How Can I Stop Car Repossession?

When a car buyer finances a vehicle, the vehicle itself is used to secure the loan. If the buyer misses payments, sometimes by being as little as a few weeks late on a single payment, the finance company may exercise its ability to repossess the vehicle. Although the repossession process seems highly mechanized to most borrowers, debtors have several options to postpone or completely stop repossession.

Work With the Lender

Although the lender has the legal right to repossess a vehicle if the loan it secures is not paid, most lenders exercise this right only as a last resort. The repossession process is very expensive for lenders, as it often involves contracting a professional repossession agency at a hefty cost. Even after the vehicle is repossessed, it must be cleaned and prepared, then sold at an auto auction. The sales price of the vehicle is rarely sufficient to cover the outstanding debt itself, leaving the lender to pay the repossession, cleaning and auction fees from its own profit. For this reason, lenders are generally eager to work with borrowers, even making special unadvertised payment arrangements for borrowers serious about bringing the loan to a "Current" status.

Sell the Car

Borrowers who can no longer afford the financed vehicle but do not want to experience repossession may be able to simply sell the car themselves. When informed that a car is for sale, many lenders will delay repossession activity for a short time to allow purchase of the car. After the vehicle is sold, the debtor can use the funds from the sale to pay off the remaining loan balance (and have the title sent to the new owner). Many banks are also willing to work with borrowers to avoid the repossession process and will set up a payment arrangement to cover any unpaid balance after the vehicle is sold.

Consider Bankruptcy

Although bankruptcy is an extreme measure and is best left as a last resort, a borrower who is unable to reach a satisfactory arrangement with the lender but who does not want to lose the car may consider asking for court protection. When a borrower files bankruptcy, courts immediately issue a moratorium on collection activities, including repossession. In certain cases under Chapter 7 of the bankruptcy code, the court may still require the car to be forfeited. Under chapter 13 code, however, the court may structure a repayment plan between the borrower and the lender, allowing the debtor to retain ownership of the vehicle.

Know the Law

When a borrower uses a vehicle to secure a loan, as is common when financing a vehicle, the lender places a lien on the vehicle's title that ensures its legal ability to repossess the car if the debt is unpaid. Although the specifics of the repossession process are spelled out in the loan agreement, many states have laws regulating when a vehicle can be repossessed and what actions a lender can take to obtain the car (most states prohibit lenders or their agents from entering secured private property to repossess a vehicle, for example). By maintaining familiarity with state and local regulations regarding repossession, a borrower can work to avert the process before the vehicle is taken.

Read More

What Happens if an Auto Loan Matures & You Owe a Balance?

An auto loan maturity date is a date when the loan balance is paid off if a borrower makes payments according to the schedule. However, when an auto loan matures, it does not necessarily mean that it is paid off. In some situations, an auto loan may have a remaining balance on the maturity date.

Balance Due

If you miss a payment anytime during the loan period and don't pay it, the bank adds the fee to the loan balance. Some banks offer to skip a loan payment during the holiday season. Borrowers may have fees associated with this offer that will also be added to the balance. When a payment is skipped, the due date advances to the next month, and interest continues to accrue. As a result, the balance due upon maturity will include the skipped payments and interest if you took advantage of such promotions.

Loan Payoff

If you owe a balance on the maturity date, you must pay it off. The bank may require a full payment at once or may be willing to negotiate. Unless you have missed or skipped payments, the balance should be small enough. If the loan is past-due and you owe a significant balance, you may request to pay it off by making several payments equal to your monthly payment amount. As long as you owe a balance on your loan, the bank will not release the lien on the vehicle.

Collections

If you owe a loan balance at maturity and become delinquent on payments, the bank can send your account to collections. The bank will charge late fees on the missed payments. The interest will continue to accrue on the balance you owe. To avoid additional fees and finance charges, you should stay current on payments. If you are unable to make a payment, notify the bank immediately. The bank may report late payments to credit bureaus even if they occur past the loan maturity date.

Repossession

If you owe a balance on an auto loan, the bank has a right to repossess the vehicle if you become delinquent on payments. Repossession process is expensive and time-consuming. Although banks try to avoid repossession as much as possible, they will do it if the value of the collateral is high enough to cover the loan payoff and the repossession costs. The bank will notify you of an impending repossession and will give you a chance to pay the past-due amount to avoid it. If you fail to pay, the vehicle will be sold at an auction. The sale proceeds will pay the loan off. You will receive any excess amount from the sale of the vehicle.

Read More

How to Pay Taxes Up Front on a Lease

Most lease advertisements ask for a down payment and a separate payment of taxes and fees. States calculate taxes on leased vehicles differently. Many states also issue tax rates that differ by city, town or county, so you'll have to find out your tax rate to calculate your charges. Some states tax leased vehicles on monthly payment amounts, including interest charges, some calculate the amount before interest charges and others charge tax on the total cost of the vehicle.

Instructions

1

Ask the dealer or salesperson for the total taxable cost of the leased car and which fees are taxable. Add the taxable cost and fees together.

2

Determine your area's tax rate by visiting your state's motor vehicle website or asking the dealership. If you purchase the vehicle from a state other than your own, your dealer will likely collect taxes for your state and submit the costs on your behalf.

3

Multiply your taxable cost by your state's tax rate. Ask your dealer for the total amount of tax charges, as the dealer must collect the fees for your state. Tell your salesperson that you want to pay your taxes up front.

4

Pay your down payment and taxes during the time you sign your lease contract. Depending on the total amount of your down payment, your dealer may accept a credit card or personal check.

Read More

Is Buying a Car Better Than Leasing One?

Choosing between buying or leasing a car is one of the classic dilemmas that car shoppers are faced with. In some cases, you would be better off to buy rather than lease. In other situations, the opposite is true. When making the decision, you must look at your driving needs as well as your long term goals.

Driving Habits

When making your decision, you have to look at what you plan on doing with the vehicle. If you are the type of person who will drive many miles every year, it typically makes sense to buy. When you lease a car, you only have a certain number of miles that you can drive. If you go over that, the overage charges can be significant. If you only drive a few miles to work every day, a lease might make more sense.

Long Term Goals

Look at what you want to accomplish over the long-term when making this decision. If you would like to be able to get away from a car payment, buying is definitely better than leasing. After the four or five years of loan payments are done, you no longer have to make a payment. At that point, you could start saving for the purchase of your next car. If you do not mind a car payment and have accepted it as a way of life, the lease could be the way to go.

Hands Off

If you are the type of person who does not like to worry about maintenance or repairs, buying a car might not be the best option for you. While you should be covered by a factory warranty for major issues when you buy, your warranty will eventually run out. At that point, you will have to handle repairs and any major issues that come up. When you lease a car, you can simply take it into the dealership for anything that presents itself.

Interest Rate

Not every part of this decision is a factor that directly relates to your situation. Some outside factors should also play a role in your decision. Buying is usually better than leasing when you can get a very low interest rate. For example, if you have good credit and you can take advantage of a zero percent interest rate, it makes sense to buy. The lease payments would not be much lower than your loan payment. If interest rates in the market are much higher, lease payments will be lower. At that point, it becomes more tempting to get a lease.

Read More

Does Negative Equity Effect a New Car Loan?

Negative equity might impact your car loan's overall interest charges. You'll pay more for your vehicle loan if you add excess money to the total loan amount. Lenders increase interest rates for lending terms over 60 months, so if you try to keep your payment lower by extending your loan term, you'll pay more in interest charges.

Interest Charges

If you've already secured the terms of a new loan and know your interest rate or the vehicle's manufacturer is offering low-rate financing, determine the difference you'll pay in interest charges when carrying over negative equity. Use an auto loan calculator to compare loan payback differences between loan options and to determine the impact the negative equity has on your monthly payment. If you don't know your interest rate, apply for a pre-approval. Find special interest rate offers online at the dealer's or manufacturer's website.

Loan-to-Value Ratio

Your credit determines your total loan approval amount, which is based on the vehicle's lending value. With poor credit, you might obtain an approval for only 60 percent of the vehicle's value, or you might obtain as much as 120 percent of the vehicle's value with good credit. Lending value is based on the vehicle's sticker price and does not take rebates or discounts into consideration. If you have a poor loan-to-value ratio, you may have to provide a down payment that covers negative equity and a portion of the new car's cost.

Rebates and Discounts

Shopping for a vehicle with rebates helps to roll over negative equity. Rebates are automatic price discounts provided by the manufacturer, viewed as a down payment, not a price deduction. Shopping for vehicles at the end of the model year or during a holiday sale might provide increased discounts. If your dealer reduces the vehicle's sticker price, you can add more negative equity to your new loan. For example, a $25,000 vehicle with $4,000 in rebates and a dealer discount of $1,000 off the sticker price results in room for $5,000 of negative equity, assuming your loan-to-value ratio is 100 percent.

Considerations

If you live in a state that recognizes a tax deduction for trade-ins, you might not carry over as much negative equity as you think. Depending on your tax rate, your trade-in might save you thousands in tax charges. For example, if you live in an area with a 10 percent tax rate, purchase a $30,000 vehicle and trade in a vehicle worth $15,000, you'll save $1,500 in tax charges. Tax savings combined with rebates might decrease a down payment requirement or create a more affordable monthly payment for a shorter loan term.

Read More

Does Returning a Car to the Bank Ruin Your Credit?

Returning a car to your bank does ruin your credit. Returning the car without completing payments is known as "voluntary repossession" and significantly decreases your credit score. In addition, you're still required to pay the balance of your loan if the bank sells the vehicle for less than you owe. If you don't pay, your credit may be further damaged.

Repossession

Because you returned the vehicle yourself, your credit report will read "voluntary repossession." A credit report will state "involuntary repossession" when a bank must seize the vehicle itself using a towing or repossession company. Both instances affect your credit the same, so returning the car yourself doesn't make a difference to your credit rating. You will avoid paying excess fees the bank charges to locate and seize the vehicle when you return it yourself. The repossession will remain on your credit report for at least seven years.

Bank Process

Once the vehicle is in the bank's possession, it will sell the car either privately or at auction. You'll receive correspondence from the lender stating the date it intends to sell the vehicle and the amount you can pay to retrieve the car if you want it back. If you don't pay to get the car back, you'll receive another letter after the sale stating the balance due on your loan. If the bank was able to sell the vehicle for more than you owed, you'll receive the excess payment as profit.

Paying Your Lender

Make arrangements to pay your lender the excess balance on your loan to avoid further damage to your credit. Your credit report will still list the repossession and the balance due to satisfy the loan agreement. If you don't pay, the lender can sue you to collect the balance. Once the lender wins the lawsuit, it can issue a judgment to garnish your wages. Having a judgment listed on your credit report further decreases your credit score. The judgment will remain on your credit for at least seven years, even after the lender receives payment.

Fixing Your Credit

You can eventually improve your credit rating even after the repossession. Continue paying your other loan accounts on time every month, such as your credit and loan balances. While utility bill payments or other debts you pay aren't reported to the credit bureaus while your account is in good standing, non-payment is reported to the credit bureaus and further damages your credit. After several years of satisfactory payment history, you'll decrease the impact of the repossession on your credit score and may be able to pursue other lines of credit.

Read More

Can You Insure a Vehicle When You Are Taking Over Car Payments?

You probably can't insure a car if you're taking over car payments for someone, unless you have been added to the borrower's loan contract and are recognized as a co-owner by the lien holder. If you are unsure as to whether or not you can insure the vehicle, contact your lender.

Contacting Your Lender

Call your lender to find out its insurance requirements. Most lenders require proof of insurance coverage before loan approval. If you haven't been properly added to the loan, you cannot call to obtain any loan information; the actual buyer must call herself. Some lenders may allow an insurance policy in a different person's name than the borrower if the insured person is added to the vehicle's registration. Otherwise, consider sharing an insurance policy with the original borrower instead so both names are on the policy.

Taking Over Payments

Most lenders don't allow another person to take over a car loan without submitting a credit application. Unless you are simply helping the original buyer by making her car payments, you may want to follow actual bank procedures in order to add yourself to the car's loan. Otherwise, you have no recourse with the vehicle's lien holder because you are not recognized as an owner. Consider officially taking over car payments as a recognized co-owner or sole owner; if the borrower isn't paying for her required insurance policy, the vehicle can be repossessed from you even though you're making payments.

Becoming a Co-owner or Owner

To go about taking payments over the correct way, you must purchase the vehicle from the original borrower. You may also ask to be added to the loan, although monthly payments may change based on interest rate and loan approval terms. If you are simply helping the borrower during financial distress, you may want to help with car insurance, as well. Otherwise, you can apply for a loan to purchase the vehicle. This way, you can also insure the vehicle and receive credit for your timely monthly payments.

Insurance Options

If you can add yourself to the vehicle's loan or the lender allows an additional registrant, call your insurance provider to add the vehicle to your policy. Be sure to check with the lien holder to find out the amount of coverage it requires; many lien holders require collision coverage, reduced deductibles and higher liability limits. If you aren't going to purchase the vehicle and the lien holder requires its borrower to remain on an insurance policy, find out if you can add the borrower to your policy instead.

Read More

What to Do to Get Rid of an Upside Down Car Loan?

Because cars lose value over time, especially when they are new, people who purchase cars with a car loan may find themselves owing more on the loan than the car is actually worth. This is because the car depreciates in value faster than the owner pays down the principal balance on the loan.

Definition

An upside-down car loan is one in which the current market value of the car is less than the outstanding balance on the loan. For example, you may have bought a car for $20,000 and taken out a loan for the full amount. Two years later, the remaining balance on the loan is $18,000, but the car will only sell for $15,000. This car loan is now considered to be upside down.

Time Frame

Because new cars depreciate more quickly than old ones, the car loses more value per year during its first couple years than during subsequent years. In addition, because monthly payments on a car loan go toward interest before paying down the principal, payments in the early stages of the loan have less of an impact on the principal balance than those at the end of the loan repayment. People with an upside-down car loan can get right-side-up eventually by keeping the car and continuing to make payments.

Extra Payments

Making extra payments on the car loan can help speed up the process of getting rid of the upside-down loan situation. People who get a holiday bonus at work or a tax refund check could put those directly toward the car loan. Another idea is to get an extra job for a while and put that money toward the car loan.

Immediate Solution

For someone who cannot afford the monthly payments or wants to get rid of the car, the best option is to sell the car and get a personal loan to pay off the part of the car loan that its sale price does not cover. If a replacement vehicle is necessary, get an extra $3,000 in the personal loan and use it to purchase an inexpensive used vehicle. Selling the car to a private party by advertising through the newspaper or with signs in the car's window will get a better price than a dealership trade-in.

Warning

Although some car dealerships may be willing to let someone who is upside down on a car loan trade in the vehicle and take out a new loan that includes both the old loan and the new vehicle, this is not a good idea. Rolling the old loan into a new one will only make the problem worse because you will still be upside down in your new loan and the new vehicle will depreciate more quickly than the old one did.

Read More

Can You Get a Car Loan After a Repo?

Yes, you can get a car loan after a repossession, but securing financing can be tough with a blemish as serious as a repo on your record. Even if you have reaffirmed on the repo and paid the back balance, it may still present a difficult hurdle when seeking financing. You might stand a better chance if some time has passed since the repossession, and if you have successfully paid off other vehicle loans since that time.

Impact of a Repo

A vehicle repossession remains on a credit report for seven years from the date the loan was originally reported delinquent, not the repo date. Therefore, if you have a repo on your credit report, the true impact will vary based on how long ago it occurred. If it is more than seven years since the first delinquency, the repo will not factor into the credit decision. For repos still in your report, the impact will lessen depending on how far the repo is in your past.

Managing a Repo

If you have repossession on your credit report, there are ways you can help salvage your credit score and your ability to get financing for another car. Managing your other debts and paying debt obligations on time can help you keep your credit score respectable. However, even with a good payment history on your other debt, it can still be difficult to secure another car loan. Auto lenders will still consider you a risk with secured debt.

Reaffirming on the Repo

If you can pay the back balance after the lender repossesses your car, you can regain physical possession of the vehicle. You also must pay any repossession and towing fees charged to your account. The process of paying the back balance to get your car back is "reaffirming." However, even if you reaffirm on your repo, the negative impact will remain on your credit report and can keep you from getting a loan.

Strengthening Your Application

If your repossession occurred recently, or you simply do not have the credit history or income to get approval for another car loan, finding a cosigner with a better credit history can help you get the car or truck you want. Verify that the prospective cosigner has a consistent source of income and a good credit history. Otherwise, your efforts to use a cosigner to strengthen your application could be an exercise in futility.

Read More

How to Refinance Your Car With Bank of America

Many Americans turn to Bank of America, the largest bank in the U.S., when they need to refinance car loans. Most people refinance loans to lower their interest rates, but some extract cash from vehicles they own free and clear, through cash-out refinance loans. The refinance process at Bank of America normally takes one business day, which enables borrowers to have fast access to funds.

Instructions

1

Go to bankofamerica.com. On the homepage under "Borrow," select "Auto loans." Near the bottom of the auto loan screen, select "auto loan eligibility requirements." A pop-up box appears containing general underwriting guidelines for auto loans. Review the guidelines to ensure your vehicle meets the eligibility requirements. Bank of America, like many banks, does not lend against vehicles more than seven years old. Loan amounts range between $7,500 and $100,000, so if your car falls within the guidelines, you can apply for a refinance loan.

2

On the Auto loan screen, select "Apply Now." Complete the application, entering your name, address, date of birth, driver's license number, Social Security number and other information. You must enter your annual before-tax income. If you are self-employed, enter your previous year's gross income. Bank of America uses a computer-based underwriting system to make preliminary approvals and most people receive a response within 60 seconds. The bank forwards applications for marginal applicants to underwriters who make the decision. Whether approved or denied, you will receive a phone call within one business day. If you are declined, the bank will also send a letter detailing the reasons why.

3

Provide the loan officer with information about your vehicle, including the Vehicle Identification Number, mileage, year, make, model and the amount you owe on your current loan. The loan officer researches the current value of your vehicle and determines its eligibility. If your current loan exceeds the value of the car, you cannot refinance. The loan officer provides you with a range of interest rates and term options. The longer the term, the higher the rate. Agree upon a loan term. The loan officer sends you a loan closing package via overnight delivery or via email.

4

Send the loan officer documents to support your application, including your last two pay slips and a payoff quote from your current lender. Sign the loan papers and send the package back to the loan officer. Bank of America will electronically pay off your current lender and send any funds to you via direct deposit or check. The funding process normally takes 24 hours.

Read More

Do You Have to Wait for Your Car Insurance to Expire for it to Cancel?

If you sell your vehicle or want to take it off the road, do not allow your car insurance to expire. Many states require registered vehicles to maintain an active liability policy, so you may face fines or a license suspension if you do not return your plates. In addition, you are wasting money by continuing to insure a vehicle that you no longer drive.

Selling Your Vehicle

If you sell your vehicle, promptly remove your plates and cancel or transfer your insurance to another vehicle. Do not allow a buyer or dealer to keep your plates; returning the plates to a motor vehicle office is your responsibility. If you fail to notify your state of the sale, you may face future liability issues for the vehicle. If the new owner abandons the car, receives tickets or has an accident, you may be charged or fined as the last known owner.

Call Your Insurance Company

If you want to take your car off the road, your car insurance agent can let you know how to do so legally and whether you can cancel the entire policy. Some states require you to return your plates before canceling your policy; your agent can further instruct you. Some insurance companies can backdate your cancellation to reflect the day you sold your car or returned the vehicle's plates. Because you normally prepay your policy one month ahead of time or longer, you will receive a refund for your early cancellation. You may also have to sign cancellation documents.

New Insurance

If you want to cancel your old insurance policy because you've found a new provider, ask your new agent if it can cancel the old policy for you. Rules for insurance cancellation differ by state, so be sure to talk to an authorized insurance agent. You may have to call your old provider to let them know you have new coverage and sign forms stating so. Don't just let your car insurance expire; this can cause problems with your state motor vehicle office.

Considerations

Some states require licensed drivers to remain insured even without a registered vehicle, so letting your policy expire may not be an option. Your policy cost may also rise in the future. If you received tickets or had an at-fault accident since your original policy was issued, your insurance won't be affected until it's time for renewal. Before you cancel your insurance, talk with your agent about the possible financial repercussions of doing so. It may benefit you to lower your limits during the time being.

Read More

How to Write a Request for a Lower Car Payment

Rather than waiting until you have several late payments on your record or the car dealership is in the process of sending out the repo man, write a request for a lower car payment. If you offer to making arrangements to pay the car loan -- even at a lower payment -- the car dealership might work with you. However, if you do nothing and the car payments remain unpaid, there is a strong probability you will lose the car and be walking.

Instructions

1

Find the lender's address. Look on your billing statement for the lender's physical address for loan inquiries. (This might be different than the billing address.)

2

Type your name, address and phone number on the top of the document. Place it in the center of the letter. Skip two lines, and add the date underneath your address. Space down two lines.

3

Move to the right-hand margin. Type the lender's name, street address and the city, state, zip code on three separate lines beneath each other. Skip two lines, and write, "RE: Request to lower monthly car payments of Your name" on the first line and "Car loan number: XCQ123456" on the next line. Make sure that your insert your name and car loan number into the writing.

4

Space two lines down, and write the salutation. Choose from examples such as "Dear Gentleperson," "Dear Sir" or "To Whom It May Concern." Go down two more lines.

5

Compose the letter. Place the request to lower the car payment on the first line. Point out your history of on-time payments, the length of time you have owned the vehicle and your strong desire to keep the car.

6

Give the reason for the request. For example, discuss medical problems that are overwhelming you financially or the loss of employment. Include situations that lead to a lower monthly income, such as a change in marital status like a divorce or the death of a spouse.

7

Suggest alternative loan arrangements. Ask that the loan be rewritten to a lower monthly payment by reducing the interest rate. Request the loan payoff date is extended for one year to reduce the monthly payments.

8

Close the letter. Include a thank you and a date to get back to you. Sign your name. Proofread the letter for errors. Make a copy for your file. Type the envelope, insert the letter, add a stamp, and place the letter in the mail.

Read More

Do Car Dealers Prefer Cash or Financing?

When you buy a car you have the option to either pay with cash or seek financing in the form of an auto loan. When you finance you must pay interest and continue to send money for the car every month. If you have the luxury of choosing to pay with cash or getting a loan, you might wonder which method the car dealer would prefer. Knowing this could give you some bargaining advantages when it comes to the car deal.

Which Is Preferred?

You may assume that a car dealer will prefer a buyer who comes in prepared to buy the car with cash or a cashier's check. The transaction is simple and straightforward --- you make your payment and drive off the lot just like any other retail transaction. But in some cases the car dealership may benefit financially if you get a loan instead. Dealerships often act as brokers for car loans or have associated financing units. When a customer comes in to buy a car and uses the dealer's financing company, the dealership receives a commission for closing the loan as well as the profit from the vehicle sale.

Bargaining

Since in some cases the dealer may benefit from a car loan, try to negotiate with the car salesman on the cost of the car. Place an offer for the car based on taking the dealer's financing. Explain that you can purchase the car with cash, but ask if the dealer can offer incentives if you decide to buy with a loan instead. You may find that the salesman will work with you on the price or offer a rebate of some type.

Decide Which Is Best For You

It's important to focus on which payment method benefits you most when buying your car. Weigh the total cost versus the total benefit of both choices before you make a final decision at the dealership. If you have the cash to buy the car but choose to finance because the dealer offers you an irresistible deal, keep in mind that you can probably just pay off the loan soon after closing instead of making monthly payments that include interest costs.

Additional Costs

Whether you choose to finance or pay cash don't forget to include additional fees in your final amount due. The car dealer may charge you to issue your temporary tags, register the vehicle, cover your state sales tax cost for the car and even for advertising costs in some cases. When paying cash, make sure you have the money on hand for these additional costs as well. If you finance, you may also have to pay document preparation and loan origination fees in addition to the price of the vehicle.

Read More

Does a Co-Signer Help Lower Interest Rates on Cars?

Getting a co-signer on an auto loan might help you get a lower interest rate if you've had past credit problems or have a short credit history. However, it may be tough to find someone who's willing to co-sign an auto loan because people put their finances at risk by co-signing loans.

Lenders

Lenders base loan interest rates on the risk they perceive a borrower poses. People who have low credit scores usually pay high interest rates because lenders classify them as high-risk borrowers. A co-signer can help a high-risk borrower get a lower interest rate on a car loan because a lender uses the co-signer's credit rating and income to guarantee repayment of the loan. You would need to know whether a potential co-signer has a better credit rating than yours to determine whether you could get a lower interest rate with a co-signed auto loan.

Credit Scores

An auto lender will likely require a co-signer to have an excellent credit score to get an interest rate that's significantly lower than a borrower with credit problems could get on his own. Co-signers generally should have scores of 700 or higher to get some of the best rates on auto loans, according to Cars Direct. People who have scores that high have a history of paying their bills on time, which appeals to the lender.

Loan Payments

Co-signed auto loans also get lower interest rates because the co-signer and the borrower are equally responsible for repaying the loan. Most states even allow lenders to collect payments on delinquent loans from co-signers without first pursuing borrowers for payment, according to the U.S. Federal Trade Commission. Some lenders seek repayment from co-signers first because they have better repayment histories than the primary borrowers. A co-signer also may have a higher income, which increases a lender's chances of recouping delinquent loan payments.

Considerations

Borrowers who have co-signed auto loans can improve their credit scores by making their loan payments on time. Payment history alone affects 35 percent of consumers' Fair Isaac Co., also known as FICO, credit score. Borrowers who consistently make on-time payments may eventually be able to refinance their auto loans to remove their co-signers from their contracts. You should first find out if the interest rate on a refinanced loan would be higher than the rate on the co-signed loan. A higher interest rate could make the loan unaffordable.

Read More

Can a Friend Cosign on a Car Loan?

A cosigner is a person who applies for a loan with you, and if approved, becomes equally responsible for payments and other contract agreements after signing the loan contract. Anyone with good credit and debt-to-income ratio can cosign your car loan. If you have poor credit and your friend has good credit, you'll obtain a loan based on his credit score instead of yours.

Benefits of Using a Cosigner

Without a cosigner, your auto loan application might be declined. If approved, you might pay a high interest rate, shorter loan term or have to provide a large down payment. These loan restrictions reduce lender risk by expediting vehicle equity. High interest rates and shorter loan terms often result in a high monthly payment. Using your friend as a cosigner might result in more lenient loan terms, allowing you to choose a higher priced vehicle for an affordable payment based on interest rate, longer loan term and less of a down payment requirement.

Disadvantages of Having a Friend Cosign Your Loan

Friendships can change at any time. If you and your friend argue or decide not to remain friends any longer, she still remains as the vehicle's co-owner. You can't sell or trade in your vehicle in the future without your friend's permission. Even if you decide to refinance the loan, your friend has to agree to release her portion of ownership. You can't simply remove someone from an auto loan. If you plan to sell your car or trade it in the future, you'll have to work with your friend to complete the process.

Loan Process

To determine if your friend is an ideal cosigner, apply for a car loan pre-approval. Search new or used car interest rates to decide where to submit an application. Even if you don't have good credit yourself, shop for good rates, because your cosigner might qualify. Discuss your budget with a bank representative to determine how much of a loan you can afford. Once you find an ideal lender, both you and your friend must provide your credit information. Pre-approvals can take up to one week, so apply for your pre-approval before you go car shopping.

Understanding Responsibility

Using a friend as a cosigner might cause trouble in your relationship if you don't make payments on time. Your entire loan account, including amount borrowed and payment history, is reported on your friend's credit report. If you don't make your payments, your friend's credit score will drop, increasing his own interest rates and affecting his chance of future loan approvals. Cosigning the loan also decreases your friend's debt-to-income ratio, as your loan payment becomes part of your cosigner's debt responsibility. Explore the affects of cosigning a loan with your friend to determine if the option is best for both of you.

Read More

Comparing Auto Financing for Cars

Financing a new or used vehicle can be a harrowing process for an amateur. Strong sales tactics, confusing documents and aggressive sales personnel can all be intimidating. The best way to find financing when purchasing (or refinancing) a car is to compare options, ask lots of questions and never, ever sign before you're completely sure of and comfortable with the terms of an auto loan.

Credit

The major determinant in most auto loans is a borrower's credit score. Make sure exactly what range you fit into before applying for financing (see Resources). If you have FICO score over 720, you should qualify for all top-tier rates and programs (so long as your income will support the loan). In an up or down market, a 720 FICO score should never qualify you for a rate higher than 7 percent and usually much lower. As for lower scores, it's often up to the discretion of the lender or dealership. Compare rate offers side by side and ask pointed questions of lenders who charge noticeably higher rates than competitors.

Different Sources

Most dealerships and car lots have lenders with whom they work exclusively for auto financing. Check offers with credit unions and local banks---both of which may offer more favorable loan terms. Be sure, while in negotiations with a lender, to focus specifically on lowering the total cost of the vehicle, not the monthly payment. Think of negotiations as a step by step process. First, select the vehicle (make sure it's in your budget and fits your needs); next, negotiate a total price (including all extras); last, attempt to finagle with the monthly payment by adjusting the term (length) of the loan.

Check Third-Party Sources

When comparing rates and payments, do outside research. Do research online for similar vehicles and check to see the going rate (sticker prices). Also, check the Kelley Blue Book valuation site (see Resources) to make sure you're not being overcharged for the vehicle. Make sure to double check the math---do your own DIR (Debt to Income) calculation. For example, if you make $3,000 a month (before taxes), and your total monthly obligations (including a proposed monthly auto loan payment) equal $1,400, your DIR ratio is 47 percent---high, but not unmanageable. You'll want to strive for a DIR below 50 percent. Many lenders allow DIRs to exceed 50 percent, so it will be your responsibility to ensure you can repay the loan.

Read More

Do I Negotiate With Dealers First or Finance?

Most car dealers have a finance person who is happy to arrange an auto loan for you once you have reached a deal on a new vehicle. Dealerships make money from various sources, like extended warranties and aftermarket add-ons, not just from the car sale. Financing is another way in which they wring extra profit from you, according to Edmunds automotive site editor Philip Reed. Prevent this by getting your own loan before you car shop.

Reason to Finance First

You can easily find out the invoice price of the vehicle makes and models in which you are interested by doing some online research. Websites like Edmunds and Kelley Blue Book provide this information for free and let you look up current rebates and direct-to-dealer incentives. You may negotiate a great price on your chosen vehicle, but Reed warns that you may get overcharged on interest because the finance department adds some points for profit. This cannot happen if you are pre-approved for financing from an outside source.

Pre-Approved Vehicle Financing

Many financial institutions offer pre-approved vehicle financing at competitive rates. Credit unions tend to offer lower interest rates than banks, according to Dana Dratch of the Bankrate.com financial site, and online lenders and even some car insurance companies finance vehicles at good terms. Confine your loan shopping to a two-week period so credit scoring firms count the multiple inquiries as a single credit check. Otherwise, your score can drop many points.

Process

Do not tell a car salesperson you already have vehicle financing before you start price negotiations. Dealerships are sometimes reluctant to give really good deals if they know there is no possibility of recovering some of the lost profit by arranging your loan. Simply state that you want to negotiate based on total price, not on monthly payments. This is a good strategy even if you do intend to use dealer financing because salespeople can disguise a high total price more easily by breaking it down into payments. Dealers also extend the loan length to make payments lower, the Lendingtree financing site warns, which means you pay more interest.

Considerations

Car manufacturers sometimes offer special financing terms to attract buyers. For example, you might be able to get a single digit interest rate, or even zero percent interest, if you buy a certain model. Finance through the dealer if you can get a manufacturer-subsidized loan that beats bank and credit union terms. You need an excellent credit rating to qualify for low promotional rates, the BCS Alliance advises.

Warning

Never get a car loan that lasts longer than 48 months, consumer radio host Clark Howard advises. Financing that lasts 60 months or longer puts you in a bad position because your vehicle's value drops more quickly than your loan balance. You owe more than your car is worth in the loan's later years, which means you must pay or finance the deficit if you need to buy a new car before your loan is paid in full.

Read More

Do You Still Pay When a Car Gets Repossessed?

In the United States, vehicle repossession law is mandated at the state level and determines both the consumer's and lender's rights. If your car is repossessed, you are still responsible for the remaining amount on your full car loan, but this amount may be lowered if the lender sells or if any violation occurred in the repossession or auction process.

Buy-Back Option

In some states, you have the legal right to buy-back a repossessed car for the overdue amount on your loan plus the dealer's repossession charges. To determine your state's vehicle repossession laws, visit your state's Attorney General website.

The Auction Option

If your state does not allow a buy-back or you cannot afford to pay the overdue amount on your loan, your bank lender or dealer has the option to re-sell the repossessed car to help recoup the loss. As a consumer, you also have the option to bid on the car at auction, but your rights in this matter will vary from state to state. If you do not buy back the vehicle at auction or it sells for a lower amount than the total you owe, you are responsible for the dividend, which is known as the deficiency, as well as the lender's repossession charges. If you buy the vehicle at auction, you will only owe the repossession charges. Your lender must give you any surplus amount if your vehicle sells for more than the amount left on the loan, although this is rare.

Paying the Deficiency

If you owe a deficiency on your auctioned car, your lender has the right to sue you for this amount in some states. However, you have legal rights when it comes to the manner in which the vehicle was auctioned and whether the price was legitimate, how long the lender waited before billing you for the deficiency and whether the repo man legally obtained your vehicle in accordance to your state's breach of peace laws. Also keep in mind that you have full legal rights to the personal items in your car, even if your car was repossessed while they were still inside. If any of these violations occurred, speak to a lawyer about your rights and whether your deficiency can be thrown out or lowered.

Solutions/Tips

One of the best ways to avoid repossession is to talk to your lender about your options before the car is taken. Another option is to find a family member or friend to buy your vehicle or take over your payments, or to file for bankruptcy, although the latter should only be considered as a last resort. To talk with a credit counselor about your finance options, visit the National Foundation for Credit Counseling at FFCC.org.

Read More

How to Keep a Deceased Relative's Auto With a Loan

When a relative dies and leaves behind a vehicle, that vehicle does not have to be sold. In fact, you can keep the automobile. While a loan in the deceased relatives name cannot remain open for you to make payments on, it is possible to keep the car with financing of your own. Each state's department of motor vehicles has a slightly different process to take over a vehicle from someone deceased, but the basic requirements remain the same throughout the U.S.

Instructions

1

Contact the financial institution that services the deceased relatives loan to inform the company about the death. Send the institution a death certificate for your relative.

2

Apply for financing with the lender to take over the loan. Unless your name was originally on the loan with the relative, the current loan must be paid off and you must get a new loan to keep the car financed in your name. If you prefer to use a different lender, you can get the payoff amount from the current lender and apply for a loan to cover that amount with your lender of choice.

3

Get the vehicle title from the executor of the estate and take it to your local department of motor vehicles to register the vehicle in your name. Bring a copy of the death certificate. If you are listed on the title as a joint owner or if the vehicle was left to you by the relative in a will, you do not have to pay tax on the vehicle. However, if none of those scenarios applies to you then you should expect to pay an excise tax on the vehicle. The amount varies by state. Pay any registration fees as well, which also vary by state.

Read More

How to Be Removed as a Co-signer on a Vehicle

If co-signing a vehicle loan, your name will stay on the car loan for the length of the term. Because the loan affects your debt-to-income ratio, you may run into problems when applying for your own car loan or mortgage. For this reason, you may consider options for removing your name from a vehicle loan for which you co-signed. This is possible, but requires the primary borrower refinancing the loan.

Instructions

1

Meet with the vehicle owner, who's also the primary borrower on the car loan. Tell him that you want to remove your name from the loan.

2

Ask the primary borrower to apply for a new auto loan. Auto lenders will not make changes to existing loans or rewrite a loan unless the borrower refinances and qualifies for the loan based on his own income and credit. Contact the bank to inquire about refinancing requirements. Ask about credit score minimums.

3

Suggest adding someone's name in place of yours if the primary borrower doesn't qualify for a new vehicle loan without a co-signer. Once approved with a new co-signer, this person appears with the primary borrower at closing and signs the papers for the new vehicle loan. Because the new loan replaces the old, this action releases you as a co-signer.

Read More

How to Finance a Nissan

Special rates and financing for Nissan vehicles are provided through the NMAC (Nissan Motor Acceptance Corporation). Nissan calls its financing for new and used vehicles the "Signature Purchase" program, but does have restrictions different from alternative traditional lenders. The NMAC does not offer financing for used cars over six years old. You can also finance for a term of 12 to 72 months, but other lenders may offer an 84-month option that could benefit the buyer of more expensive models, such as the Titan or Armada.

Instructions

1

Go to NissanUSA.com to view current Nissan incentives. New car offers are listed on the main website, but you can use the "locate a dealer" option to find out if additional offers exist for new and used cars by visiting the dealer's independent website. Rebates and interest rates usually change monthly, but going to the website ahead of time can let you know if any special financing exists for the vehicle you want.

2

Read the details thoroughly. Sometimes, low rates are for very short terms, such as 36 months, which is the equivalent of a very high payment. But often, the NMAC offers low-rate financing or rebates (not both at the same time), so read the details to determine which Nissan incentive you'd prefer for your financing.

3

Input your ZIP code into the "Find a Dealer" section to help you find your local dealers, if necessary. Call to make an appointment, or stop in during business hours to find your car and apply for a loan.

4

Go to a Nissan dealership and ask for a salesperson. Work with one until you find the Nissan vehicle that you like, in the color you want, with the options you prefer. Once you do, discuss money down, interest rates or your desired monthly payment to find the best offers for your needs.

5

Fill out an NMAC credit application. Your Nissan salesperson will answer any questions you have, or walk you through the credit application to explain any formalities.

6

Wait for your approval. A Nissan dealership submits credit applications to the NMAC electronically, so your approval should take no longer than an hour. Go over any additional details with your salesperson, such as approved interest rate, term and monthly payments.

7

Arrange to pick up your Nissan. To complete the financing, you must provide acceptable insurance coverage for the Nissan, which your salesperson will set up with you through your insurance provider while you're at the dealership. Give your dealer representative your cash down, if necessary, and sign your NMAC contracts to complete your financing.

Read More

RV Financing Options

Purchasing an RV is similar to buying a car, in that there are many options available to finance your vehicle. If you have good credit and knowledge of where to apply for a loan, financing an RV should be a simple task. Keep in mind that RV loan rates mimic the rates of car loans, so when auto loan rates are low, RV loan rates should be as well.

RV Financing Companies

Some finance companies work specifically with RV loans. As an RV is not considered a necessity item, financing one typically requires higher credit scores than those needed to qualify for a car loan. In many cases, the RV dealership can finance you on the spot. In other situations, you will have to apply for a loan in advance, obtain prequalification paperwork and take the documents to a dealer to prove that you have the financing available. The Recreation Vehicle Industry Association offers lists of dealerships and RV financing companies.

Older RVs

For those with less than stellar credit, older RVs provide an option. Financing for older RVs is easier to obtain. They also typically require less of a down payment. Banks and credit unions are options when you're seeking to finance an older RV, and they'll finance it as they would a car. Be wary of RVs more than 7 years old, because many banks will not finance an RV older than that.

Cash Recapture

In cases where an RV is being sold at an auction or distress sale at a price below its actual value, you may be able to pay for the RV with cash on hand and then get the cash back through a special type of loan. Through a cash recapture, many banks will give you the money for a loan after you have already purchased the RV, especially if you bought the RV for far below its actual value.

Read More

How to Fill Out a Certificate of Title When Selling a Car in North Carolina

While some states allow vehicle title transfers while a lien is still listed, the state of North Carolina does not. You must make sure that, if your North Carolina car had a loan on it at one time, your title was signed by the bank to release the lien. In addition, owner signatures must be notarized. Any co-owners also have to sign the title.

Instructions

1

Check the front of the title to make sure no bank names exist under the lien holder section. If one does, make sure the bank has signed in the designated area to prove the lien has been satisfied. Call the bank listed on your title for further information, as you cannot transfer your title with a lien present.

2

Turn the title over. Additional information is required on the back of the title. Print your name and the name and address of the purchaser in the space provided, and input the correct odometer reading. Date the title and fill out the Damage Disclosure, as North Carolina requires that serious vehicle damages be reported.

3

Go to a North Carolina Vehicle & License Plate Renewal Office with any co-owners to sign in front of a notary. Bring your driver's licenses.

Read More

Tips to Lease a Car in California

Agreeing to a car lease is a major financial commitment. You're bound by the provisions of the lease contract, including early-termination penalties and mileage overages. Some leases come with the option to assume ownership. In California, there are rules and protections for customers of car leases.

Advantages of a Lease

A lease is a long-term car rental. Leases are an option for consumers who can't afford or choose not to purchase a new car. Leases have some advantages over purchases. Lessees have lower upfront costs and monthly payments than car buyers and are not required to make a down payment. Additionally, some may choose to lease for intangible reasons. As an example, "some people like to have a new car every two to three years, or may prefer to always drive a car that is under factory warranty," according to the Marin County District Attorney's Office.

Drawbacks of a Lease

Even though leasing is a good option for some, it also has drawbacks. The overall cost to the consumer of leasing a car is usually higher than buying one. Ending the lease early can result in costly termination fees, and the contract language that explains these fees is usually complicated, according to Marin County. Lessees don't have equity in the vehicle and cannot sell it. Finally, most leases require customers to stay below a specified mileage, and consumers are charged more for excess mileage or wear and tear.

Your Rights as Lessee in California

Car lessees are entitled to legal protections in California. The Moscone Vehicle Leasing Act regulates car leases in the state. This law prohibits excessive termination fees and guarantees lessees the right to end a lease early. The law also allows dealers to charge late payments and reasonable maintenance or repair fees. It also permits a security deposit to cover these costs.

Watch Out for "Lemons"

The California lemon law entitles car lessees to warranty protection against "lemons," or severely defective vehicles. Under this law, a dealer must replace the vehicle if it is unable to repair it after multiple attempts under the warranty. The lemon law applies to all vehicles in the first 18 months of the lease, or under 18,000 miles, whichever comes first. Used vehicles are covered if the dealer provides a written warranty.

Your Rights Under Federal Law

Lessees are also protected by federal regulations. The federal rule that governs a car lease is called Regulation M, and is found in the Code of Federal Regulations at 12 CFR 213. Under this regulation, lessors must disclose all of the major terms of the lease in the initial contract. Lessors in violation of this rule or the contract terms can be sued by the lessee to recover damages, court fees and legal costs.

Read More

Does the Title of the Car Remain in the Co-Signer's Name?

A co-signer is a person who is equally liable for a car loan debt, but who is not necessarily a car owner or entitled to use the car. Whether a co-signer's name remains on the title or is ever on it in the first place depends on the conditions of the loan and the agreement between the co-signer and the debtor. Talk to an attorney if you need legal advice about the rights and obligations of co-signing a car loan.

Co-Signer

The co-signer is another person who agrees to pay back a loan in the event the borrower cannot. If the borrower and co-signer fail to pay back the loan, the lender can then sue both, or either individually to recover the unpaid funds as well as repossess the car and use its sales proceeds to pay for the debt.

Title

A car's title is the legal document that indicates who owns the car, very similar to a deed for a home or piece of real estate. The title lists the name of the owner as well as the name of any lien holder. A lien is a legal interest in the car that a lender takes as security in the event the borrower fails to repay. Once the borrower repays the loan in full, the lien holder releases the lien and the borrower can get the car re-titled in his name alone. If the borrower used a co-signer in the borrowing process, the co-signer's name is typically not included on the title.

Co-Owner

A co-owner is not the same as a co-signer, though a co-owner can act as a co-signer. If, for example, you and your spouse buy a car with a car loan as co-buyers, the car title typically lists both names on it. The car title will include both names with either an "or" or an "and" between them. If the car title lists the owner's names with an "or," either spouse can sell or transfer the car without the other spouse's permission. If there is an "and" between the names, both spouses must agree to any transfer.

Re-Titling

Whenever you buy or sell a car, the owner has to re-title the car in her name. If there are co-owners, the co-owners have to re-title the car in both of their names. If, for example, a borrower uses a co-signer on a loan and pays that loan off, the borrower can then have the car retitled in her name once the lender releases the lien. The co-signer's name doesn't appear on the title. However, if the co-signer is listed as a co-owner, the co-owner's name must also appear on the title after the lien release by the creditor.

Read More

How to Calculate & Payoff Balances on a Loan

The principal of a loan is the amount of the initial loan, and the interest is a fee the borrower pays the lender for the use of the principal. The lender repays the principal and interest over time with a series of installment payments. A lender can minimize the amount of the interest by paying off the balance of the loan as quickly as possible. The calculation of the current balance requires you to know the principal, interest rate, amount of the payment and number of payments.

Instructions

1

Obtain the principal of the loan from the lender. Assume the principal is $12,000 for this example.

2

Obtain the interest rate from the lender. Lenders generally provide the interest rate as the annual percentage rate, or APR. Assume the APR on this loan is 6 percent.

3

Divide the APR of the loan by 100 to obtain the annual interest rate. The APR of the loan in this example is 6 percent, so the annual interest rate is 6 / 100 = 0.06.

4

Divide the annual interest rate of the loan by the number of payments in a year to obtain the interest rate for the payment period. Assume the loan in this example requires monthly payments. The interest rate for the payment period is therefore 0.06 / 12 = 0.005.

5

Obtain the length of time needed to repay the loan, also known as the term of the loan. Assume the term of the loan in this example is 20 years.

6

Multiply the term of the loan in years by the number of payments in each year to obtain the total number of payments required to pay off the loan. The term of the loan in this example is 20 years, and the loan requires monthly payments, so the loan requires 20 x 12 or 240 payments.

7

Obtain the payment amount from the lender. The payment amount for this loan is $85.97.

8

Calculate the balance of the loan with the formula B = L x (1 + I)^N ' (P / I) x [(1 + I)^N ' 1]. B is the current balance of the loan, L is the principal, I is the interest rate for the payment period, N is the number of payments you have made on the loan and P is the amount of each payment.

9

Assume you wish to know the current balance on a $12,000 loan that requires monthly payments. The monthly interest rate is 0.005, you have already made 117 payments and the amount of each payment is $85.97. The current balance is B = L x (1 + I)^N ' (P / I) x [(1 + I)^N ' 1] = 12,000 x (1 + 0.005)^117 ' (85.97 / 0.005) x [(1 + 0.005)^117 ' 1] = 7,884.12. The current balance on this loan after 117 payments is therefore $7,884.12.

Read More

How to Switch Ownership of a Leased Vehicle

Switching ownership of a leased vehicle is known as a lease transfer or lease assumption. Before attempting to transfer your lease, you must contact your bank to find out if you're allowed to do so. Banks may differ on lease assumption requirements. Most banks, however, require that your lease account be in good standing and active for a certain period of time, or several months or more. Additionally, your bank likely charges a transfer fee that you or the person you're transferring to will have to pay.

Instructions

1

Call your leasing bank to inquire about the lease transfer process. A bank representative should describe the application process and state whether any fees are due if the transfer is approved. Obtain a phone number to offer your potential lessee for the application.

2

Give the person taking over your lease your bank's phone number and any information to identify the account, such as the car's VIN (vehicle identification number) or account number if your bank instructed you to do so.

3

Sign any forms and lease transfer paperwork mailed to you once the application is approved. Overnight the paperwork back to the bank to quicken the transfer process. (The person who is acquiring the lease should do the same.)

4

Arrange to give your vehicle to the new lessee once your bank has accepted and approved all paperwork. Take your plates off of the vehicle and give the new lessee the car's owner's manual and all sets of keys. Cancel your full-coverage insurance policy immediately.

Read More

How to Transfer a Car Loan

In addition to helping a car owner get out of an auto loan without ruining their credit, transfering a car loan can help an individual who wants a used vehicle to purchase one without going to a dealership. Transferring a car loan is an easy way for two individuals to save time and money.

Instructions

1

Review all loan documents for the original purchase of the vehicle to make sure that transferring the loan to another individual is allowed. Many lenders will allow a qualified buyer to assume a loan payment, but there are some who do not allow car loans to be transferred. If you have looked through your original car loan documents and cannot find what you are looking for, contact the lender directly.

2

Start looking for potential buyers. Many individuals interested in buying a used car will jump at the chance to have a car loan transferred to their name. In most cases, transferring a car loan will mean that the new owner will not have to pay a down payment. However, if the car loan payment is behind and money will be needed in order to catch up on past due payments, be sure potential buyers are aware of this. Do not wait until the last minute to tell a potential buyer that the vehicle they are interested in having transferred to their name might be repossessed if past due payments are not made immediately.

3

Obtain a loan transfer package (sometimes called a loan assumption package) from the lender. This package will include everything that is needed by the lender to have the car loan transferred out of the original owner's name and into the name of the new buyer. In addition to an application, the package will request information needed for income verification and ask for references. Encourage the potential buyer to check her credit prior to completing this package since she will need to meet certain credit requirements to qualify for the car loan transfer.

4

Prepare to pay any necessary fees. Even after finding a qualified buyer to take over the remaining balance of the car loan, some lenders will still require payment of some fees, such as loan assumption fees, loan transfer fees, processing fees, or even application fees. The buyer may be willing to pay some or all of these fees if they are still cheaper than a traditional down payment, but the original owner should be prepared to pay all of the fees himself.

Read More

How to Get an Auto Loan With Poor Credit

Many car purchases are funded using financing provided by the dealership, a captive financing company or a bank. A captive financing company is a separate financing company owned by the dealership or the dealership's parent company. Bad credit may prevent you from getting an auto loan in a large enough amount to afford the car you want, or the interest rate may be too prohibitive. Certain dealerships, credit unions and other financial institutions have options for borrowers with bad credit to get transportation.

Instructions

1

Pay down credit card and store card balances a month to two months before going car shopping if possible. Paying down your revolving debt balance is a fast way to raise your credit score if you are have a high percentage of credit card debt compared to your credit card limits. This credit score boost may be enough to get you a lower interest rate.

2

Check car lots and dealerships that market financing with no credit check or that offer financing to those with bad credit or no credit. Many are buy-here, pay-here dealerships that arrange financing for you and take your car payments directly. These loans tend to have higher rates than standard car loans.

3

Call the dealership from which you want to buy a car. Ask what the general credit requirements are to get financed and whether options are available for borrowers with bad credit. If the dealership has an arrangement with a specific lender, you may be able to call the lender and talk to a loan officer about the likelihood of getting approved.

4

Go to a credit union or local bank and talk to the loan officer. Smaller banks and credit unions may be willing to take a chance and lend you the money, especially if it is for a small amount. Explain the circumstances surrounding your bad credit and the steps you are taking to rectify the matter.

Read More

How Long Do You Have to Wait to Buy a New Car After Bankruptcy?

Consumers can get classified as subprime borrowers in a variety of ways, such as building up a high debt load and skipping loan and credit card payments. Filing bankruptcy is a sure way to make lenders back off, but Warren Clarke, an editor for the Edmunds automotive research website, explains that credit blemishes do not completely lock consumers out of the new car market.

Definition

The Federal Trade Commission (FTC) explains that bankruptcy is a court action that absolves a person from paying certain debts. Individuals usually file Chapter 7 bankruptcy, which gets rid of almost all bills and liquidates most assets, or Chapter 13, which allows retention of some property and creates a repayment plan.

Effects

Bankruptcy puts a big negative mark on a consumer's credit because it is usually a last resort for people who cannot pay their debt, according to the FTC. Creditors view it as a sign of bad financial management and are reluctant to risk lending money to someone who has a history of not repaying what they owe. This includes all types of credit, including credit cards, retail accounts and all installment loans, such as new car loans.

Time Frame

Bankruptcy remains on credit reports for 10 years, according to the FTC, but consumers do not have to wait an entire decade to get a new car loan. They can often finance a new vehicle within a year or less, although they face more difficulties than their counterparts with high credit scores. Bankruptcy no longer affects car loan applications after it drops off the credit reports, and its effects lessen with each year because most lenders focus more on current financial performance.

Process

Clarke advises subprime borrowers to search new car loans as soon as they are ready to buy a vehicle. Car shoppers with recent bankruptcies are in a better negotiating position when they have arranged their own loans before visiting dealers. Dealerships make money from setting up financing, so they usually charge higher rates to boost their profits. Banks and credit unions often give financing to established customers even if they have bad credit. Also, some firms specialize in working with subprime borrowers, but their interest rates are typically high.

Considerations

Car buyers who get subprime loans due to past bankruptcy can often refinance their loans at better rates in as little as three to six months, according to the Car Buying Tips website, although it often takes a year or two. Consumers must diligently rebuild their credit during that time, which requires having a modest number of credit accounts, using them regularly and making every payment by the due date. Such activities raise a person's credit score and show prospective lenders that these consumers are capable of handing their finances responsibly, the FICO credit score company explains.

Read More

How to Buy a Car With Bad Credit in San Antonio, Texas

Various online financial sites and local dealers offer car loan programs for San Antonio, Texas, consumers with bad credit resulting from charge-offs, divorce, bankruptcy, repossession and late payments. Complete an online application to find out which type of loan product you qualify for and the interest rate and terms. Expect that you will have to pay a higher interest rate with bad credit. You will need to provide the finance company with proof of income, a cash down-payment and evidence that you have full coverage car insurance.

Instructions

Car Loan Financing

1




Find a car you want to purchase at a San Antonio, Texas, car dealership. Inquire if the dealer specializes in bad credit car loans. Complete a car loan application either at the dealership or with an online finance company. The preliminary process should take anywhere from one hour to 24 hours. The finance company will advise you of the loan rate and terms so you can comparison shop to choose the best loan product.

2




Provide the car loan finance company with proof of your income such as recent paycheck stubs, an explanation about what caused your bad credit situation, evidence that you have paid any past-due debt or collection debt and evidence of your down payment so the company can review and evaluate your application.

3




Make the down payment. Bring a cashier's check or personal check to the car dealership as a down payment for your car. The higher the down payment you make, the better chance you have that the finance company will approve your application. The finance company assumes less risk when there is more equity in the loan.

4




Read your car loan finance papers carefully. Make sure you understand the terms of your loan before you sign anything. Ask the car dealer or finance company to explain them to you.

Read More

Can I Build Credit After Bankruptcy With a Cosigner on a Car Loan?

A bankruptcy affects your credit score negatively, but you are not stuck with the bad credit score forever. After a bankruptcy, reestablish credit in your name to build a positive credit history that will increase your credit score over time. If you are having trouble finding a lender to finance a car loan for you, getting a cosigner can help you qualify for the loan.

Cosigners and Credit Reports

A cosigner is somebody who applies for the loan with you and signs all of the loan documents with you. The cosigner legally has as much responsibility to repay the loan as you do, even if you are planning to make all of the payments on your own. The car loan and all of the payment history will appear both on your credit report and on your cosigner's credit report. The loan influences your score just as much as a car loan without a cosigner would.

Benefits of Having a Cosigner

If your cosigner has a better credit score than you do, this can help you secure the best possible car loan. Lenders will often reject car loan applications from people who have a recent bankruptcy, and if they do accept the application, they will charge a very high interest rate. Applying with a cosigner increases your chance of approval because the lender takes the cosigner's positive credit history into account. In addition, you will probably get a lower interest rate with the cosigner than you would without.

Making Payments

Because your payment history makes up about 35 percent of your credit score, focus on making every car loan payment on time to build credit. If you are not going to be able to make a payment, contact your cosigner before the payment is due. Because the late payment will also damage the cosigner's credit, this person might be willing to give you money so you can make the payment on time.

Considerations

A year or two after you first got your car loan, you might have improved your credit score enough to qualify for a car loan with a decent interest rate on your own. In this situation, contact your lender and ask the lender to release the cosigner from the obligation. Another option is to apply for a refinanced car loan with a credit union on your own.

Read More

Should I Purchase or Lease a Car?

A vehicle lease often has a cheaper monthly payment than a car loan payment, however, the lease contract may prove too restrictive for some buyers. As a lessee, you must abide by wear-and-tear limits and a mileage allowance that you choose at the beginning of the lease. Consider your driving habits and vehicle needs to determine whether a lease or purchase is the right choice for you.

Ownership

If you finance your vehicle, you will own it once you pay off your loan. If you lease your vehicle, typically you'll return it to the dealer at the end of the lease period, never owning it. However, at any time during your lease, you can purchase the vehicle from the leasing company, allowing you to trade it in or sell it on your own. If you like to change cars every few years, a lease may be best.

Budget

Leasing often results in a lower monthly payment than financing. Rather than paying the car's retail price, you'll pay about 50 percent of that. The leasing company assumes the vehicle's future market value and only requires you to pay toward the car's depreciation amount, plus interest. If you have a strict budget, consider a lease if you can abide by the contract terms. Leasing can save you $100 or more per month than a comparable loan payment for the same car.

Restrictions

Since you don't own the leased vehicle and the company expects you to return it at the end of the contract, expect to stay within your mileage allowance. If you exceed your mileage allowance, the vehicle's resale value suffers. The bank can charge up to 20 cents per mile over the allowance. You also must maintain the vehicle. The leasing company will charge you for any repairs or maintenance that you didn't complete. If purchasing, you can do with your car as you please without concern for mileage, use or wear-and-tear. Consider a finance if your yearly mileage changes or if you don't consistently maintain your vehicle.

Warranty

Consider your warranty when deciding between a lease and a purchase. Leasing contracts usually are offered for a period of 36 to 39 months, so you'll remain under the vehicle's bumper-to-bumper warranty. If you plan to purchase, you may want to include the cost of an extended warranty with your purchase. Warranty prices are cheaper when a vehicle is new. If you are able to abide by your lease contract and continue to lease, you can enjoy driving a newer vehicle that's always under factory warranty.

Read More

What Does Leasing a Car Mean?

People who need a car to get around have two major options. They can buy a vehicle, or they can lease one. Leasing gives you a vehicle temporarily and doesn't require you to commit to ownership. To decide if leasing is best for you, you must understand what it involves.

Leasing Basics

Leasing a car means that you make payments toward the use of the vehicle. You don't make payments toward ownership. Although leasing a car is similar to renting, leasing is a form of financing -- renting is not.

Return of Vehicle

When you lease a vehicle, you make payments toward the use of the vehicle for a short period of time, usually two or three years. After the lease period is up, you must return the vehicle, renew the lease or purchase the vehicle by paying the depreciated value. Most people opt to return the vehicle because then they can get a lease on a newer model that doesn't have as much wear and tear.

Payments

As with a car purchase loan, you make payments on a car lease every month. To decide how much your payment will be, the leasing company figures out how much the vehicle will depreciate during your lease period -- this is the value of the use of the car. They then calculate a finance charge, which generally is interest. There also may be other fees involved, depending on the lease contract, but most of those fees are due upfront. The lease company then subtracts your down payment from the total of these figures. Then they divide the result by the number of months in your lease, giving you your monthly payment amount. Because you are paying only a portion of the value of the car -- the portion you'll use -- leasing generally is cheaper per month than financing a car loan.

Advantages and Disadvantages

Because leasing companies typically offer new vehicles, you usually don't have to worry about maintenance. You also have flexibility; if you want a different vehicle, you easily can get a different one at the end of the lease. The lower payments often are easier on a tight budget, but in the long term, leasing is more expensive. Because you don't own the car, you can't make modifications to the vehicle, and you may have to have more comprehensive insurance coverage, which is more expensive. Because most leases only last two or three years, you have to deal with leasing companies and contracts more often, and the terms of every lease can vary. Payments can fluctuate from lease to lease depending on the value of the car you select and your credit score. Many leases have restrictions, such as limiting you to a certain number of miles.

Read More

Can I Break a Car Lease?

You can break your car lease; details and costs are outlined in your bank contract. Expect to pay a bank-determined termination fee, which usually costs more than $1,000. You must also pay all payments due for the term of your contract. If you went over your mileage allowance or exceeded wear-and-tear fees, expect to pay additional fees, as well.

Call the Leasing Bank

Call your leasing bank to find out the total amount of fees you can expect to pay for lease termination. Ask if you can set up a payment arrangement or if the fees are due at once so you can plan ahead and budget. Expect the fees to prove more costly if you have recently initiated your lease; termination costs may prove too expensive to end the lease. If you are nearing the end of your contract, your bank may offer an opportunity to get out of the lease without penalty in the event that you lease or finance another vehicle from the same bank.

Arrange an Inspection

Some leasing banks require lessees to complete a vehicle inspection before returning a lease even if the termination is early. If not, arrange an inspection with the leasing bank to better plan ahead for lease-end costs. A lease representative will inspect the car to determine if you have exceeded wear-and-tear fees or if you need to complete repairs or maintenance items before returning the car. Completing the inspection before the lease's return can help you to plan ahead; you'll have an opportunity to fix your vehicle and avoid an extra bill.

Returning the Lease

Your lender may request that you pay your termination fees upfront or after return. Regardless, pay the fees as soon as possible to protect your credit rating. If you do not pay the fees, the leasing bank reports the nonpayment to the credit bureaus. Return your vehicle to the bank's designated drop-off point, which is usually a same-make dealer. Make copies of all paperwork that the dealer completes with you. If you did not arrange an inspection before return, a representative (not the dealer) will inspect the vehicle once the bank collects the car from the dealer and bill you if necessary.

Other Options

Explore other options before you decide to terminate your lease and pay the fees. If you're still under your mileage allowance, you can transfer your lease to someone else if your bank allows it. LeaseTrader.com and the SwapaLease website bring lessees and buyers together for lease transfers. You can also avoid over-mileage and termination fees by purchasing the vehicle. Call the leasing bank to determine the car's purchase price and sell or trade the car instead.

Read More

Can I Get My Car Downpayment Back?

You may be able to get your car down payment back, all depending on the reason you left one and where the dealership applied the money. A down payment goes toward a vehicle's value, while a deposit is meant to hold a vehicle until you can return to purchase it; the two are often confused. Leasing down payments, however, are not returned.

Deposits

To determine if you can get your deposit back, read your receipt. As long as you did not take the dealership's car, leading the dealer to believe you would be back to make the purchase with your own financing or cash, most dealers will return your deposit, although some may give you a hard time. If you did drive the dealer's vehicle for several days, it can rightfully charge you cleaning fees, for the mileage you drove or for any damage that occurred to the vehicle while in your possession.

Down Payment Toward Purchase

You should be able to get your down payment back if you purchased a vehicle. However, you should be sure to discuss your intentions with the dealer beforehand. If you left a down payment but told the dealership you wanted it back upon purchasing the vehicle, your down payment will be returned if it was not applied toward the vehicle's purchase price when you obtained financing. Also, if you total your vehicle, you will not receive your down payment back, but will receive money for any equity in the vehicle after the loan amount is paid off, if any is left over.

Vehicle Leases

Unfortunately, if you leased a vehicle and paid every payment up front, you will not receive any of the money back. Your leasing bank is listed as your insurance policy's loss payee, a requirement for leasing. In the event of a loss, you not only lose your down payment amount, but will not receive any equity refund after the loan is paid off, if any exists. For this reason it is not advisable to put down a lot of money when leasing.

Reporting a Dealer

If you believe the dealer is unfairly keeping your down payment, you may have recourse to get it back. Because many dealers are regulated by a state's motor vehicle office, you can call to put in a complaint. If your complaint is valid, the dealership is called and asked to explain why the money was kept. Without valid reason, the dealer may be investigated. Sometimes this is all it takes to get a dealership to return your funds. Otherwise, you can call your state's attorney general or file a complaint with the Better Business Bureau.

Read More