Percent Financing Benefits

Zero Percent Financing Drawbacks

Cash Back Financing

Cash Back Benefits

Cash Back Drawbacks

Considerations

Definition

Negative Effects

Benefits

Considerations

Warning

Monday, April 27, 2009

Instructions

Sunday, April 26, 2009

Reasons

Rates

Minimizing Depreciation

Other Options

Lower Monthly Payment

Driving Habits

Mileage Penalties

Considerations

Saturday, April 25, 2009

Instructions

Friday, April 24, 2009

Check for Vehicle Damages

Complete an Inspection

Review and Make Copies of Your Paperwork

Clean Your Vehicle and Return Vehicle Items

Thursday, April 23, 2009

Advantages Compared to Leasing

Refinancing Benefits

Early Payoff Advantages

Tuesday, April 21, 2009

Instructions

Instructions

Monday, April 20, 2009

Buy Here Pay Here

Bad-Credit Financing

High Interest

Considerations

Instructions

Bankruptcy

Pay Down and Trade

Refinance

Negotiate a New Payment Plan

Saturday, April 18, 2009

Instructions

Thursday, April 16, 2009

Instructions

Payment

Future Market Values

Options

Warranty and Repairs

Wednesday, April 15, 2009

What Leasing Companies Want

Company Requirements

Cosigners

Bottom Line

Tuesday, April 14, 2009

Instructions

Monday, April 13, 2009

Instructions

Sunday, April 12, 2009

Pro: It's Only a Few Years

Pro: Short-Term Price

Con: Long-Term price

Con: It's Not Yours

Saturday, April 11, 2009

Instructions

When Repossessions Occur

Future Auto Purchases

Seven Years