2011 ~ Managing a Car Loan

Thursday, December 29, 2011

Is a Bank Account Needed to Get a Car Loan?

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There are many things needed to get approved for a car loan. The list of specific items is determined by the bank or lending institution where you apply. It is possible to get approved for a vehicle loan without a bank account, but most lenders won't allow it.

Most lenders approve car loans based on your credit score, income and how well you have paid your credit obligations in the past. At the time your application is submitted or shortly after, the underwriter will check your credit score with the three major credit bureaus. The underwriter will also request certain documentation such as pay stubs, tax returns and statements from all of your bank or investment accounts. The type of documentation requested will depend on the type of loan you want.

The lender wants to see documentation because it gives the underwriter verification that the information on your application is accurate. Your pay stubs and tax returns show the underwriter you are employed or have a steady income stream. Your bank statements show you have the ability to manage your money, increasing the lenders confidence in approving your loan. Investment account statements show the lender you have some assets, which also increases confidence you will meet your loan obligations.

Having a bank account gives the lender more proof you can manage your money. Your account will show you are paying your bills and depositing money. Some lenders offer discounts if you allow your monthly car loan payment to be deducted automatically from your bank account.

If you are thinking about applying for a car loan and don't have a bank account, it would improve your chances of getting approved if you had one. If you aren't able to open an account because of age or problems with maintaining bank accounts in the past, try adding yourself as a joint account holder with someone who is able to open an account. Some banks have accounts specifically for people who have problems opening one.

Most Important Tips When Buying a Used Car

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If it's time to trade in your current vehicle for a "new used" car, you can do it by walking into a dealership and choosing a car based on cosmetic appeal alone -- or you can do your homework and take your time before you make up your mind. If you take your time and make a decision based on a mechanic's report and maintenance records, you're much likelier to be happy with your choice.

When you are looking at a car, don't commit to one right away. If you see one that you might be interested in buying, let the salesperson know you want to get an independent mechanic to look at the car before you make any decisions. This should cost you approximately $100, which is a small price to pay if it prevents you from having to pay for expensive repairs in the future. Ask him for a written report that includes all the problems and how much he would charge to make repairs, suggests Tips on Buying a Car.

Ask the salesperson for a copy of the precertification inspection paperwork. This paperwork should include everything that was evaluated, as well as mechanical problems that were found and repaired. Find out if the certification you're looking at is a manufacturer certification. Any pre-owned cars with a manufacturer-provided certification are easier to bring back for any needed repairs.

Check the exterior of the car you're interested in. Look for chipped paint and dents on the body. Look closely at the gaps between the body of the car and the doors -- any unevenness may indicate the vehicle was involved in an accident. Push down on all four corners of the car you're interested in. They should go down and spring back up with no hesitation. Open and close the doors. If you feel any resistance, the car may have been involved in an accident, according to Tips on Buying a Car.

Ask the salesperson how the dealership obtained the vehicle. If it was bought at auction, ask to see any mechanic's reports to verify the roadworthiness of the vehicle; if it was traded in, ask for the maintenance records so you can verify it was serviced regularly and on schedule.

Pop the hood of the vehicle you're looking at and look at the engine. If you're not mechanically inclined, take someone who knows his way around cars with you. Check the oil -- it should be a clear golden color, free of dirt, indicating it has been maintained regularly. While you are checking the engine oil, check other fluid levels, such as the coolant, transmission and brake fluids, recommends Tips on Buying a Car.

Ask for an overnight test drive, promising you won't put any more than 100 miles on the odometer. You'll have to provide proof of insurance and fill the gas tank if it has a full tank when you take it. Take the mechanic or someone else with you as you drive the car. Compare notes.

Verify the mileage shown on the car. Use the vehicle registration paperwork and the trade in paperwork to ensure it is accurate.

Ask to see a CarFax report. Check to see that the VIN on the car matches that on the report. The CarFax report lets you know if the car has been involved in any previous collisions or if the title is unclear.

Turn the headlights, windshield wipers, turn signals, air conditioner and heat on and off, making sure they work. Test the seats, checking to see if they adjust easily. Have someone press the brakes as you check to see whether the lights work properly. Look at the maintenance log, noting whether the vehicle has been maintained on the recommended schedule.

What Happens If You Do Not Turn a Car in at the End of a Lease?

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As stated in your lease contract, you must turn in your vehicle at the end of the leasing term. While repercussions and penalties are further stated in your contract, you can expect significant penalty fees or a repossession if you do not return the car, as the vehicle is not yours if it is not paid for.

Go to your lease contract to review bank penalties. Your lease contract also lists the lease buyout amount, or your last lease payment which is due upon the end of your term to keep the car. Most banks try to contact you before your lease is up to help you determine your best lease-end option. Contact your bank if you want to keep your car or extend the term; do not simply keep it past the lease end date. Some banks allow lease extensions, allowing you to stay in your car longer.

You can finance the amount owed on the vehicle if you want to keep it. You do not have to finance through your leasing bank, you can choose whichever lender you would like. You can also return your lease and walk away at the end of the term. Or, you can trade it in for the buyout amount and put the vehicle toward another car purchase. If you're concerned about over-mileage or other leasing fees, trading in or selling privately may prove your best bet.

If you fail to return your lease and do not contact the bank to work out a purchase or lease extension, the bank can repossess the car. The terms of repossession are further discussed in your contract, but usually one missed payment is all it takes. The bank will hire a repossession company to collect the car, whether it be from your home, work or a parking lot. The bank does not have to notify you if it plans a repossession because you acknowledged the terms when you signed your contract.

Late payments and repossessions are both reported to the credit bureaus, damaging your credit. A repossession significantly effects your credit rating, and it is unlikely you will be able to lease again for years to come, as good to excellent credit is required to do so. To avoid the negative and expensive consequences of damaged credit, call your bank to determine your options or work out a payment plan if you owe money.

What Are the Qualities I Need to Lease a Car?

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Car leasing banks require good to excellent credit for application approval. Expect to provide your credit information when applying for a lease. Aside from credit score and history, leasing banks also determine an applicant's debt-to-income ratio, which is the lessee's ability to pay his monthly lease payment. If you're turned down for a lease, consider financing instead.

Expect to provide a credit application to lease a vehicle. A leasing bank reviews all of your current and past accounts, including payment history, length of time on accounts, credit score, account balances and available credit. If your report shows past-due accounts, such as previously reported late payments or current past-due payments, judgments or charge-offs, you aren't likely to obtain a lease approval. You may, however, apply for a lease with a co-signer, or someone who has good credit who can secure your lease.

Aside from your payment history, a leasing bank also reviews your debt-to-income ratio. This ratio is used to determine whether or not you can afford a lease payment. The leasing bank requires proof of income and compares it to the amount of debts you pay out each month, which are listed on your credit report. You'll also provide the cost of your mortgage or lease payment on your credit application. Even with a good credit score, you application can be declined because of your debt-to-income ratio.

A leasing contract restricts your vehicle use. Before applying for a lease, make sure you understand all contract requirements and possible penalties and fees. Expect to stay within your mileage allowance. If you go over the allowance, you may pay as much as 30 cents per mile. You must also maintain and repair your vehicle throughout the leasing contract. At the end of the contract, the leasing bank inspects the vehicle and charges you for any repairs or maintenance not completed. If you can't abide by a lease contract, you might find yourself paying thousands of dollars at the end of the lease term.

If you don't meet standard leasing requirements, you can still purchase a new car. You may choose to finance the vehicle instead. You may obtain a loan approval even with blemished credit. Financing also allows you to drive your vehicle as you please. You won't have to abide by mileage or wear-and-tear restrictions. Rather than pay for a vehicle's depreciation and return the vehicle as you would with a lease, your payments result in full vehicle ownership if you finance.

Can You Buy a Car While on Unemployment With a Cosigner?

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Unemployment is a form of temporary income. Most lenders won't approve a loan without a stable income and verifiable employment. A cosigner, however, secures the terms of your loan with his income and credit rating. Whether or not you'll obtain a loan approval depends on your and the cosigners credit history and income.

Lenders review each loan applicant's debt-to-income ratio. This ratio consists of the money you and your cosigner have coming in compared to the amount of debts you have to pay out. Because your cosigner is as responsible for the car loan as you are, the lender considers his total debt responsibility. If your cosigner's debt responsibility isnt in line with his income, the application might be declined. Your cosigner must also prove he can afford the payments even though you plan to make them.

Aside from a good debt-to-income ratio, your cosigner must also have good credit, which requires an established history of paid accounts. For example, a cosigner who just opened a credit card as his only piece of credit history isn't likely to prove an ideal cosigner. He shouldn't have any repossessions, bankruptcy, tax liens, foreclosures or past due payments listed on his credit report. Even if you have excellent credit yourself, using a cosigner with a poor payment history might affect your chances of a loan approval.

To ultimately determine if a cosigner can help you obtain a car loan while youre on unemployment, apply for a loan preapproval with your cosigner. Check the rates of lenders before you determine where to apply. Once you find a lender, apply with your cosigner and secure your loan before you start shopping for a car. Approval processing differs by lender, but you might wait up to one week for the lenders decision.

If you can't obtain a loan while on unemployment because of cosigner issues, wait until you're working again before applying for an auto loan. Consider using a buy here, pay here lot, which is a dealership that lends directly to buyers. These dealers often lend to people with credit issues who can't obtain a loan elsewhere because of income, employment history or credit score. Rates are often higher and require a shorter term for quick payoff, but might prove an ideal option if you need to purchase a car immediately.

Hints and Negotiating Tactics When Buying a Car

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Negotiating the price of a new car can intimidate prospective buyers. Car dealers never automatically offer the lowest possible price of a vehicle and always attempt to make the most profit possible. In order to negotiate successfully, you need to be an informed and determined buyer.

Find out what the dealer most likely paid for a certain vehicle by searching for dealer invoice pricing. Also, research the Manufacturers Suggested Retail Price (MRSP). Determine if your car choice has any rebates or dealer incentives. You can find all of this information by searching on Edmunds.com. To calculate dealer cost, add together the dealer costs, delivery fees (which average about $800) and advertising fees (which average about $300). Then subtract any rebates and incentives and also subtract three percent of the MSRP (a holdback amount that the dealer gets the manufacturer when it sells a car). Negotiating Dynamics explains that most dealerships need to make at least a three percent profit on every car sold. CarBuyingTips.com recommends that customers offer five percent over the dealer's cost.

Negotiating Dynamics suggests that you get quotes on automobiles from at least three or four dealerships in your area by visiting local dealership websites. After you get the quotes, make phone calls to all of the dealers to verify quotes and indicate to the salesperson that you want a lower price closer to the invoice price of the car. At this point, the salesperson will most likely suggest that you come to the dealership to discuss the deal further. Make an appointment with the salesperson of your choice.

When you meet with the salesperson, offer to pay the price that you have calculated as the invoice price to a reasonable profit of three to five percent. If the salesperson argues that your offer does not reflect the actual invoice pricing, then ask to see the actual invoice and negotiate based on the invoice.

If you cannot reach an acceptable price at your first appointment, leave and plan to continue negotiations by phone or at a follow-up appointment. Negotiating a car purchase may take some time if you really want to get the lowest possible price. If you lose focus or get impatient, you will likely pay more for the car in order to halt negotiations.

How to Change a Car Registration

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Every state requires drivers to register their cars, trucks and SUVs before driving them on public roads. While laws vary by state, many of the procedures are the same. You can also change your registration if you change your name, transfer the car from a parent to a child or move.

Your state's department of motor vehicles will supply a list, either in a brochure or on its website, of the information you need to present when you apply for a change of registration. Besides valid identification, one of the most important things you'll need is a copy of the title to prove that you own the vehicle. If you don't have the title because you are still financing the car you'll need to supply a copy of the bill of sale or a letter from the financing company that holds the title naming you as the owner. Other requirements include a check for the registration change fee and an insurance card to prove that you have a policy that meets your state's minimum standards.

Once you have the required documentation and information, you can apply for a change to your registration. Your state's department of motor vehicles will offer a form called a change of application form, or a similar name. This is the form you'll need to fill out and submit along with copies of your documentation. Once the department has your request it will take several weeks to print and mail out your new registration. If your former registration is no longer valid, the department will issue you a temporary registration that serves as proof of vehicle registration. Driving without a valid registration is a violation that can lead to fines.

Most states allow drivers to change their registration information by visiting a department of motor vehicles office. If you change your address or other basic information only, you may also be able to make the change when you renew your registration online or through the mail.

When you buy a new vehicle, the dealer will apply for your registration for you. If there is not time to apply for a registration the dealer can issue a temporary registration and include an estimated charge for the registration cost on the bill of sale. This means that you may owe an additional fee or receive a refund from the dealer once the department of motor vehicles processes the application and issues a permanent registration.

If you move from one state to another, you'll need to change your registration to reflect your new state of residence. Most states limit the amount of time you can wait to change your vehicle registration once you take up a permanent residence. Besides providing proof of ownership and other documents related to changing a registration, you may need to submit to a vehicle inspection. This inspection determines that your car's vehicle identification numbers, or VINs, match your records. You may need to also submit to a safety inspection or smog test to make sure that your car complies with the new state's auto registration guidelines.

The Correct Way to Handle Lease Termination

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The primary advantage of a car lease is that, through lower monthly payments, you can afford a nicer vehicle than if you opted for financing. Leasing, however, is not permanent. Lease terms vary by dealership, but at the end of the lease you must return the car to the dealership. In essence, you are "renting" your vehicle. Whether you terminate your lease at the end of your contract or break your lease early, following the right protocol helps you save money.

Instructions

Read through your contract for your options. If you plan to break your lease early, your contract will contain the provisions you must follow when doing so. If the dealership allows you to terminate your lease before the contract expires, your lease contract will stipulate the fee you must pay. If no provision exists, determine how much it would cost you to buy out the lease. In some cases, buying out a lease by paying the remaining payments in a lump sum is cheaper than paying a break-lease fee.

Detail the car. This includes washing, waxing, vacuuming and spot cleaning. You can either detail the car yourself or hire someone to do it for you, but returning the car clean saves you from paying the dealership's high cleaning charges.

Replace the tires. If your tires all match and still have plenty of tread, replacing the tires is not necessary; but if the tires have little tread left or do not match, the dealership will deduct the cost of a set of new tires from your security deposit -- and you can purchase them cheaper elsewhere.

Take the car in for maintenance and minor repairs before returning it. The dealership's fees for routine maintenance and any minor repairs the vehicle requires will almost always be higher than a private auto repair shop's fees. Bring your paperwork with you, demonstrating that maintenance was recently performed, to avoid additional charges.

Ask the dealership to prepare your lease termination paperwork while you wait rather than mailing it to you. Just because a car dealership employee tells you that everything has been successfully taken care of and you will receive your security deposit back, you cannot hold the dealership to verbal promises. Get it in writing, and don't leave your vehicle at the dealership until you do.

What Are the Benefits of Paying Cash for a Car?

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Many car buyers are accustomed to getting a loan from the bank or working out a payment schedule with the car dealer. Before financing your purchase, take the time to figure out how much money it will cost you over the life of your car.

If you buy a car with cash, you've paid for it before you even drive it home. You will never make an interest payment on it. If you borrow $10,000 to buy a car at 5 percent interest and take five years to pay it off, you will spend over $1,300 in interest over that period. You're better off financially if you can get by without a car, or drive a low-cost used car, for the amount of time it takes you to save the money to pay for a new car with cash.

If you pay for a car with cash, instead of paying interest on your car loan, you can be earning interest or dividends by investing the money that you're not paying out for your car. Unless you have your money in a tin can at home, it's always working either for you or against you. Pay upfront and put your saved money into good investments and it will always be working for you.

Decrease the risk that's involved in the transaction by paying in cash for your car. Taking out a car loan puts you at risk of having the car get damaged or wrecked before you've even paid it off, leaving you with a debt and nothing to show for it.

Once you open the door to getting a car loan, you may be tempted to borrow more than you need and to buy a car that is more expensive than your budget can or should support. If you decide that you will pay in cash, you can only buy as much car as you can afford with the money that you have. By opting out of the credit game, you protect yourself from the risk of succumbing to your own temptations and keep yourself out of problematic future debt.

What to Do When You Are Behind on Car Payments?

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If you're behind on your car payments, immediately call your lender to discuss your financial situation. Many lenders can offer help to distressed borrowers to eliminate late fees, bring payments current or lower a car payment. Repossession should be your last resort, as it significantly damages your credit rating. Consider the different options your lender may offer and if any can help you to bring your payment current.

Ask your lender if you can defer one or more of your car payments. If your lender allows this, it can help to bring your account current without having to pay penalty fees. You also can avoid having your missed payments reported to the credit bureaus. Even if your lender only allows one payment deferment, you can subtract the amount of the car payment from the money you are past due. Some lenders may offer a deferment only if your payments are not past due, so call your lender as soon as you know you can't make your payment.

Your lender may work with you during financial hardship by lowering your monthly payment amount, which is accomplished by extending your loan term. Before you ask your lender for this option, go over your budget to determine how much you can afford to pay per month. If you are facing hardship because of unemployment, disability or other documented causes of hardship, have your paperwork ready to provide to your lender. Discuss loan modification with your lender, but do not agree to an unaffordable payment. If you come to an agreement, be sure to get it in writing.

If a loan modification or payment deferment isn't an option, consider selling your vehicle. Obtain your loan's payoff amount from your lender and check your car's value at the Edmunds or Kelley Blue Book website. If you can sell your vehicle for less than the amount you owe to your lender, you can keep the profit. If you owe more than the loan's payoff amount, determine if paying your past due amount or the remaining balance due on the loan after your sales price is cheaper. You must satisfy your loan to sell the vehicle.

If your payments are already past due, your lender may have already started the repossession process. Rather than allow the lender to collect your vehicle unexpectedly, arrange to bring the car to the bank or a dealership for return. Otherwise, the repossession company can take the vehicle from your home, place of employment, a friend's house or a parking lot. Once the vehicle is taken back, your lender will sell it and bill you for any amount due on your loan balance if the vehicle's sale doesn't satisfy your loan. You must still pay your lender if you owe money to avoid a future lawsuit or wage garnishment.

How to Buy a Repo Motor Home

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Purchasing a repossessed motor home can save a buyer a lot of money, according to MotorhomeRV.org. Many lenders repossess a motor home from the owner when the payments are not made on time. The motor home owner may also voluntarily surrender the vehicle to the lender if the payments are no longer affordable. The lender then must sell the motor home to help offset a potential loss.

Contact a lender in your area and ask to speak with the repossession manager. Find out if the manager currently has any motor home repossessions for sale. Arrange a time to meet with the repossession manager if there is a motor home for sale that interests you. Take a mechanic with you if you are not confident in your ability to decide whether the motor home is roadworthy. Ask a mechanic how much the fee is for an on-site inspection before you hire one.

If you decide that you want to make an offer to purchase the motor home after inspecting it, do not make the offer right away. Thank the repossession manager and ask for a business card so you can get back in touch later. Once you are home, use a search engine to find a website that has motor home pricing to determine the value of the vehicle. Find the motor home on the website and scroll down the list of options. Check the box next to an option the motor home features, such as a refrigerator or awning. Print the valuation report to refer to when you begin negotiating with the repossession manager.

Call the repossession manager and find out what the asking price is for the motor home. Compare the price to the website valuation report. If the manager is asking the "Retail" price, make a counteroffer that is close to the lowest price on the report. Depending on how badly the lender needs to sell the motor home, you may be able to negotiate with the repossession manager until you arrive at a final sales price that is close to the low value on the report.

Ask the repossession manager if there is a discount on the interest rate for using the lender to finance the motor home purchase. The manager may not have the authority to offer a specific interest rate, but you may still be able to receive a discount if you ask. Apply for the motor home loan with the lender and if the financing terms are agreeable, set up a time to close on the loan and to take delivery of the motor home.

Many lenders use a motor home auction to sell repossessions. If you are unable to find a motor home repossession at a local lender, look online for auctions in your area. Check the auction website for motor home repossessions that are for sale. Research the value of a motor home you like and print the report to take with you to the auction. Take your mechanic if you need help evaluating the condition of the motor home. Set a maximum price that you will bid for the motor home and do not get into a bidding war that causes you to exceed the price. Finalize the sale if you are the winning bidder and arrange the financing to complete your motor home purchase.

The Legal Amount of Time to Return a Car That Can't Get Financing to the Dealership

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If a dealership let you take a vehicle but couldn't obtain an approval from a lender, bring the vehicle back immediately. Since the vehicle isn't paid for, it still belongs to the dealer. If you don't bring the car back, the dealership can report it as stolen. Most dealers will work with you if you are out of town or need a day or two to return the car, but don't assume so.

A dealership does not directly lend money. If you purchased a vehicle after banking business hours and signed paperwork, the paperwork you signed was never processed. Dealers have lending contracts on-hand, which they may have had you sign but never sent to the lender. Usually, a dealer will call a lender to obtain a definite approval, but if not, he will have you sign contracts if he believes the lender will approve you after receiving your information. The decision is based on your credit information, down payment, the vehicle you choose and your budget. If the bank declines the loan afterward, the dealer probably doesn't have another lender to extend you a loan.

You can't keep the car because it belongs to the dealership. If you check your paperwork over, you'll probably find that you signed a buyer's order, which states that your purchase was subject to financing or payment. Even if you added the vehicle to your insurance policy, you probably have a dealer plate on the vehicle. Many dealers require buyers to sign a dated document to keep in the car for a dealer plate, which has an expiration date. If you're pulled over while using the dealer plate with an expired document, you might run into problems. The dealer can also report the vehicle as stolen if you refuse to return it.

Return the car immediately unless you are able to pay for the vehicle in another way. Read through your paperwork to determine if the dealer provides a time frame for the car's return. You might also call your state Attorney General's office or motor vehicle department to find out if you have any rights. Otherwise, arrange for a ride and bring the car back to avoid police interaction. If you can't immediately return the vehicle, let the dealer know, he may work with you.

You can keep the vehicle if you can obtain your own financing. You don't have to use the dealer's financing options to secure a loan. Try to apply to another lender for the amount stated in your buyer's order. If your application is declined, use a cosigner. A cosigner, who should have good to excellent credit, can join you on the application to secure the loan. Lenders also use a cosigner's income and score to determine rates and lending terms, so you might obtain a low rate and payment if you apply with a cosigner.

How to Price a Salvage Title Vehicle

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The term salvage can mean different types and degrees of damage in various situations. A previously salvaged vehicle might have sustained heavy flood damage or a bent frame in an accident or it could have been recovered soon after a theft and never been damaged. While a salvage title will always reduce the resale value of the vehicle, it is critical to assess what type of damage was done and to get a detailed inspection of the car or truck in question.

Instructions

Uncover and document the event that resulted in the issuance of the salvage title. Whether you are buying or selling the vehicle, you can arrive at a much better price estimate if you know the details of what has happened and have access to solid proof of the events. Obtain pictures of the crash, flood, fire or other adverse event and get all receipts for replaced parts and labor performed. Also try to find out how much the vehicle was sold for in the damaged condition. If a car that ordinarily sells for $20,000 changed hands for $14,000 immediately after the accident or theft, perhaps the damage wasn't catastrophic. If the price was $7,000 for the same car, however, it was probably in fairly bad shape. Keep in mind that withholding key information about the vehicle's past while trying to sell it may have legal consequences later on.

Get the vehicle inspected, if possible, at an authorized dealer. The factory-authorized dealerships usually charge more for both parts and labor. However, when dealing with a salvage vehicle these are the best places to get the car inspected. Not only will an authorized dealer be able to tell if the car has been properly fixed following the adverse event, he can also identify whether original parts have been used during the process. While a mechanic who works on all sorts of vehicles may not always be able to identify which parts on a vehicle are original factory parts, authorized dealers are more familiar with every single component on the car brands they specialize in.

Following the inspection, get a statement that summarizes the findings.

Find comparable vehicles and calculate the average price depreciation for salvages. Search the used car databases for cars or trucks with salvage titles and try to find vehicles that are similar to yours in terms of manufacturer, trim level, mileage, model year and type of damage previously sustained. Just as importantly, match the level of documentation. If you are buying or selling a vehicle with "full documents" detailing what happened, how it was fixed and what kind of state the vehicle is in at the moment, you should reference vehicles with similarly detailed histories and paperwork. If you have not been able to access most of this information, your reference point should be similarly undocumented or under-documented vehicles.

If you cannot get exact hits at first, widen your search criteria and include other makes and models with similar damage levels and documentation, just to see how much lower they are selling compared to similar cars that have never been damaged. The percentage by which vehicles depreciate as a result of a particular type of event, backed up by similarly detailed evidence, is often similar across brands and models.

Another useful method is to reveal the car's full history to a reputable dealer and ask for a quote. Typically, dealers offer 15 to 25 percent less for a car than what you can get by selling it to a private party. While certain dealers may refuse to make an offer for a vehicle with salvage title, many will, so keep trying.

How Will it Affect My Credit If I Return a Car Back?

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Returning your vehicle back to a dealership or bank is known as repossession. Breaking a loan contract significantly impacts your credit rating. Learn what to expect after the vehicle's return; you will still owe money to your borrower. Your credit can be further damaged if you don't pay your lender for the balance due after the resale of your repossessed vehicle.

If you make arrangement to return your vehicle, it is known as a voluntary repossession. If your lender hires an outside collection company to collect your vehicle, the repossession is reported as involuntary. Both types of repossession affect your credit the same. Make arrangements with your lender to return your vehicle if possible, as an involuntary repossession may prove embarrassing or unexpected. A repossession company can take your vehicle from wherever you leave it, which includes a parking lot while you're in a store shopping, your place of employment or your driveway.

Your credit score starts to decline once you become late on your car payments. Future creditors can view how long your account is past due before the repossession occurs. For example, if your account was 90 days past due and you returned your vehicle voluntarily; both instances are listed with your loan account and is viewable to future lenders for at least seven years. Once the vehicle is returned and the repossession is counted against you, your credit score will drop substantially. You may be declined for future loans, credit cards and even employment or an apartment because of the repossession.

Once your vehicle is repossessed, the bank will resell it in an attempt to minimize its loss. If you owe less than the vehicle's sales price, the lender will return the profit to you. If not, expect to receive a statement itemizing your fees and the amount of money due on your loan balance. Lenders usually offer a payment plan once the vehicle is resold. The repossession will still remain on your credit history even once you pay the balance.

Your lender is within its rights to sue you for the amount of money you owe, as stated in your loan contract. If the lender sues you and you still refuse to pay, the bank can pursue a judgment and garnish your wages. A judgment is also reported to the credit bureaus, furthering damaging your credit rating. If you decide to settle the balance due to avoid the judgment, you must pay applicable taxes on the amount of the loan balance that you did not pay, which counts as income. Expect to pay any taxes due or the Internal Revenue Service can report your nonpayment to the credit bureaus, as well as garnish your wages.

How to Change Your Address on a Car Insurance Policy

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When you change the address for your car insurance, the policy is reassessed to calculate risks because of the distance you travel yearly. If you increased your daily driving mileage or moved to a high-crime area, you will likely see a price increase. For this reason, you should call your insurance agent as soon as possible. While you may be able to access your policy information online to make changes or adjustments, calling your agent ensures you'll be aware of any price changes that result from your address change.

Instructions

Find your insurance information. Locate your agent's phone number and policy number, usually found on an insurance card or the packet sent to you that lists your coverage and policy information (sent to you when you first bought the policy).

Call your agent and tell a representative that you wish to update your address information. Give the agent your policy number and identifying information.

Tell the representative your new address and discuss any additional policy-change information, if any. Your representative will likely ask if you still work at the previous address on file. Discuss the policy cost difference and ask for new cards to be sent to you.

Can I Refinance My Car Lease at My Credit Union?

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If you want to finance your leased car, you must purchase it from your leasing bank. For this reason, the process is considered a first-time finance, not a refinance, which implies transferring a loan from one lender to another. You may finance your leased car at a credit union as long as you can obtain loan approval.

Credit unions are local to an area, serving communities as nonprofit organizations. Auto loan rates and various banking fees are often lower at credit unions than at banks. For this reason, you may obtain a lower auto loan interest rate than at other lenders in your area and save money on your overall loan payback amount and monthly payment. To obtain a loan at a credit union and to learn more about credit union incentives, meet with a loan adviser to discuss your options.

Credit unions, just like most auto loan providers, base your total loan amount on a vehicle's loan-to-value ratio. Used car values are determined by a credit union based on a vehicle's year, make, model, features and mileage. After the credit union determines your vehicle's loan value, it then determines a percentage that you can borrow of that value. Each credit union has its own loan-to-value threshold, so you may obtain an approval for more than 100 percent of the vehicle's value or less. If your vehicle's value is less than your leasing bank's buyout amount, you may have to provide a down payment to obtain your auto loan.

Credit union loan approvals or declines are not instant, so expect to wait up to five business days for a decision on your loan application. Besides your loan-to-value ratio, the credit union will also asses your debt-to-income ratio, which is the amount of money you have coming in (verified by proof of income) versus the amount of money you pay out (verified by your credit history). Once approved, credit unions use a tier system to determine your loan's interest rate. You may not obtain the best rate available even with good credit; interest rates may fluctuate by less than 1 percentage point depending on approved tier.

When you purchase a vehicle from a leasing bank, you must pay taxes on the car's purchase price unless your state does not charge sales tax. Your credit union may allow you to roll taxes and other state fees into your used car loan or require that you provide a down payment depending on your loan-to-value ratio. You must also pay state fees, such as titling and registration costs. Until you purchase your leased car, it is registered and titled to your leasing bank.

Can I Still Donate My Car Even If It Hasn't Run in Years?

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Most charitable organizations that accept car donations will gladly take a car that does not run. You should remember, however, that the cost of removing such a vehicle is higher as a tow truck is required to move it. To make the effort worthwhile for the charity, the vehicle must be in sufficiently good condition and have at least some value beyond the scrap metal.

Old cars are among the most popular items that are donated to charitable organizations. A large number of charities throughout the country will gladly accept your old car, which they in turn sell to old car dealers or to junk yards. Such donations help clean up the streets in your neighborhood by removing an old, and in some cases inoperable, vehicle, benefit the charitable organization and save you time as it can be rather difficult to sell an old car. In some cases, donating your vehicle can be financially more rewarding than selling it. Since such donations are usually tax deductible, you may very well save more on your taxes than you could have received in a conventional sale.

Most charities that accept car donations will gladly take an inoperable vehicle. For instance DonateaCar.com states that most car donations are accepted whether the vehicle is running or not. The organization has an online Car Donation Form you can fill out to see if your vehicle will be accepted. Similarly, American Kidney Fund states that your car donations will usually be accepted even if the vehicle isn't running.

When donating a car, keep in mind that the charitable organization must rent or send one of its own tow trucks to remove an inoperable vehicle. This will inevitably involve a certain cost and the value of your car must make this operation worthwhile for your donation to be accepted. To ensure that the operation will run smoothly and that you do not waste the charity's time, describe the condition of your vehicle in detail and try to give an idea about the location of the car and the kind of effort it will take to remove it from its present location. A vehicle trapped by trees in your backyard may take several hours to load on a tow truck and may therefore not be accepted by the charity.

Before you donate the vehicle, locate the title. Although you will not receive cash for the car, you must still prove that it is legally yours before you can donate it. If a name other than yours is displayed on the title, you must ensure that either that person is available to sign the title over to the charity or obtain a power of attorney from that person allowing you to sell or donate the car.

Finally, make sure to get a receipt from the charitable organization for your donation. This will allow you to deduct the vehicle's value from your taxable income while also absolving you of any legal responsibility associated with the illegal operation of the car after you donate it.

How to Lease a Company Car Without a Cosigner

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Even though you plan to lease a car in your business's name, you must apply as the lease's guarantor. A leasing bank uses your personal credit information, income and payment history to determine whether to approve your lease application. Upon approval, you may register and title the car to your business. If you fail to make payment, your own personal credit will suffer. Good credit is a requirement of lease approval, so if you can't obtain an approval because of less-than-perfect credit, you might have to finance the vehicle instead.

Instructions

Call a dealership and make an appointment to test drive a vehicle and submit a lease application. If you're unsure about lease prices or which cars suit your needs, visit manufacturer websites to review specifications, lease specials and vehicle options.

Test-drive the vehicle you want. If the car suits your needs, let your salesperson know that you'll be registering and titling the vehicle to your business. Fill out a credit application.

Provide your personal information, such as Social Security number, date of birth and housing cost. When stating your income, report the amount you claimed the previous tax year. Leasing banks require tax returns for proof of income for self-employed borrowers.

Wait for your approval. Dealers submit lease applications electronically to lenders, so the approval shouldn't take long. Discuss the lease terms with your salesperson to ensure they're affordable and manageable, such as the mileage allowance and down payment requirement.

Provide your proof of income, business license and tax identification to your salesperson. Add the vehicle to your insurance policy, or authorize your salesperson to call your insurance company to obtain state and lessor required documents, such as insurance cards and an insurance binder. Ensure your information and your business information is correct before signing your contract.

California Law on Lien Sales

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In California, car owners who fail to pay for repairs, towing, furnished supplies or storage fees for their vehicles run the risk of losing their cars at a lien sale. The California Civil Code outlines a legal process by which a lien holder can get paid the money owed by taking the car owner to court and obtaining a judgment against him, or a non-judicial process in which the lien holder can sell the car at a lien sale.

First and foremost, a person or company must have a valid lien against a vehicle's title to attempt a lien sale pursuant to California law. To obtain a proper lien, the company or person must present the car owner with a written statement outlining the work completed and the resulting charges. Once the written statement is presented, the lien arises. If the car owner fails to pay the bill and the lien holder meets certain requirements, the lien holder can sell the vehicle at a lien sale.

Only California residents in physical possession of another person's car can conduct a lawful lien sale. In addition, the person must have placed a lien against the vehicle's title because of a debt the car owner failed to pay that person. Finally, lien holders who have a monetary interest in the vehicle may not conduct a lawful lien sale. California law on lien sales considers that a conflict of interest.

Two separate procedures exist for conducting a lien sale. The procedure used depends on the market value of the car. The threshold amount is $4,000. If a car is worth less than $4,000, then the lien holder must follow a certain procedure. If the car is worth more than $4,000, then the lien holder must follow a different procedure. In other words, the lien holder must determine the car's value before proceeding.

Repair shops must provide car owners with specific notice before performing expensive repairs to a car. They must notify the car owner if the cost of the repair service will exceed $1,500. If the storage charge will be greater than $1,025, they must also notify the car owner. In addition, the car owner must receive notice before the lien sale can go forward. If the vehicle is worth less than $4,000, the party attempting the lien sale must notify the car owner. If the vehicle is worth more than $4,000, the California Department of Motor Vehicles will notify all relevant parties.

The Department of Motor Vehicles must approve the lien sale. However, if the car owner submits a declaration of opposition to the lien holder, the DMV may cancel its prior authorization of the sale. The lien holder may, in response, submit additional documentation to the DMV to attempt to continue the sale and obtain approval again.

Please contact a qualified attorney licensed to practice in California to find out how the facts of your situation apply to California laws on lien sales, which are subject to change.

Car Lease Strategy

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You can likely save more money per month than lease advertisements indicate, even with a lower down payment amount than you find advertised. To get the best lease deal, consider shopping from your home computer and emailing dealers to negotiate. Consider minimizing your down payment amount and maintaining your vehicle properly during your contract to avoid paying money at the end of your contract.

To determine current lease offers, go online to manufacturer websites to view lease advertisements. Manufacturer lease offers often change monthly, so be sure to note the dates of any offers you find. Read the small print of all lease advertisements; you'll find that mileage, term and down payment requirements differ by manufacturer. Leasing terms are adjustable; you can change the term and mileage allowance of lease offers to support your driving needs. Visit individual dealer websites by entering in your zip code from the manufacturer's website. Individual dealers may offer discounts or sales aside from manufacturer offers.

Email same-make dealers to discuss pricing. New car dealerships employ Internet sales departments to work with customers by email or phone. You can often obtain better pricing through email. Before you make your offer, determine a fair discount. Most lease figures are based on a vehicle's sticker price, so research pricing the same as you would if paying cash for the car. Every $1,000 that you put toward a lease results in about $30 off of your monthly lease payment. Keep this in mind when making your offer. If you find that you can lease a $30,000 vehicle for $400 per month, but you can obtain a $2,000 discount if purchasing, email a dealer asking if it can meet your monthly lease payment goal of $360 per month. Once you have an offer, use it to shop other dealers.

Advertised lease payments usually require thousands down in addition to taxes and fees. Minimize your down payment amount even if it raises your monthly payment cost. While leasing, you must maintain a full-coverage insurance policy for your car. If at any time during your contract your vehicle becomes damaged beyond repair or stolen, your vehicle's market value is paid to your leasing bank, not you. Even if you paid your entire lease cost upfront, you won't receive any of your money back. Avoid a down payment if possible to minimize your potential loss.

Keep your vehicle in excellent condition by maintaining it properly and repairing it when necessary. Otherwise, when you return the car, the leasing bank will charge you for loss of value, which you must pay to maintain your good credit standing. If you find that you may exceed your leasing mileage allowance during your contract term, consider transferring the lease to another person to avoid penalty fees. Do not put stickers on your vehicle or alter it in anyway. If your car has body damage, use your full coverage insurance to pay for damages or pay out-of-pocket for repairs. Your deductible is likely less than your leasing bank will charge if you return your car with damages.

What Are the Rights of a Cosigner on an Auto Loan?

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Buying a new car can be expensive and many are purchased with financing plans, which require a down payment and monthly future payments. In some cases, according to CarBuyingTips.com, buyers with bad credit receive less favorable financing plans, higher interest rates and may need the assistance of a cosigner. A cosigner is someone who signs the contract with the buyer and commits to making payments should the buyer default. Because of the risks involved in cosigning (credit and financial loss), it is imperative to know your rights.

In spite of the fact that a cosigner may have to make payments or have adverse credit repercussions because of the primary signer's inability to make timely payments, a cosigner does not have ownership rights. If a cosigner continues the payments, there are never ownership rights to the vehicle. Conversely, if the vehicle is paid off by the primary signer, the cosigner has no further obligation as it relates to the vehicle.

Cosigners who find themselves in the precarious position of making payments, late payments or having their credit affected, may ask the lender to refinance the deal under the signer's name. This may prove effective if the signer's payment history is good. However, many lenders don't favor this option. Because cosigners have no rights to ownership, they cannot refinance auto deals under their own name.

Cosigning for an auto loan, and many other loans, is the act of signing over credit to another individual. The risks include not only the potential for a bad credit report, but also financial loss because a cosigner may need to make payments that are late or missed. FirstCarGuide.com explains that cosigning may impact the ability of the cosigner to be approved for other loans because the auto loan will be calculated as debt against income.

How to Get Out of an Auto Lease Without Affecting Your Credit

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That sport coupe you leased a year ago was the right car at the time for you and your spouse, but with a baby now on the way it will soon become wholly impractical. Your child will be a toddler before your contract expires, certainly not a happy thought for any parent.

There is a way for you to get out of an auto lease without inflicting damage to your good credit. What is more, if you want to come away with a new car, you may be able to do that too.

Instructions

Review your lease agreement. Look for a provision or clause outlining early termination fees. Some motor vehicle lease agreements spell out that you must pay off your lease before turning in your car. Other agreements charge you a flat termination fee. If you elect one of these options, expect to pay hundreds, perhaps thousands of dollars to break your motor vehicle lease agreement. If you break your lease exactly according to the terms of your contract and pay all fees, then your good credit will not be affected.

Transfer your lease. If the fees associated with terminating your lease are exorbitant, then consider transferring your lease to a new owner. Essentially, you will need to find someone to take over payments, a move---if approved by the leasing company---that can free you from your contractual obligation. If the leasing company approves of the person who takes over the lease, then transfer papers are prepared and related fees paid. This kind of deal can preserve your good credit if done according to requirements as set forth in your motor vehicle lease agreement and lease transfer agreement.

Get help to transfer your lease. If you have placed ads in your local newspaper or even used the services of Craigslist.com, Oodle.com, Kijiji.com or other sites and have not been able to find someone to take over your lease, then using the services of a car leasing trading company can help you get out of an auto lease. LeaseTrader.com, Swapalease.com, LeaseTrade.com and other services work to bring people together to take over leases. Acting as an intermediary once an approved customer has been identified, these companies charge a set fee to handle the paperwork and contact the leasing company about the transfer. Once approval is given, then the seller and buyer can meet to transfer the vehicle.

How to Find a Student Auto Loan

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Students without a credit history may have a difficult time qualifying for a car loan. A credit history provides the financial institution a way to verify the applicant is capable of paying back the borrowed money, since many students do not have a credit history. However, there are financial institutions that will work with students to secure a car loan without the traditional requirements. To qualify for the auto loan, the student may need a co-signer with a good credit history. Sometimes a down payment may allow the student to obtain the loan without a co-signer.

Instructions

Check with your school's financial aid office and its student services center. Businesses and banks offering discounts, loans and special pricing for students will relay this information to appropriate departments within a school's administrative system.

Contact your bank and inquire about student car loans. Having a checking or savings account with a bank may help you obtain a car loan. If the bank initially refuses to lend you money, find out what you need to do to qualify. Qualifying may be as simple as keeping a minimum balance in an already established savings or checking account, making a down payment or providing proof of school enrollment.

Contact area banks and credit unions and inquire about student auto loans. To qualify, the student may be required to open an account with the bank or have a co-signer open an account. Opening bank accounts and applying for loans always requires a Social Security number.

Check the local newspapers. Car loans are advertised in the auto section of local newspapers. Check with your local paper to verify what day of the week its auto section is released. Most auto information is usually run on Sunday's, although classifieds are released daily.

Car Depreciation Rules

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Buying a new car is a big financial commitment, whether you dip into your savings or finance the car and take on a monthly payment. In either case, one thing you'll need to prepare for is depreciation, which occurs over time as a car naturally loses value. Understanding the rules of depreciation can help you maintain your car's value and plan ahead for its sale or trade-in.

Many different factors contribute to auto depreciation. They include the region where you buy your car, the make, the model, the optional features and how many miles you put on the odometer each year. Heavy use and damage will speed up the depreciation process but even if you keep your car in excellent condition it will lose up to 20 percent of its value within a year, according to Edmunds (10 percent of which it loses the moment you drive it off the dealership lot and it goes from new to used). As a rule, sports cars and other rare vehicles hold their value better than more common cars simply because buyers interested in used models will have fewer options to select from. New models and major changes to a model line drive down the value of older cars that take on an outdated appearance or reputation.

One situation where vehicle depreciation should matter to you is when you finance your purchase and need to consider gap insurance. Depending on your down payment, you only own a small percentage of your car when you drive it off the dealer's lot. Even though you have insurance, it will only pay for the car's actual value, which begins to fall immediately. If you owe more than your car is worth, gap insurance is an optional form of insurance that will pay for the difference in the event of an accident that your insurance provider deems a total loss. The faster your vehicle depreciates the more use you might have for gap insurance until you make enough payments to reduce your loan debt below the depreciated value of your car.

Another case where depreciation figures into your financial decisions is when you opt to lease a vehicle. At the end of the lease you'll have the option to turn your car in or pay the predetermined buyout and own the car. However, because of depreciation buyouts seldom represent reasonable values. Most cars depreciate to well below the buyout, which means you'd be better off turning in your car and buying a similar model elsewhere for market value. If your vehicle doesn't depreciate because of special features or meticulous care, the buyout might even represent a bargain.

There are several ways to slow the rate at which your car depreciates. One is to avoid excessive mileage, which drives down value. Another is to keep the car in generally good repair and attend to accident damage promptly. Much of your control over how fast your car depreciates disappears once you make a buying decision, so research used examples of each model you consider and see how well they hold their value. More expensive engine options or performance packages may slow depreciation rates, especially for sports and luxury cars, but they're still unlikely to pay for themselves when it comes time to sell your vehicle.

What Do I Need When I Buy a Car?

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You should always thoroughly prepare when buying a car. Know your credit score and report, payment range and what you are looking for before applying for a car loan. Make a list of questions you may have and items to take with you when you begin your new car search.

Lenders want to see that you have a job with sufficient income to make the payments and afford your other living expenses. They generally look for a monthly income of $1,600 or more and that you have been with your current employer for at least six months.

If you are the purchaser and you are applying for a car loan, you will need a driver's license. You can have the best credit in the world, but without a driver's license, that car you love will remain on the lot. If you are paying in cash, a state identification will suffice. You will need a driver's license to obtain automotive insurance, so it is in your best interest to get it before you even start the process.

To take advantage of the low interest rates that are advertised, in most cases you need a credit score of 680 or above. You will more than likely pay a higher interest rate if your score is between 600 and 680. Finding a lender willing to finance you with a score between 550 and 600 is quite difficult. With a score below 550, you may not qualify for a car loan. Remember that lenders are different and have their own set of qualifications; ask what they are before you apply.

How to Calculate a Lease Payment With Money Factor

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Calculating a lease payment with a money factor lets you estimate the monthly lease payment for a vehicle before you visit the dealership. This lets you consider just how well a particular vehicle can fit within your monthly budget. Money factors are used to express the interest rate applied to an automobile lease, and it is equivalent to a interest rate divided by 2400, explains Edmunds.com. For example, an interest rate of 4.99 percent converts to a money factor of .00208. Money factors are used almost exclusively with automotive leases.

Instructions

Calculate the residual of the vehicle that you plan to lease. Residual value is calculated by multiplying the vehicle's Manufacturer's Suggested Retail Price (MSRP) by the residual value percentage. For example, if a vehicle has an MSRP of $20,000 and a 50 percent residual value, the residual value of the car is $10,000 at lease end. Edmunds.com recommends that you call the bank or auto dealership to obtain the residual value.

Calculate the total depreciation. This figure is calculated by subtracting the residual value from the negotiated selling price of the car. For example, if you negotiate a selling price of $19,000 and the residual value is $10,000, the total depreciation during the lease term is $9,000.

Divide the depreciation by the lease term to calculate monthly depreciation. If this is a 36-month lease, divide $9,000 by 36, giving a monthly depreciation figure of $250.

Calculate the monthly interest using the money factor. Add the negotiated price of the vehicle ($19,000) to the residual value ($10,000) for a total of $29,000. Multiply this total by the money factor, which is .00208 in this instance. The resultant monthly interest is $60.32.

Add the monthly depreciation and monthly interest together. In this example, the total is $310.32.

Calculate the monthly sales tax. Just like depreciation and finance charges, the tax on an auto lease is calculated on a monthly basis. Multiply your monthly base payment of $310.32 by your local tax rate to obtain the total monthly payment. For example, if the local tax rate is 7 percent, multiply the payment of $310.32 by 107 percent to include tax in the figure. The total resulting payment is $332.04.

If I Owe Money on My Car Can I Buy a New One?

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Buying a new car while you owe money on another loan is a possibility, although not everyone can have two loans at once because of income or credit issues. You can also trade your vehicle toward a new purchase; the dealer will pay off your old loan. Before pursuing either option, budget accordingly or consider trading or selling your car instead.

When you apply for a second car loan, a bank uses your current income as a determining factor. The bank accesses your credit history to view your debt. On your credit application, expect to provide the name, phone number and address of your current employer. Expect to also supply a copy of your most recent paystub, which the bank uses to determine your annual income. If you have a positive payment history with creditors, a stable job and decent income, a second loan is likely.

Even if you do obtain an approval for a second car loan, you should carefully review your budget to determine the true costs of a second car and if it is affordable. Most lenders require a full coverage insurance policy on its vehicle (the most expensive you can purchase), so your insurance cost will likely double. You'll also have to maintain two cars, so check with a dealership or service shop to find out about recommended service schedules and cost.

Even though you still owe money on your current vehicle, you can use it as a trade toward another purchase. In the event you trade your vehicle, the dealer will pay off the vehicle's loan balance. If you were unable to obtain an approval for a second loan, a bank might allow you to take out a new car loan if you end your current one. You can transfer any excess loan amount, or negative equity, into your new loan or use the trade's equity as a down payment.

If you couldn't obtain a second loan because of your income but don't want to trade your car, consider selling it on your own for more profit. Dealers offer wholesale value for trade vehicles, which is the lowest when compared to other options. Private sale values, which you can gauge at Edmunds.com or the Kelley Blue Book website, are thousands higher than wholesale value. Even with a loan, you can use your sale amount to pay off the loan balance. However, you must come up with the loan's balance if you can't sell your car for the loan's total payoff.

Can You Take Over an Auto Loan for Someone Else?

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Some auto financing lenders may be willing to transfer a loan provided the new buyer qualifies with appropriate credit and employment history. However, many lenders have restrictions that do not permit an auto loan to be transferred. If the seller is willing to sell and the buyer is able and willing to buy, there may be a way to execute the transaction.

The loan is a legal contract between the lender and the person who purchased the vehicle and signed the loan agreement. That original buyer is responsible for making the payments on time. The title will transfer to him when the loan is paid off. If the new buyer takes possession of the vehicle and does not make payments in full on time, the original buyer's credit will be adversely affected and the original buyer retains responsibility for paying off the loan.

If the lender allows loans to be assumed, the original buyer must contact the lender and identify himself with his personal information and loan number. The new buyer will then need to qualify for the loan, submitting his Social Security number, date of birth, and verification of employment and address. The lender will likely check the new buyer's credit. The new buyer will also need to provide evidence of insurance for the vehicle.

The new buyer could take out a no-collateral, personal loan in the amount of the purchase price of the car. He would give the money to the original buyer, who would use it to pay off the existing loan and then transfer the vehicle to the new buyer.

If the original buyer and the new buyer are friends, they could agree for the new buyer to take possession of the vehicle, have it insured and sign a contract to make regular payments to the original buyer. The original buyer would send these payments to the lender. At payoff, the lender transfers title to the original buyer who transfers title to the new buyer. All is well provided the new buyer makes all payments in full and on time. If the new buyer fails to pay and has possession of the vehicle, the original buyer is at risk of financial loss.

Requirements to Finance a Car

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Whether you're a first-time buyer or a seasoned veteran on the subject of automobile financing, there are certain requirements you must provide to obtain a loan. Meeting those requirements becomes increasingly important with every additional dollar you borrow.

There are times when you can get a car loan with little or no down payment. Most times, however, you need about 10 percent of the full purchase price of the new car as a down payment. A down payment partially shields the lender from the depreciation of the car. In lieu of a cash down payment, you can also offer your old car in trade for the new one. It's the same as a down payment in that it offers the lender protection--except it serves to reduce the loan required instead.

Before making a car loan, most lenders ask permission to contact one or all three of the credit bureaus for your credit report. Each one rates your credit in a different way, but they all rely on your repayment history, current availability of credit and other information about you. In addition, some lenders ask you to fill out a financial statement. The lender will grant you the loan if all of that information meets his criteria.

Many lenders will ask you if you have had the same employer for at least 2 years. It's his way of verifying that you have a steady income. If you have been employed a shorter length of time, you may have to tell him the name of your previous employers. Your lender may also ask for your permission to contact your employer to verify that information.

An automobile lender may ask if you have lived at your current address for at least 2 years and whether you rent or have a mortgage. If you haven't lived at the same address for 2 years, he will likely ask you the address of your previous home; if you are a renter, he'll ask for the name of the landlord and permission to verify that rent has been paid.

Your auto loan will be approved if you meet the lender's minimum standards. If you don't, he'll either increase your interest rate on the loan to cover the added risk or will turn down your request. Most car lenders can tell you the status of your loan application within an hour or two.

How Long Do You Have to Pay on a Vehicle Before You Can Refinance in Your Own Name?

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A co-signer is someone who secures your loan with either his income or good credit standing. People need co-signers for various reasons, so the time it takes before you can re-apply for a car loan depends on your own credit issues. To determine when you can refinance your car loan on your own, consider why you had to use a co-signer in the first place.

Some buyers need to use a co-signer because of income issues. If you don't make enough money for a loan approval, your lender considers your co-signer's income along with yours. If this is the reason you needed a co-signer, you can likely refinance your vehicle after your income increases. Most lenders prefer at least two years of verifiable and steady income. If you used a co-signer for this reason and your income has increased, try to refinance your car after six months to one year of steady and provable income once your income increases.

Lenders decide loan approvals based on a borrower's debt-to-income ratio. Based on the information obtained in your credit report and your income, a lender decides how much you can afford to pay toward your loan each month. Even if you make more money than average, you aren't guaranteed a loan if you have a high debt responsibility. For example, if you already have a car payment, a mortgage and several credit cards that require a payout of $2,000 per month and you make $2,500 per month, your debt-to-income ratio is poor. Refinance your vehicle once you pay off other debt and increase your available funds.

If you have poor credit, it can take years to improve your rating. Items listed on your credit report, such as repossession, bankruptcy, foreclosure or judgments, can substantially reduce your credit score and chances of securing credit. Most of these issues remain on your credit report for at least seven years. Pay off your debts and prove to lenders that you can make payments consistently and on time with your current car loan. The amount of time necessary to improve credit differs by person and payment history.

You may find that you can currently refinance your loan. But the terms may not be favorable. You might obtain a higher interest rate, have a large down payment requirement or term restriction, which lenders may require as a term of approval. A shortened loan term or high interest rate can increase your monthly loan payment by more than $100. To stick to a budget and save money over the term of your loan, you may want to keep your current loan co-signer because of the loan terms you've already secured.

How Will a Home Equity Loan Affect a Car Loan?

11:50 PM 1 comment

When you apply for a car loan, an existing home equity loan could have an impact on your ability to obtain that loan. Lenders look at your existing debts and how you manage those debts before extending new credit to you. Additionally, you cannot take out a car loan unless you have sufficient income to pay both that new loan and your existing debt payments.

Lenders make regular reports to credit bureaus about your credit management. High balances and payments made more than 30 days late have a negative impact on your credit score. Since houses hold value better than cars, you can obtain a home equity loan with a lower score than the score needed to obtain an automobile loan. Therefore, even if you had good enough credit for an equity loan, you may not qualify for a car loan, and missed payments on your equity loan could jeopardize your chances of even getting a car loan.

You only have so much money to spend each month, and lenders examine your debt-to-income (DTI) ratio to ensure that a new loan will not cause you to have more debt than you can afford. Your DTI reflects your debt payments as a percentage of your overall monthly income. Typically, lenders only allow you to obtain new credit if your DTI ratio does not exceed between 35 and 45 percent. A large home equity payment may not leave you enough spare cash to afford a car payment.

When you have established your home equity loan and your car loan, how you manage one loan has no direct impact on the other. Your home equity lender cannot raise your interest rate or charge penalty fees if you miss a payment on your car loan or vice versa. As long as you keep to the terms of your loan agreement with one lender, a car repossession or home foreclosure related to another loan can have no bearing on that particular loan.

Home equity loans have fixed interest rates, but many banks also offer home equity lines of credit that have variable interest rates and require interest-only payments. You may take out a car loan alongside your low rate equity line of credit and have no problem paying both of the debts. However, most equity lines have very high rate ceilings, which means that your payment could double or triple when interest rates rise. If that happens, your equity line of credit could soon have a big impact on your car loan if you cannot afford to pay both debts and must choose between protecting your home or your car.

Do Insurance Companies Offer Car Replacement for a Totaled Car?

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The auto insurance industry offers a bewildering array of insurance policies and options. The last few decades have seen the basic idea of auto liability and/or collision coverage morph into a wide variety of options. One option is comprehensive coverage, which includes loss from theft or weather-related damage, towing and/or rental car coverage while your vehicle is being repaired, as well as "gap" coverage and new vehicle replacement coverage where you receive a new car and not just the current value of your totaled vehicle.

The basic type of auto insurance is liability insurance, where the driver/vehicle is insured for any damage caused to others that is the driver's fault up to the liability limit. Another common type of car insurance is collision insurance, where you are essentially insured against most damage you do to your own vehicle.

New vehicle replacement coverage is insurance coverage that will replace your vehicle with a new vehicle of the same make, model and factory equipment as the totaled vehicle or the cash equivalent. New vehicle replacement insurance, however, is relatively expensive and is generally only available for the first year of car ownership.

Gap insurance coverage, also called loan/lease coverage, protects the buyer of a new car from the immediate 15 to 25 percent depreciation of buying a new car. Let's say you got in an accident and totaled your $25,000 car just four months after buying it. The insurance company will only pay you the actual cash value of the vehicle, which could be as low as $20,000, and assuming a $1,000 down payment and four $300 payments, you will still owe the financing company around $2,800. Gap insurance would cover this amount. Gap insurance is relatively inexpensive and is typically chosen by those who are leasing or making small down payments on new vehicles.

Rental car coverage will cover the costs of a rental vehicle while your vehicle is being repaired or otherwise for some specified period of time -- usually from a week to 30 days. Rental car insurance is inexpensive and commonly packaged with emergency roadside assistance insurance as a low-cost or free additional service.

Predatory Car Loan Lending Laws

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Predatory auto loans are those that are comparatively more expensive than regular auto loans. They may exhibit variable interest rates, high fees or unusually high annual percentage rates. Those who fall victim to predatory lending tend to be the most financially vulnerable. Few federal laws are in place to regulate the practice.

Generally, a car loan can be considered predatory if the interest rate of the loan is considerably higher than that of others. Such loans not only target customers with low or no credit scores, but may also trick some into thinking they are unwittingly entering a superior deal when in fact they are not. Many such loan agreements tend to be equipped with what is termed "mandatory arbitration"; when an agreement is signed by a borrower, this waives her rights to sue the dealership once she has realized she entered the agreement on unfavorable terms.

One of the basic types of predatory auto loans is that of a varying interest rate. When the buyer first takes out the loan, he is given a very low introductory rate known as the buy rate. The dealer is then able to increase the rate at his discretion. Because dealers profit from increased rates, they are very likely to increase them. Another method is to insert an assortment of fees and charges onto to the loan, which adds to the outstanding balance. This increased balance raises the amount of interest owed.

The net effect of predatory auto loans is almost always toward the benefit of the dealer at the expense of the borrower. People who had previously good credit, and who may have otherwise qualified for a loan with more favorable terms, can see their credit rating plummet. Furthermore, those who took out predatory loans because of their poor credit history find themselves in an even worse financial situation than before. According to "Predatory Lending: A New Face of Justice," predatory lending cost consumers $1 billion a year as of 2005.

Unlike the mortgage industry, which in 2010 saw some new regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act, very little legislation has been put in place to regulate auto loans. The Dodd-Frank Act did, however, introduce the establishment of the United States Consumer Financial Protection Bureau, which will oversee and promote financial awareness among the American public. The bureau will also be charged with researching and investigating any new problems in the loan market so that it can mitigate its negative effects.

If I Have a Car Repossessed How Can I Get a Good Credit Score Again?

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Having a car repossessed can be a traumatic experience resulting in additional financial hardship. On the upside, it can also be a stark reminder that it's time to get back on track with finances. It's not impossible to get a good credit score again after having a car repossessed, but it will take some time, discipline and motivation. Researching ways to improve credit scores after your car is repossessed will help you decide which course of action makes the most sense for your situation.

Repossession happens when your secured debt is tied to an asset. Most car financing agreements permit lenders to repossess your car at any time, without notice, once you've begun defaulting on payments, according to the Federal Trade Commission. To get the car back, you may have to pay the entire balance on the loan back, plus the costs of towing and storing the car as part of the repossession process. Borrowers having problems making payments are better off selling the car and using resulting money to pay off the loan, since repossession leaves a dark mark on your credit score.

If possible, pay off the balance for the car that was repossessed and any fees associated with storage or preparing the car for auction. While this won't remove the repossession event from your credit report, future lenders, landlords or other professionals viewing your credit report will see that you've taken care of the debt. Paying down debt will help you move toward a good credit score.

Credit scores reflect your ability to handle credit, and one way to build up a credit score is to take out and reliably pay back another loan. Securing a loan can be tough after lenders see that your car was repossessed, but allow some time to pass as you gradually build up better credit by paying credit card bills, student loan payments and other financial obligations on time. After six months of good payment habits, your credit score may rise enough to take out another credit line to purchase another car, if desired. If you can wait two or three years, it'll be less likely that you'll need to take out a loan from a subprime lender, which comes with higher interest rates and fees.

Contact TransUnion, Equifax and Experian credit reporting agencies and add a short note to your report explaining your side of the repossession. Lenders may take your explanation into consideration when reviewing your report.

Far from being a magical bandage to resolve your financial woes, including repossession, bankruptcy is a very serious financial measure considered to be a last resort because of the lasting negative effect it can have on your credit report---up to 10 years, according to the Federal Trade Commission. While declaring bankruptcy can stop repossessions and other punitive measures, it won't help you much after a car has already been repossessed and certainly won't make it easier for you to get a good credit score.

Tips on Knowing When to Sell or Trade in Your Car

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Dealing with an old car is one of the more difficult parts of buying a new car. Buyers of a new car have to weigh the importance of getting the best possible deal on their old car against the amount of time spent selling the car. Though the decision to trade in or sell the car is a personal one, there are a number of factors that new car buyers should consider when getting rid of their old vehicles.

Before either selling or trading in a used car, determine the fair market value for the vehicle. There are a number of print and online price guides that a consumer can use to determine value. Some well-known examples are NADA and the "Kelly Blue Book." These guides use a vehicle's make, model, condition, mileage and other factors to determine market value. Price guides will give figures for both retail value and trade-in value for the vehicle. Consumers can also use Internet car listings to look at prices that comparable vehicles are selling for in their areas.

The primary advantage of trading in a vehicle to the dealer is convenience. A typical trade-in consists of taking the vehicle to the dealer for inspection and receiving an offer. Consumers can negotiate the price with the dealer, but the process is relatively simple. Trading in a vehicle is also less of a hassle, as the dealers will also handle the paperwork needed to transfer the title and documentation for the vehicle.

The primary advantage of selling a car over trading it in is that a private sale will typically result in a larger financial return for the vehicle. When a car dealer buys a car, he is buying it to sell. This means he will offer less than the retail value of the car, as he needs to be able to sell it for a profit. Selling a car also allows consumers to get rid of the car when they are ready, allowing them to concentrate on buying the new car instead of preparing the old one.

In some cases, dealers may offer customers as much or more for a trade-in as the customer could get selling it himself. As part of the new car buying process, it is always a good idea to see what the dealer will offer for the vehicle. Certain vehicles are more in demand in some areas, and this will greatly influence the time it takes a consumer to sell the used car, as well as the price.

What to Know Before Buying a Car

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Buying a car and getting a good price and interest rate requires savvy skills. Car salesmen and dealerships want to make a certain amount of money on each purchase, and lenders base interest rates for auto loans on credit scores. For these reasons, there are several things to take into account before buying a car.

The sticker price on a new automobile is what the dealer hopes to receive for a new car purchase. However, the invoice price is what they paid the manufacturer for the car, and knowing the invoice price paid by dealerships provides a price point to begin negotiating the price of the car. Find invoice prices for various automobiles with car buying guides such as Edmunds.com and Kelley Blue Book. Enter the make, model and year of the automobile to learn what dealerships paid.

Know your credit score and the information listed on your credit report before buying a car. Credit scores and history affect two aspects of buying a car -- approvals and the interest rate on the auto loan. MyFICO.com offers credit scores for a fee, and Annual Credit Report gives consumers access to one free report from the three credit bureaus each year. Some dealerships work with bad-credit applicants and offer sub-prime auto loans. However, a score in the upper 600s and higher makes you a candidate for a desirable interest rate and lower payment on the auto loan.

Know how much you can spend on a new or used auto loan before shopping for a car. Some buyers find a car first, and then submit an application for financing. Finance companies review existing debts and monthly income to determine if you can afford a particular price. Getting pre-approved for an auto loan before going to a dealership alleviates looking at cars that are out of your price range. Plus, pre-approvals let you know in advance if you're even able to qualify for a car loan.

If getting the lowest interest rate and monthly payment are a top priority, save money for a down payment before buying a car. Auto lenders do not require down payments. However, Financial Web recommends putting a sizable down payment on the loan to help you negotiate a lower interest rate. Down payments can be as little as 10 percent of the sale price or as much as half the sale price. Plan to put a minimum of 20 percent down.

Thursday, December 29, 2011

Requirements

Bank Statements

Bank Account

Considerations

Get a Mechanic

Certification Program

Check Exterior

Dealership History

Check Engine and Fluids

Test Drive

Mileage Check

CarFax Report

Test Vehicle Equipment

Monday, December 26, 2011

Contract

Lease End Options

Repossession

Credit Reporting

Sunday, December 25, 2011

Good or Excellent Credit

Debt-to-Income Ratio

Ability to Stay Within Leasing Provisions

Considerations

Debt-to-Income Ratio

Payment History

Preapprovals

Other Options

Determine Dealers Costs

Shopping Around

Appointment Negotiating

Continued Negotiations

Friday, December 23, 2011

Requirements

Process

Where to Go

Moving Between States

Instructions

Thursday, December 22, 2011

No Interest

Savings

Low Risk

Price Control

Wednesday, December 21, 2011

Defer Payments

Loan Modification

Sell Your Vehicle

Repossession

Lender Repossessions

Finding the Value of the Motor Home

Negotiating the Purchase

Financing the Motor Home

Motor Home Auctions

Tuesday, December 20, 2011

Issues with the Purchase

Why You Can't Keep the Car

When to Retun the Car

Other Option

Monday, December 19, 2011

Instructions

Sunday, December 18, 2011

Repossession

Credit Reporting

Paying Loan

Long-Term Expectations

Thursday, December 15, 2011

Instructions

Wednesday, December 14, 2011

Benefits of Using a Credit Union

Loan-to-Value Ratio

Application Process

Fees and Insurance

Tuesday, December 13, 2011

Charitable Donations

Inoperable Vehicles

Removal Cost

Paperwork

Instructions

Monday, December 12, 2011

Lien