Auto Financing Problems

Numerous auto financing problems exist, although many can be overcome. Depending on your credit history, money down or even the vehicle you choose, you may find difficulties with a loan approval. Learn about different auto financing problems and what you can do to solve them.

Vehicle Value

Banks lend according to loan-to-value ratios, which is the amount you ask to borrow compared to the vehicle's bank-determined retail value. Even with excellent credit, you cannot borrow $20,000 for a vehicle worth $10,000. Loan-to-value ratios become an issue when the car you're trying to buy costs more than it should. Banks also make determinations about the loan amount compared with the vehicle value according to credit. Good to excellent credit consumers may be able to borrow up to 120 percent of a vehicle's value, while poor credit consumers can see as low as a 60 percent lending value. A good cosigner or money down will help.

Debt-to-Income Ratio

Even with excellent credit, you can still face vehicle financing problems because of debt-to-income ratios. While the bank does consider your credit score, it also views your credit report to determine the amount of debt you pay out each month, including loan balances and payments, mortgage payments, credit cards and whether or not you are the primary or secondary borrower (if you're a cosigner or someone cosigned for you). Your income is looked at, as well. With this issue, a cosigner can help you to establish a loan because of additional income, or you can find a lower priced car.

Credit History

Other issues may include lack of credit history, poor job history or first job, unstable home address (you move often) or self-employment. Some banks offer a "first time buyer" loan, which offers a higher interest rate than traditional loans, but can help to establish credit. Borrowers without credit history may also face a lesser loan-to-value ratio, meaning money down is necessary to obtain a loan. Otherwise, a cosigner is strongly recommended for those who have not yet established themselves. For business owners, prepare to produce years of tax information to prove your income.

Warning

No matter which vehicle financing problems you face, consider your budget before making a desperate or pressured decision. A cosigner is a safe bet for problem borrowers, but finding one can prove difficult, as the cosigner must have good to excellent credit, an income and agree to become liable for your vehicle loan should you default. It is not advisable to borrow money for a required down payment or to accept a higher interest rate and car payment than you can afford, even if you cannot obtain approval otherwise.

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Auto Loan Requirements

While some people may be able to pay for their vehicles with cash without financing an auto loan, it is far more common to make such a large purchase based on credit with monthly payments. As with any loan, the lender will need to decide whether they will give you the loan based on whether they think you will pay it back. This decision is fueled by factors such as the car itself, its value and age, and your personal financial history.

Down Payment

Some lenders, either banks or car dealerships with their own financing programs, will require that you make a down payment on the vehicle you intend to finance. This shows the lender that you are taking a financial interest in the vehicle from the beginning of the transaction, and that you are less likely to default on the loan. A down payment also ensures that if you were to not make your loan payments, the value of the car is more than the value of the loan and the lender would be able to recoup their interest in the vehicle fully. Down payment is usually required to be a certain percentage of the value of the car, and requirements may vary, so it is best to contact the lender you wish to use to find out their specifications. If down payment is not a requirement you would like to comply with, you may consider financing the car with a home equity loan, which automotive website CarClicks.com states is an increasingly popular option.

Car Value

Most creditors who do auto loans on a regular basis will have a system for evaluating the value of the vehicle they are about to finance. They will often ask you to tell them all of the specifics on the car; stereo system, power options, extras, upholstery type, etc. This is so that they can get a more accurate estimate on the value of the car. The value likely will be required to be either more than or equal to the amount you are looking to obtain from the loan. This means that you will start out with equity in the car, and can either be accomplished by obtaining a good deal on a highly valued car or by placing a down payment on the vehicle.

Age of Vehicle

While most car dealerships will extend financing for any car on their lot, some banks and other lenders will have restrictions on exactly how old the car can be. For instance, U.S. Bank has a requirement that vehicles it finances not be more than seven years old. While this is not a consideration if you are financing a current model vehicle, if you are shopping for a used car, it may be helpful to ask your intended creditor whether it has a maximum age for cars they are willing to finance. If there is a requirement in place, you can either adjust the age of the cars you are looking at to compensate or find a lender with a looser restriction.

Income

In terms of your personal financial situation, one of the most important factors evaluated by your lender is likely to be your monthly or annual income. They will want your income to demonstrate that you have the ongoing ability to make payments on the loan, and will want you to provide documentation that supports your income. Acceptable proof of your income usually consists of copies of your pay stubs, tax returns or W2s.

Debt to Income Ratio

Lenders will also evaluate the ratio between your monthly income and your monthly debt obligations to determine whether or not there is room in your income to support an additional payment. The creditor will ask you to tell them the amount of any monthly payments you have, such as your mortgage, credit card payments and current car payments. This amount will then be divided by the amount of your gross monthly income, and if the result is under a certain threshold --- determined by the financier --- you are considered credit worthy.

Credit

The final aspect of the lender's evaluation will be your credit report, which the lender will retrieve from one of the three credit bureaus. This report will contain a credit score and a credit history, showing any patterns of late payments or defaults on credit obligations. If you have any derogatory entries on your report, you may be able to explain the circumstances to the loan officer and have them weigh less on the credit decision.

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What Can I Do If My Car Is Repossessed & I Can't Pay the Difference After Auction?

Most people know that if you do not make your car payments, the lender will have your car repossessed. According to Edmunds.com a repossessed vehicle is auctioned off and the amount at auction is applied toward the balance you owe. You are responsible for the difference, and even though you lost the car because you couldn't make the payments the bank wants their money on the balance due.

Avoid Repossession

Because of the credit collapse of the last few years, there have been measures designed to help you either keep your car or give up your car without repossession. According to AutoLoanDaily.com some car manufacturers are offering programs where they will either make your payments for you if you are out of work, or they will allow you to turn in the car without going through a repossession. If you have bought your car recently, contact the manufacturer to see if you qualify for these programs. You could also find out about refinancing your car loan. When you refinance your loan you decrease your monthly payments and that may allow you to keep your vehicle without the fear of repossession.

Take Out a Loan

In some cases the amount you owe after a repossessed car has been auctioned can be significant, and it may be difficult for you to raise the money on your own. Consider taking out a loan to help pay that difference. More than likely you will be required to pay the entire remaining balance due on your repossession and you will not be offered an installment plan by the lender. A personal loan or a home equity loan can be used to help pay the car lender now, and then pay the loan off in installments for the next few years.

Bankruptcy

If the amount you owe is sizable and you are unable to raise the money or get a loan, then NationalBankruptcyForum.com suggests that you may have to consider bankruptcy. If you do not pay the balance on your loan, the lender will take you to court and garnish your wages to pay back what you owe. Not only will you be liable for the loan amount, but the attorney fees for the lender will also be added to what you owe and you could be looking at many years of a garnished paycheck. Discuss bankruptcy with your attorney to see if that will help you discharge the debt.

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Why Do People Lease Vehicles?

When a consumer goes shopping for a new vehicle, she has two basic options to consider: to buy or to lease the new vehicle. While opinions vary on which is the best way to go, there are a number of reasons why a person might choose to lease a vehicle instead of buying one. By understanding the reasons, the consumer can decide for herself whether leasing is a good option for her life.

Driving a New Vehicle

Driving a new vehicle can be a statement of status for some people, while others simply feel safer driving in a new vehicle. Regardless of why a person wants to drive a new vehicle, if driving a new one is important, then leasing may be a good option to consider. A standard lease is for two years, meaning that someone who leases his vehicle will get to drive a new vehicle every two years when the old lease expires.

Less Money Down

Though some consumers buy new vehicles with no down payment or a small down payment, typically the down payment for a new vehicle purchase will be substantially more than a down payment for a lease. For a consumer looking for a new vehicle who does not have the amount of cash needed to make the required down payment, leasing may be an option to consider. Regardless of whether a consumer is buying or leasing a new vehicle, it is always important to investigate and understand all the fees and other costs associated with the transaction.

Lower Monthly Payment

In general, a new vehicle lease requires a lower monthly payment than purchasing a new vehicle. When purchasing a new vehicle, the consumer is making payments on the entire value of the vehicle. With a lease, the consumer is only covering the amount of depreciation that the vehicle experiences during the lease period. In both cases, there is also an additional charge to create a profit for the seller or owner of the vehicle.

Reduced Hassle

Another significant factor for many people in the decision to lease a new vehicle is the reduction in hassle. This is especially true at the end of the lease period. The consumer simply returns the vehicle and pays the fees stipulated in the lease contract. The consumer who purchases a vehicle must sell or trade in the vehicle when she wants to buy a new one. With either selling or trading, typically a lot of negotiation must take place and many consumers simply prefer to not have to deal with this.

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How to Finance a Hybrid Car

Buying a hybrid car can be good for the environment, and good for your wallet, as well. As the price of gas gets higher and higher, the value of having a car that runs on electricity and gasoline become more and more apparent. You can save even more on your hybrid car if you are able to take advantage of special rates and terms for fuel-efficient vehicles.

Instructions

1

Check your credit report before you start shopping for a new hybrid car. An error in your credit report could hurt your chances of being approved for the loan you need, or cause you to be charged a higher interest rate. You can get a free copy of your credit report once every 12 months at annualcreditreport.com.

2

Contact the bank or credit union where you have your checking or savings account and ask to talk to a loan officer. Ask if the bank offers a special financing rate on hybrid car loans.

3

Shop around at other area banks and credit unions for rates on hybrid car loans. Compare those rates to what your own bank is offering.

4

Negotiate the best price you can on our new hybrid vehicle, then talk to the salesperson about your financing options and any rebates or incentives the dealership and manufacturer are offering. Compare the financing rates offered by the dealer to what you found on your own from area banks.

5

Contact your elected representatives for information about any special financing options and tax incentives that might be available for the hybrid vehicle you plan to purchase. A number of states provide tax incentives, rebates and special financing options to encourage the purchase of hybrid vehicles. Your senator or congressman can provide you with information about any incentives available in your part of the country.

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What if I Can't Pay a Car Loan After a Total Loss?

You must satisfy your car loan even if you no longer have your vehicle, as stated in your loan contract. Even if you can't pay your loan balance, talk to your lender to find out your options. If your lender will not work with you, you may have other options.

Call Your Lender

Assuming you maintained a full-coverage insurance policy on your vehicle before it was totaled (as most lenders require), you shouldn't have to pay your entire loan balance off. Your insurance company pays your lender for the vehicle's market value. If you are out of work or without a car, your bank may work with you to satisfy the loan balance. Go over your funds and budget carefully. Decide the amount of payments you can afford and how long it will take you to pay off your loan balance. Call your lender to discuss your finances and ask for a payment adjustment.

Credit Issues

If you do not pay your loan balance, the loan is reported to the credit bureaus as an open account, which can affect future lending. Late payments also reduce your credit score. If you try to pursue another loan to purchase a different car, it is likely you'll be declined until your loan is satisfied. Unless you have enough income to support two car payments, most lenders require borrowers to trade in a previously financed vehicle or satisfy exisiting car loans before approving an application.

Other Options

If you do need to pursue another loan to purchase a vehicle, work with a dealership to satisfy your old loan. If you owe several thousand dollars or less on your previous loan, a dealer can transfer the balance to a new loan and pay off the old lender. If obtaining a second loan is an issue, call dealers to find one who can work with you. You may have to purchase a new vehicle with rebates to obtain an approval that allows you to roll over another loan balance, but it can be done.

Gap Insurance

In the future, purchase a gap insurance policy to avoid this problem. Gap insurance pays off your loan balance if your vehicle becomes a total loss. In the event that you are upside-down in your loan (or owe more than the car's value), your insurance company still pays the lender for the market value of the vehicle, but gap insurance picks up the rest of the bill. You can purchase this policy from a dealership, your lender or insurance company.

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Frame Damage Depreciation

One of the most important mechanical components of a vehicle it its frame or unibody structure. This forms the basic physical core of the vehicle and attaches to major mechanical, interior and body components. Because of its importance to a vehicle, damage to the frame can hasten the process of depreciation, which happens to all cars as they lose value over time.

Cost of Depreciation

Frame damage is among the most damaging factors when it comes to determining a used vehicle's value. According to The Law Offices of Hovanes Margarian, frame damage can cause a car to depreciate quickly, losing between 30 percent and 70 percent of its market value due to the damage alone. In addition to normal wear and tear, plus the external damage that a frame-damaging accident typically causes, this means that cars with frame damage are worth only a small fraction of their pre-damage value. As with any other type of depreciation, the less a car is worth before the damage, the less value it will lose. Likewise, a newer, more expensive car will lose more value from having its frame damaged.

Reasons

Frame damage causes such extreme depreciation for several reasons. The first is the fact that frame damage can compromise a vehicle's resistance in the event of another accident, creating additional risk for passengers. Frame damage is also difficult and expensive to repair, which pushes down the price of vehicles that need frame work even further. Because accidents cause most cases of frame damage, a damaged frame can be an indicator that a vehicle has other mechanical problems, including unseen problems that have yet to manifest.

Identifying Damage

Frame damage can be difficult to identify, and nearly impossible to spot during a quick visual inspection. This is because frame damage often materializes throughout a vehicle's structure, not necessarily near the site of an impact. Auto body technicians can also replace body panels, removing most indicators of accident damage and making a vehicle look like it's in much better condition and less likely to have a depreciated value than it actually does.

Considerations

Some states require dealers to disclose incidents involving frame damage when the value of the depreciation that the damage causes exceeds a certain dollar amount or percentage of a vehicle's value. In addition, vehicle history reports document accidents that may indicate frame damage. Buyers should request such reports and, in cases where frame damage is a possibility, request an inspection from a neutral collision expert to determine frame damage and make the appropriate adjustments to a vehicle's sale price.

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Do I Need Verification of My Income to Buy a New Car?

It's up to lenders to determine whether a new car buyer needs a verifiable income to purchase a vehicle. Your credit score and the amount of your down payment also affect whether a verifiable income is necessary. In any case, it will likely be harder to buy a new car without a verifiable income.

Lenders

People who can't pay for a new car without getting a bank or credit union loan usually need to have an income that a lender can verify with an employer. Lenders also verify incomes by checking tax returns or paycheck stubs. Dealerships and other auto lenders who are willing to provide loans without verifying a buyer's income will likely charge high interest rates and require big down payments. Large down payments protect lenders because they prevent situations in which buyers owe more on their car loans than their cars are worth.

Employment History

Lenders also consider the amount of time car buyers have worked with an employer to determine if they have steady incomes. Most lenders require buyers with low credit scores to show they've had at least 90 days of steady employment, according to Cars Direct. An exception to that may occur if buyers who have worked with an employer for a shorter time can show they previously had a stable employment history. Stable employment typically means buyers don't have any long periods of unemployment in their most recent work history.

Credit Rating

Borrowers who fall into lenders' subprime category usually have a difficult time getting new car loans without income verification. The Edmunds auto information website indicates that subprime borrowers should expect to present a paycheck stub to show a lender how much they earn. Subprime borrowers are people who have credit scores of 619 and below, according to Edmunds. A down payment of at least 20 percent may help subprime borrowers qualify for a new car loan if they have a verifiable income.

Considerations

You should ask a lender why you didn't qualify for a new car loan if your loan application isn't accepted. You can then work on whatever you need to do to qualify later. For example, you might get a loan if you provide a higher down payment, even without a verifiable income. You also should consider shopping in the used-car market. The prices of used cars are lower, so you may be able to pay for a used car with cash to avoid the need for a loan and income verification.

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Can People Who Have Filed Chapter 13 Get a Car Loan?

After filing for Chapter 13 bankruptcy protection, some people conclude that the days of applying for a car loan are over. Quite the contrary; it's possible to get an auto loan after bankruptcy. And if you make your payments on time and satisfy the debt, acquiring an auto loan can help your credit in the long run.

Re-establishing Credit Score

Credit damage from a bankruptcy lessens with time. But you can jump-start credit improvements by taking steps to re-establish and rebuild your credit soon after a discharge. Getting a new line of credit helps build a better score. But since many creditors are less likely to approve you for an unsecured credit card after bankruptcy, visit your bank to see if you meet the criteria for a secured credit card. These cards do not require good credit, but you will need a security deposit and an income source. Paying this credit card on time and managing the debt helps improve a low score.

Make a Down Payment

Down payments can help you get a car loan after Chapter 13 bankruptcy. While many lenders approve borrowers without down payments, financing the vehicle with a down payment (perhaps 10 percent or 20 percent down) can convince a hesitant auto lender to approve the car loan request.

Sub Prime Lenders

Lenders differ; and while one auto loan company may eagerly offer fresh start loans to people with a Chapter 13 in their recent past, another loan company may only work with prime borrowers or people without credit issues. Don't let a rejected loan application stop your car-buying efforts. If one lender rejects you, talk with another loan company.

Car Loans and Co-signers

Not everyone with a Chapter 13 has a co-signer on standby. But if there's someone available to co-sign your auto loan, use this person to help you qualify. Because co-signers accept responsibility for the auto loan if you fall behind on payments, lenders are more likely to approve your loan request. To be eligible, co-signers need steady income and good credit.

What to Expect

Getting a car loan after a Chapter 13 bankruptcy doesn't usually result in the best financing terms. A recent bankruptcy places you in a high-risk category; and if the chances of default are higher, lenders charge a higher interest rate or financing fee for the loan. The higher your rate, the more expensive your car payment. This is why it's important to rebuild your credit first, then finance a car.

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Used Car Laws in West Virginia

In West Virginia, the state's consumer protection laws govern the rights consumers have against sellers of defective vehicles. The state's lemon law covers vehicle purchase transactions within the state, and buyers who purchase defective vehicles may have legal rights against vehicle sellers if they are covered by any existing express warranties.

Lemon Law

The West Virginia Lemon Law covers vans, trucks, automobiles and motor homes' vehicle chassis. The law applies to both used and new passenger vehicles but only covers new motor home sales. Under the state's lemon law, vehicle owners have recourse against sellers if they are still covered by an existing written warranty or within one year following the sale, whichever occurs later. To seek coverage under the state's consumer protection law, the driver must report defects within this time frame.

Reasonable Number of Attempts

If a consumer is protected by the state's lemon law, she must provide the vehicle seller with an opportunity to remedy the defect. If the dealer or manufacturer is unable to repair the defect after a reasonable number of repair attempts, it must offer a replacement vehicle of the same make and model or comparable vehicle. The replacement must conform to its warranties. Under West Virginia law, a car buyer has given the dealer or manufacturer a reasonable number of attempts to cure defects if she provided at least three repair opportunities, and the dealer was unable to remedy those defects after three attempts.

Limitations

Only car dealers and manufacturers have a legal duty to remedy covered defects under their express warranties. Private sellers do not have any obligations, and the car buyer must pursue his rights to remedy from the dealer or manufacturer that issued the original warranty. According to West Virginia law, defects that are significantly likely to cause serious injury or death are not subject to the three attempts rule. In this case, the owner can provide the dealer with only one chance to fix the defect, and if it unable to remedy the problem, the buyer can demand a replacement vehicle.

Disclosures

West Virginia's lemon law requires manufacturers and dealerships to post a written notice to buyers of their rights under the consumer protection law. The dealer's written notice must be displayed prominently in at least 10-point font and in all capital letters. The disclosure must be given to the consumer at the time of purchase. The disclosure statement must contain the exact information as it appears in the state's statute. Dealers also have a duty of informing consumers of any existing repairs made on new vehicles. Under West Virginia law, a dealer must disclose a repair if the retail value of the repair was at least $500 and it performed the repair after the shipping date when the dealer accepted the manufacturer's merchandise.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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Car Financing FAQ

You have various options to choose from and decisions to make if you finance your next vehicle purchase. Although the bank chooses your rate, you can plan your finances better by asking the right questions, which can ultimately help you determine where to apply. Find a lender who complements your lending needs and future financial plans.

How Much Will My Interest Rate Be?

Your interest rate can cost you significant money over the term of you loan. To determine current interest rates, call or check bank websites. Most are advertised online but are usually for new-car loans, so call to be sure. Consider applying for a pre-approval at a bank with competitive interest rates so you know if you qualify for the best rates. Vehicle manufacturers offer low rates for new-car financing, which you can view at manufacturer and dealer websites.

Can I Pay Off My Loan Early?

Most banks allow you to pay off your loan early. You can eliminate interest charges this way. If you're expecting cash in the near future, ask potential lenders to if you are required to have the loan open for a number of months before paying it off. Even if you don't have the means to pay off the loan entirely, you can send in additional payments to shorten the loan term. Find out if any fees apply for satisfying the loan early, which is unfavorable.

How Much Will My Payment Be?

Your payment is based on your interest rate and term. If you have a pre-approval, you can speak to a loan or dealer representative to find your exact payment based on your qualifying interest rate. Otherwise, use an online auto loan calculator to determine differences in payment by changing the term and rates, money down or vehicle sales price (see Resources). Include your sales tax and other fees in your calculations.

What are the Term Options?

Most banks offer a 24-month to 84-month loan option, although some banks may offer a longer term. Rates increase over 60 months. Some banks do not lend for 84 months or more unless you apply for a large loan. For example, you may have to borrow at least $30,000 to qualify. Whichever you choose, try to keep your vehicle's value in line with your payments. A 72-month loan for a four-year-old vehicle is not beneficial; you'll have a hard time selling or trading your car in the future.

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How Does Cash Back Work When Buying a Car?

If you are in the market for a new car, an offer of cash back from a manufacturer provides an additional incentive for you to purchase a particular model. Cash back offers are sometimes referred to as new car rebates. Car buyers who understand how cash back offers work will achieve the maximum benefit from the available rebates.

Manufacturer Rebates

Cash back offers usually originate with the car manufacturer. The purpose of the offer is to promote the sales of cars sitting on dealer lots, so the dealers can order more cars from the manufacturer. The amount of the rebate is based on how well a particular model is selling and the manufacturer's estimate of how much cash will help move the cars off the dealer lots. For example, in March 2011, General Motors offered rebates of $5,000 on 2010 model year Chevrolet and GMC pickup trucks.

Cash Back or Down Payment

Although the rebates from car manufacturers are called cash back offers, car buyers rarely receive the cash. The money provided in a cash back offer is usually an additional down payment on the new car. A car buyer does have the option to receive the cash back amount as a check from the auto manufacturer. If you want the cash back as a check, tell the car salesman and he will make sure you complete the proper forms. If you intend to use the cash back as a down payment, the car dealer will credit the amount against the purchase price and file with the manufacturer to receive the money. This approach allows the car buyer to receive the immediate effect of the cash back.

Either/Or Offers

Car manufacturers sometimes combine a cash back offer with an offer for low rate financing. The car buyer can choose which offer to accept. Compare the two choices by having the dealer calculate the monthly payment using the cash back plus standard financing compared to using the special interest rate. If the payments are close, the cash back offer will start the car buyer out with a lower loan balance, which could be the deciding factor.

Dealership Negotiations

For a car buyer, a cash rebate can represent a nice savings on the car purchase. The buyer should remember that the cash rebate is not coming from the dealer and she should still negotiate the best possible price from the dealership. Cars with large cash back rebates are the models the manufacturer and dealerships most want to sell and get off the lot. If you are negotiating on a car with a large cash back offer, redouble your efforts to negotiate a lower price. These are the cars the dealer is anxious to sell, even at little or no profit.

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How to Get the Best Deals on a New Car

When you are in the market for a new car, getting the best deal possible can be challenging. Even if you negotiate with the sales person at an auto dealer, you may wonder whether you could have done better. By keeping a few things in mind during the auto shopping process, you can eliminate any doubt and get the best deal on the car that you really want.

Instructions

1

Research the car that you want to buy before you ever go to a dealership. Search online for the invoice price of the car or what the average price others are paying for the car. By getting this information, you will be ready when negotiating later.

2

Arrange the financing for your car in advance. Shop around with multiple banks and auto lenders to get the best rate available. If you wait until you show up at the dealership to finance the car, you will be at the mercy of the dealer. If you have good credit, you can often get a better interest rate through an outside lender.

3

Choose to purchase your vehicle when there are incentives from the auto manufacturer. Typically, manufacturer incentives can be used on top of any deal that you are able to secure from your local dealer. For example, the manufacturer might offer $5,000 cash back on a purchase, saving you a substantial amount of money.

4

Negotiate the price of the car with a sales representative. Once you are sure that you have found the car you want, it is time to make a deal. Allow the sale person to start the negotiation process. From there, you can make a counter offer. If you know the invoice price, you know the lowest point that the price of the car could be sold for. Remain persistent and make it clear that you are willing to walk away. If the sales representative wants to sell it badly enough, he will come down on the price.

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The Best Way to Pay Off a Car Loan Early

The average car loan has a 60-month, or five-year, payment term. Lengthening the loan term lowers your monthly obligation, which makes a vehicle more affordable. Of course, paying on a car loan for five or more years increases the interest payment, and you'll pay more for the car in the long run. But even if you select a 60-month plan when you sign your loan documents, there are ways to pay off a car loan early.

Instructions

1

Drop a lump sum on your car loan. If you come across extra money such as an inheritance or large tax return, use this money to pay down your auto loan balance. Knocking down the balance reduces your loan term and you'll pay off the car earlier.

2

Ask your lender about biweekly payments. Pay half of your car payment every other week, rather than every month, to save money on interest payments and reduce your loan term by several months.

3

Pay more than your monthly payments. Voluntarily increasing your monthly payment decreases the interest paid and shortens your loan term. Evaluate your budget to see if you can afford to pay an extra $50 or $100 a month.

4

Select a three- or four-year loan term. Refinance your auto loan and choose a shorter loan term to pay off your loan early.

5

Find a buyer. If you're ready to get rid of your automobile, find someone to buy it and use the proceeds from the sale to pay off your auto lender.

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What Does a Bill of Sale for a Car Have to Include?

A car bill of sale is a legally binding document that records the sale or transfer of a motor vehicle. Most states require automotive transactions to be accompanied by a bill of sale. Although it may be possible to make your own bill of sale, it's best to obtain a state-specific bill of sale from your motor vehicle office. This form is usually obtained for free from the office or downloaded online. Contact your motor vehicle office to determine how to acquire a bill of sale.

Information on Both Parties

A bill of sale must contain pertinent information on both parties: the buyer and the seller. The form should contain the buyer and seller's full names, as well as their addresses and telephone numbers. Other information, such as either person's driving license number, may be required as well. It's best to check with the specific state to determine if anything else is necessary.

Vehicle Information

The bill of sale must contain information about the property being transferred. In this case, the property is a vehicle. In addition to the year, make and model, the 17-digit VIN (Vehicle Identification Number) is also required. States use the VIN when registering the vehicle; it's a unique identifier similar to a serial number. The car's color is usually required, as well its current odometer reading.

Terms of the Sale

The terms of the sale, such as the sale price and the date, are required in the bill of sale. A statement of warranty is usually included with the bill of sale. For example, if the car is being sold "as is," a statement noting this would be added to the bill of sale language in the terms of the sale. Likewise, if any warranty is offered, it would be disclosed.

Odometer Disclosure

Many, but not all, states require the completion of an odometer disclosure statement. This may be a separate form coupled with the bill of sale, or the disclosure may be written into the bill of sale. The exact procedure varies among states. The odometer disclosure is used to point out any odometer discrepancies, such as a non-functional odometer or a vehicle that otherwise displays the incorrect mileage. If the odometer reading is true and accurate, the odometer disclosure would point this out.

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What to Do If You Can't Make Car Payments Anymore

Sometimes it can be difficult to keep up with your monthly bills. A car may be essential to getting to and from work, and, if so, giving that up is not an option. Falling behind in your car payments can be stressful, but there are ways to reduce your payments.

Refinance

If you are leasing your car, it is nearly impossible to renegotiate the terms, especially once you are behind in your payments. But if you have purchased the car and are making payments on a car loan, you can attempt to refinance it by finding a better rate or extending the loan term; either one will lower your monthly payments.
Proceed with caution when extending the term of the loan, though, because you want to be sure that the car will last until the loan is paid.

Trade-In

Consider lowering your monthly payments by trading in the car for a less expensive model. This might enable you to reduce your payments and still a car to drive without negatively affecting your credit. Contact local car dealerships to see if this is a possibility for you.

Sell

If you cannot make your car payments and none of the options above work for you, you could try to sell the car and buy a cheaper one to reduce your monthly obligation. Note, though, that selling will be effective only if the car is worth more than you owe.

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Getting Financing for a Motorcycle With Poor Credit

Having poor credit can limit your ability to get financing for anything, including a motorcycle. Positioning yourself to be able to obtain financing will require work to improve your credit situation. A potential lender is willing to accept poor credit history if you can show your situation has improved--perhaps you can prove that you've been making credit card payments on time, or you've paid off a good chunk of what you owe recently--and you are able and willing to handle your debt responsibly.

Instructions

1

Review your credit report. Look for debt that is older than seven years. Look for any inaccurate item. Make note of every account on your credit report that is in positive standing and note any positive account that is actively reporting and open.

2

Count the number of accounts you have that are open and current. If you do not have at least two accounts reporting, open a credit card account. If you are unable to qualify for an unsecured credit card, open a secured credit card. Your credit score will not go up without positive items reporting. The credit line on the credit card does not need to be high, but it must report to all three credit bureaus.

3

Write letters to the credit bureau to dispute any negative accounts older than seven years and any incorrect information on negative accounts. Provide your name and list the items one by one, and ask each item be either corrected to report accurate information or removed from your credit report. You do not need to explain what information is incorrect.

4

Save money for a down payment. Having poor credit will require a down payment to finance your motorcycle.

5

Visit your local bank or dealership after you have completed the previous steps. Bring proof of income and have your down payment ready. If possible, meet with the loan officer and explain what caused your poor credit and explain how your credit situation has changed and that you know you will not have any problems paying the monthly payment. If you are unable to qualify for financing, allow your positive accounts to continue to report and try again in six to 12 months.

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How Can I Get Out of My Auto Loan?

Most people finance vehicle purchases by getting a loan and paying their lender each month for the vehicle. If a vehicle owner falls behind on his car payments, the lender can repossess the vehicle. If you are having financial trouble, you may be able to sell the vehicle or voluntarily give it back to the lender. Most lenders will attempt to help you find a solution if you tell them you are having financial difficulties and cannot pay your car note.

Selling Your Vehicle

You can sell a vehicle that you owe money on only if you can get enough money for it to pay off the bank. For example, if you owe $6,000 on a car loan, you must sell the vehicle for more than $6,000 and pay off the bank before it will release its interest in the vehicle. If you cannot get enough money for your vehicle to pay off your loan, find a buyer who would be willing to make loan payments, and talk to your bank about transferring the loan to your buyer before you sell the vehicle.

Voluntary Repossession

If you cannot afford your loan payments, you may be able to return your vehicle to your lender as a voluntary repossession. Contact your lender and explain that you cannot afford your monthly payments and would like to return your vehicle. Your lender will tell you how to do this. Although you are voluntarily surrendering your vehicle, you will still receive a negative mark on your credit report for repossession. Repossession will affect your credit for at least seven years.

Refinancing

Refinancing your loan allows you to lower your monthly payments. When you refinance, your new lender pays off your old loan and then requires you to pay back the funds it used to do so. Refinancing often lowers your interest rates, which allows you to pay less per month as well as paying less in total for the vehicle. Some auto loan companies specialize in refinancing, and you can also contact your bank to inquire about refinancing options if you are having difficulty making payments.

Considerations

If you cannot pay off your loan through the sale of your vehicle, it may be complicated to transfer the loan or complete the sale. Voluntary repossession may also make it more difficult to purchase another vehicle in the future or affect your ability to make other large-scale purchases such as buying your home. Thus you should attempt to refinance your vehicle loan unless you truly cannot afford to make payments at all.

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How to Calculate Loan-to-Value on Used Vehicles

The loan-to-value ratio shows the relationship of the amount of money that you're receiving as a loan relative to the value of a vehicle on a percentage scale. Ideally, lenders want you to borrow less than 100 percent of the car's value, though some will loan you more to cover the cost of taxes and fees. Getting a loan-to-value on a used car is more complex because the value of the car is not as straightforward as a new model. Lenders may approach the calculations using different values, but you should be able to get an estimate.

Instructions

1

Look up the value of the used car in the Kelley Blue Book or the NADA guide. The online versions take your location and mileage into account when determining a value. You'll have to enter details about the car, such as transmission style and features, which can also affect the value.

2

Divide the amount of the loan you desire by the value from Step 1. The amount of your loan may simply be the price that you negotiated with the sales representative or car owner. It may, however, be more due to taxes and fees, or less, due to a down payment.

3

Multiply the result by 100. This will give you a percentage as the loan-to-value. For example, if you want to borrow $7,500 for a car with a $10,000 value, your loan-to-value is 75 percent.

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Can I Trade a Vehicle That Has My Husband's Name on It?

You can trade in a vehicle that has your husband's name on it, but he will have to sign the vehicle's title to complete the trade process. Most dealers require any titled co-owners to come to the dealership to sign the vehicle's title in front of a dealer representative. Before you attempt to trade your vehicle, ensure your husband is willing to sign the vehicle's title.

Dealer Requirements

A dealership must follow state rules when accepting a trade-in vehicle. For this reason, your husband must sign the title. Your dealership likely requires your husband present to sign. If your husband is unable to come to the dealership to sign his portion of the vehicle title, the dealer may allow you to bring the title to him to obtain his signature. The dealership will speak to your husband to confirm his identity before doing so. Ask your dealership to explain your options.

Transferring Ownership Before Trading

If your husband owns the vehicle outright and you're driving it, you might want to ask him to sign the title over to you before you try to trade the car. Otherwise, your husband may want to be involved with the car purchase. States differ on title transfer requirements, but in most cases, your husband can simply sign his name on the vehicle's seller section to release his portion of ownership. If the vehicle is in both of your names, he must still sign the title.

Acceptable Paperwork

Your dealer will also accept a Power of Attorney form if you have one. A Power of Attorney form allows you to sign documents, including a vehicle title, on your husband's behalf. Your dealer might be able to provide you with this form or you can download the form from an Internet source. Expect to have the form notarized for it to validate it. Ask your dealership if it accepts the form and work with your husband to obtain it.

Overcoming Trade-in Issues

If you and your husband can't come to an agreement about the vehicle, you may want to sell it instead. Your husband may find selling the vehicle favorable if you agree to split the profit of the sale. Unfortunately, you and your husband will have to work together to sell or trade the vehicle. If he wants to keep the vehicle, then he has final say as the titled owner. You may also consider leaving the vehicle out of the purchase process.

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10 Things You Must Know Before Buying a Car

Buying a car can be an exciting yet exhausting experience. You are faced with a dizzying array of autos and options. Knowing how and where to finance the vehicle can further complicate the process. Knowing what you can afford, how you plan to pay for it and what you are looking for before you begin shopping can make buying a car much easier.

How You Plan to Pay for the Car

The most important thing you must know about buying a car is not the type of car you plan to buy, but how you are going to pay for it. If you have the money in the bank to buy the car, then you are set to go. But if you have some money, but not enough for the whole purchase, you will need financing. Check your credit before attempting to purchase the car, and if your credit score is low, spend a few months rehabilitating it before making the purchase, if possible. The difference can be thousands of dollars in interest.

How Much Can You Spend

Whether you are paying cash or financing, you need to know how much can afford to buy before you even start shopping for a car. This might mean calling your bank or credit union to see how much money you can borrow, even if you plan to finance through the dealership.

How Much You Can Spend on Car Maintenance

The difference between a used subcompact and a new muscle car is more than just cosmetic. Cars can have wildly varying maintenance costs, as well. Before you buy, know how much you can afford to spend on gas and routine maintenance.

How Much Your Car Insurance Will Be

The other important difference between that used subcompact and the muscle car is insurance rates. Check with auto insurers before you make a purchase to get an idea of what rates on cars you are interested are. The difference between models can be substantial.

Do You Plan to Trade a Car In

Trading a car in can provide a built-in down payment. Whether you are buying new or used, you can trade your current vehicle in if it is paid for, or if you owe significantly less than it is worth. If you owe more on the vehicle than the resale value, it is probably better to wait until you have paid more on the car before trading.

You should also know how much your car is worth before attempting to trade it in. You may be better off selling it yourself than accepting a dealer's offer. The Kelley Blue Book can give you an idea of how much your car is worth.

What Type of Car You Need

One of the biggest mistakes consumers make when shopping for a car is not knowing what they need. Knowing how you plan to use the car, whether for work, for shuttling the kids back and forth, or for pleasure trips can help narrow down your options and make finding the car that is best for you easier.

How Much the Car You Want Is Worth

Once you have settled on a car, it is a good idea to do some research to determine how much the car usually sells for. That way, there is no sticker shock when you get to the dealership, and there is less chance that you will end up paying too much. Research models you are interested in by calling dealers to ask for prices and checking websites such as Kelley Blue Book and NADA.

Whether to Buy New ...

Chances are, you already know by this stage whether a new car is in your budget. If you are on the edge, check for rebates, special financing or other incentives that may make buying a new car as attractive as a used one.

... or Buy Used

You can get great deals on used cars without buying someone else's problems. Many used cars come with the remainder of a factory warranty and options for purchasing extended warranties that make them much less expensive to purchase and insure than a new car.

Where You Will Buy Your Car

If you are unsure where to go to buy a car, ask friends or family for recommendations. Then, talk to several dealers before you make your purchase to find a dealer and financing you are comfortable with.

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Requesting a Deferral on Car Payments

Borrowers who can't pay a monthly auto loan payment may ask their lender to defer one or more car payments. If your lender agrees to defer payments, this means your lender allows you to skip car payments during a specific time period without penalty. Deferred monthly payments extend your loan term.

When to Request Deferred Payments

Ask to defer your loan payments as soon as you realize you can't make your monthly payment. Some lenders require that your auto loan be in good standing to grant a deferment. Before you're behind on a payment, ask your lender to help you. Some lenders may require several months of timely payment history. If you wait past 30 days to request a payment deferment, the late payment shows up on your credit report, which lowers your credit score. Get your deferment agreement in writing and save it for your records.

Benefits of a Deferral

Your lender may offer one or several months of payment deferment. Suspending your loan payment might help you get past financial hardship. As long as your monthly payments aren't more than 30 days late before the deferment, you'll also avoid the negative impact that late payments have on your credit score. If you're still unable to make payments at the end of the deferment period, you might decide to refinance your loan. To obtain a refinance approval, you must be up-to-date on your current loan payments, another benefit of payment deferment. A new lender won't know that you deferred car payments when reviewing your credit report.

After the Deferral Period

At the end of your deferral period, continue paying your loan payments on time. If you still can't make your monthly payment, ask your lender to change your loan's due date. Some lenders may change a due date by several weeks, meaning your payment won't be reported late to the credit bureaus until 30 days after the new payment date. If this option still doesn't help you, consider selling your vehicle before your next payment is due to avoid repossession.

Loan Modification

While you're arranging to defer your loan payments, ask your lender if it offers loan modification, which extends your loan term agreement. Modifying your loan may create a lower monthly payment responsibility. Your interest rate might increase, but you can always pursue a refinance once your financial situation improves. You might have to submit a new credit application or provide proof of financial hardship, such as an unemployment approval statement. If your lender agrees to modify your loan, expect to re-sign your loan contract.

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How to Finance a Car Vs. Paying Cash

You might find it takes longer to obtain a check when financing, as lenders can take up to five business days to approve a loan. If you have to move cash around, receiving payment can take just as much time. Plan ahead to obtain a loan preapproval before you set out to shop if you plan to finance. Once you find the car you want, you can submit the vehicle's information to your lender and receive a check promptly. If paying cash, make sure your money is accessible before shopping.

Instructions

Paying Cash

1

Decide how much money you want to spend on a vehicle purchase. Consider your tax and motor vehicle fees, which can add thousands more to your purchase price. Call your state motor vehicle office to determine your area's tax rate and the cost of motor vehicle fees.

2

Submit for a transfer of the money between accounts, if necessary. Make sure you have the funds in your checking account before shopping. Otherwise, you might lose the car you want to buy if takes a week to obtain the funds you need for the purchase.

3

Find a car you want to buy and ask the seller how he'd prefer payment. Most sellers accept cash or a verifiable bank check, so get the seller's name if a bank check is acceptable. Go to your bank to obtain the payment.

4

Pay the vehicle's seller and get the car's title. Register and title the vehicle in your own name at a motor vehicle office. Pay any extra fees associated with the purchase, such as title, registration and tax.

Financing a Car

5

Check interest rates of auto loan providers before you determine where to apply for a loan preapproval. Rates are often advertised online and you can call lenders to determine rates. Be sure to obtain rates for the type of purchase you plan to make, as new car and used car rates differ.

6

Apply for a preapproval at your preferred lender in person or on the phone. Talk to a lending representative about your loan options, target monthly payment amount and whether you plan to offer a down payment. You can also choose to finance your motor vehicle fees and tax or pay the fees separately.

7

Give the lending representative your Social Security number, date of birth, address, employment and income information for the application. Ask how long you can expect to wait for your preapproval. Once you have the preapproval, go over your loan's interest rate, term, monthly payment amount and find out which paperwork you have to provide to your lender once you find the car you want, such as a recent paystub, proof of address or a down payment requirement.

8

Find the car you want and obtain its identification number, which you can find on the vehicle's title. Also note any features on the car that increase its lending value. Include features like a sunroof, leather, alloy wheels or any other feature you think might increase the car's value.

9

Ask the seller whose name you should have the loan check made out to. Submit the vehicle information to the bank and wait for your final approval. Once approved, provide proof of full-coverage insurance for the vehicle (a requirement of auto loan providers), any additional information the lender required and sign your contracts to obtain your loan check.

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Does Advance Notice Have to Be Given Before Repossessing a Car?

Your lender does not have to provide you with advanced notice before it repossesses your vehicle. The terms of repossession are outlined in your loan contract; because you signed the contract when you initiated your loan, you agreed that the lender can seize the vehicle for any reason stated in the contract.

Your Loan Contract

Read your contract to determine reasons your lender can initialize a repossession. For example, your contract might state that payment is due by a certain date each month and if you don't pay, the lender can rightfully seize your vehicle. Lending contracts differ; some offer a grace period for late payments. Some contracts may state lack of insurance as a reason to repossess a vehicle. Most lenders, however, don't seize a vehicle the first day after you miss a payment or the same day as insurance cancellation.

Lender Correspondence

Your lender will try to contact you before it seizes your vehicle, usually by mail and phone. Ignoring phone calls from your lender doesn't protect your vehicle from repossession. If you moved or changed your phone number, your contract likely states that it is your responsibility to notify the lender. Most lenders would rather not repossess your vehicle, so respond to correspondence and discuss your payments options. You lender may have programs in place to help avoid repossession, such as payment deferment or loan modification.

After Repossession

If your vehicle was repossessed while you weren't around, call your lender or local police department to locate it. Police are notified before a repossession takes place. Once you find your vehicle, make an appointment to collect your belongings from the vehicle. Your lender may offer you an opportunity to reinstate your loan if you pay past due payments, late fees and repossession costs. Some lenders require the entire balance of the loan. If you don't pay to retrieve your vehicle, the lender will resell the car. If the car sells for less than your loan payoff amount, your lender will attempt to collect the remaining balance due.

Repossession Rules

While a lender doesn't have to provide you with warning or notice of repossession, the repossession company must abide by state rules when seizing the vehicle. Repossession companies can take a vehicle from private property, but cannot use force or threats to obtain the car, known as "breach of the peace," according to the Federal Trade Commission. If you feel your lender didn't follow proper protocol when seizing your vehicle, contact your attorney general's office.

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Requirements to Refinance a Car

To refinance an auto loan, you must apply to an auto loan provider. The application process and loan requirements are the same as you experienced for your initial vehicle loan. Your approval is based on the vehicle's value and your credit history. Depending on your lender, you may be required to provide additional documents or information.

Employment or Income

You must have an income to obtain an approval for your refinance. If you are employed, expect to provide a recent paystub to your lender so that it can verify your gross annual income. You'll also have to provide your employer's address, phone number and how long you've been with the company you work for. If you are self-employed, expect to provide proof of tax returns for several years; your lender will tell you which documents it needs. Discuss required documents with your lender if your income comes from a pension, social security payments, rental properties or investments.

Acceptable Ratio

Auto loan providers determine approvals and loan amount depending on a vehicle's loan-to-value ratio. Based on your credit history and the bank-determined value of the vehicle, you may obtain an approval of 60 to 120 percent of the vehicle's value. You may be asked to provide a down payment for your loan if you ask to borrow more than the car is worth.

If you recently purchased a new car without providing a down payment or also financed extra purchases with your loan, such as an extended warranty, you may not obtain an approval for your requested loan amount. New cars become used once driven off the dealer's lot, which decreases the car's value by thousands of dollars.

Current Loan Accounts

If you're having trouble making your current car payments, are experiencing financial hardship or your credit has suffered since your current loan was initiated, you may also find it difficult to obtain an approval for refinancing.

All of the accounts on your credit report should be current, as past due payments are viewed by lenders. If you car loan is currently past due, bring the account current by catching up on your payments. If you can't make the required payments for accounts on your credit history, you may need a co-signer to obtain a refinance.

Insurance

Most lenders require that borrower's maintain a consistent full-coverage policy during the loan's term. You likely already have collision coverage with acceptable limits for an auto loan provider, which includes a reduced deductible and higher property damage and bodily injury limits than your state requires. Once you obtain an approval for your refinance, you must provide proof of insurance to your new lien holder before it pays off your old loan. Call your insurance company to change your policy's loss-payee to reflect your new auto loan provider. Once you submit proof of insurance, you may initiate your new loan.

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Can You Add a Co-Borrower to Refinance an Auto Loan?

Refinancing an auto loan can encompass any number of strategic changes to a contract, including adding a co-borrower. In order to add a new name to your loan, you will have to cancel the current contract and arrange a new one. You will need to submit a new application to your lender listing the additional borrower, and some of the terms of your loan may change.

Car Loan Terms

Lenders consider your application when setting the terms for your loan. If you are a low-income borrower, they may extend your loan longer to create smaller monthly payments. If you have bad credit, they may apply a higher interest rate to your debt. When you apply with another borrower, the factors the lender used to determine your terms change. This means your loan will change as well, and it can change either for the better or for the worse.

Getting a Better Loan

Adding a borrower can have many positive effects on your loan. The borrower's income is used in addition to your own to determine your loan limit and monthly payments; this means you can typically afford a higher payment each month. Adding a borrower also gives the lender more security in the loan. As such, you may find a lower interest rate by adding a borrower. However, since lenders generally dislike changing contract details, you may find some penalties or fees applied to your refinance. Always negotiate these fees down using the factors in your favor to get a better deal.

Refinancing Process

To initiate the process of adding a borrower, start by contacting your current lender. Explain what you would like to do, and ask if you can apply for a refinance. If you have recently been married, most lenders will allow this process and even make it easy for you. You will fill out a joint application, and, unless your spouse has very low credit, you should have no problem. If you are adding another person, such as a boyfriend or girlfriend, the lender may be more skeptical. Lenders do not want you to enter a contract with an individual who may not be in your life for very long as this can create complications in the future. In this case, you may face more fees and penalties to add the additional person.

Co-Borrower vs. Co-Owner

It is important to remember the distinction between co-borrower and co-owner. By adding a person to your loan, you are only joining your debt. You do not share ownership in the vehicle. You must add the person to your title to do this. If you only want to share ownership but not debt, you can easily add a second person to your title directly at your Department of Motor Vehicles.

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Conditions of Buying a New Car

Several financing or lease options may exist for your new car purchase, so you may need good to excellent credit for approval depending on the lender or method of purchase you choose. If you want to pursue manufacturer discounts, restrictions may also apply. Expect to also pay various fees and your taxes when purchasing a new car from a dealership.

Auto Loan or Lease Conditions

Conditions for auto financing or leasing differ by bank or lender. If you plan to pursue low-rate financing or a lease, expect to apply to the manufacturer's bank. Good to excellent credit is required for special offers. If you want to pursue a traditional loan through your own auto loan provider, loan conditions may differ. Some lenders may require a certain credit score, employment history or income for loan approval. Many lenders also require three to five references. Have the names, addresses and phone numbers of several people ready to offer your lender.

Insurance Coverage

Finance and lease contracts require that you maintain collision insurance for your car. You must provide proof of coverage at the time you initiate your contract and maintain it until the vehicle loan is paid off or the lease contract expires. Aside from requiring collision coverage, expect to also increase your bodily injury and property damage limits to the lender's required amount. Your lender may also require that your deductible, or the amount you pay out of pocket for repairs, remain low, such as $500 or less. Lease contracts often require gap insurance, which pays your bank for the vehicle's loss if it is damaged beyond repair.

Signatures and Social Security Number

Expect to provide your Social Security whether you are paying cash for your purchase, financing or leasing. You'll include your Social Security number on your credit application if using the dealer for your loan or lease, but must provide it even if you use an outside lender. Your dealership must report all cash payments, so your Social Security number is required. You'll also sign paperwork with your dealer. Some forms are required by the new car manufacturer to confirm that the dealer followed its sales process correctly. You'll sign any state-required paperwork, your buyer's order and loan contracts if using the dealer for financing.

Fees and Charges

New car dealerships must abide by its state's rules. Inspection and emissions requirements are completed at the dealership, which you can expect to pay for. However, you'll pay the same fees you would if completing the inspections on your own. Many dealerships charge a documentation fee, which differs by dealer and state. Find out your dealer's documentation fee prior to purchase, as some states cap the cost at $100 while others allow dealers to maximize profit from the fee. Your dealer must collect your sales tax, title application and registration fees, as well.

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Why Does the Law Say You Must Have Auto Insurance?

Auto insurance premiums quickly can come under scrutiny when money is tight. After all, if you can save hundreds per year by cutting car insurance, there is every incentive to let it fall by the wayside. Even so, car insurance is mandatory in every state except Wisconsin and New Hampshire, meaning you cannot legally drop your insurance even if you want to do so. This isn't because the government wants to cheat you--it's because insurance protects you.

Protection Against Ruin

When you do not have insurance, there is no third party who will step in to cover costs in the event of an accident. Subsequently, if you are involved in a crash, you will have to pay to fix the damage yourself. You also can be held responsible for personal injury costs. If you cannot afford to pay these costs out of pocket (most people cannot), then you stand to lose some or even all of the assets you have.

Protection Against Legal Problems

If you don't have insurance and cannot afford to cover damage and injury costs, others involved in the accident have the legal right to sue you for compensation. These lawsuits sometimes resolve quickly, but they potentially can drag on for months or even years. The government thus requires insurance in part because they do not want unnecessary lawsuits to bog down the judicial system, and because they understand that dealing with a lawsuit can be disruptive to your personal life.

Social Responsibility

If you do not have insurance, you force others involved in the accident to make claims against their own policies or pay out of pocket, or to invest money in attorney fees for lawsuits. This places financial hardship on someone else and requires an investment of time and energy. You thus have to have insurance in part because, laws aside, society expects you to take responsibility for your own actions. People do not want to have to foot the bill for something that isn't their fault.

Requirements

Even though you have to have auto insurance, this does not mean you have to have total (comprehensive) insurance. The insurance required by your state is liability insurance, which usually appears in a basic collision policy. This insurance covers you only in the event you get in a crash. It doesn't pay for other damages that might happen, such as a tree falling on your car or someone stealing CDs from your backseat. In other words, the government requires insurance, but they don't force you to buy the fullest, most expensive policies available. It is up to you how much coverage you want beyond basic liability/collision.

Considerations

Even though auto insurance is required in most states, this does not stop people from driving without coverage. An estimated 16.3 percent of drivers don't have car insurance, according to Philip Reed of the Edmunds website; this equates to roughly 50 million Americans. Some of these drivers simply don't agree with the requirement, but others skip insurance because they can't afford the premiums.

If you don't do a lot of driving and are short on cash, one alternative is to purchase driver's insurance instead of regular insurance. Driver's insurance is an extremely basic coverage designed for people who drive very little or who don't own a car. You still get liability protection under driver's insurance, but because the insurance company assumes you'll be driving very little, you're considered a lower risk and premiums are much cheaper.

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How to Get Rid of Car Loan Debt

An automobile loan is a secured debt with the car serving as collateral. The secured nature of the loan makes it difficult to get rid of the car loan except by paying it off. Popular tactics used to eliminate unsecured debt, such as debt settlement on credit cards, do not apply to secured loans. If you default on a car loan, the lender can repossess the car and still hold you responsible for a portion of the debt.

Instructions

1

Contact the bank to ask for the payoff amount on the car loan. Pay the balance using cash from your savings or checking account.

2

Sell the car if you don't have enough cash to pay off the loan. The selling price must be sufficient to pay off the loan. Or you can make up the difference with cash.

3

Call the lender to arrange for a "voluntary repossession." Tell the lender that you can no longer afford the car and wish to turn it in. The lender will make arrangements for you to surrender the car. Typically the lender will sell the car, perhaps at auction, and you could be held responsible for any difference in the selling price and the loan balance. That's called a "deficiency balance." Make arrangements with the lender to pay off this amount to complete the elimination of your car loan debt. According to the Federal Trade Commission, the lender could also decide to simply keep the car -- relieving you of any further responsibility for the loan. A private or public sale is more likely, however.

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How to Take Over the Payments on a Truck

There are several different ways to acquire a vehicle for personal use. The conventional way is to buy the vehicle from an owner or dealer. An alternative method is to take over payments on the owner's existing loan. This process is called assuming a loan. Assuming a loan involves more than a simple agreement between the buyer and seller. Merely making truck payments on behalf of a seller could have legal ramifications if the seller's lender refuses to turn over the truck title once the loan is paid off or if the truck is repossessed in conjunction with bankruptcy proceedings.

Instructions

1

Obtain a copy of the seller's financing agreement with the lender. Read the finance agreement carefully. This document will contain information regarding whether the lender will permit assumption of the loan and other conditions pertaining to the loan such as the length of repayment.

2

Contact the seller's lender and ask to set up a meeting to discuss the loan assumption with the seller and the lender. The lender will advise you as to whether a loan assumption is possible and the specific process they use for the assumption. If formal loan assumption is not available through the seller's lender, you should consider applying for a new loan to purchase the vehicle from the seller outright rather than merely making loan payments to the seller.

3

Read, sign and submit any documentation provided by the seller's lender for purposes of the loan assumption. You will most likely need to undergo a credit check and sign a promissory note to assume the seller's loan. Additionally, read all documents carefully. The seller's lender may impose a higher interest rate or change the terms of the loan depending upon your credit score. If you do not agree with these terms, do not sign the assumption documents.

4

Begin making monthly payments to the seller's lender. The seller's loan is now your responsibility.

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How Easy Is It to Get Vehicle Financing?

As of 2010, auto loans are available, despite news reports to the contrary. Many people will have no problem getting an auto loan from the dealership or from their own bank. The terms of the loans may vary, but with some effort, you can find an acceptable auto loan. For those who do not qualify for these loans, there may be other special credit available to allow them to drive a reliable vehicle.

Credit Score

Your credit score is the largest factor in how easy it is to get vehicle financing. That three-digit number ranging from 300 to 850 controls the world of financing and lending money. If you have a credit score above 720, you are a top-tier borrower. Any auto loan should be available to you at a good rate. A study by the Consumer Banking Association says that half of all car buyers fall into this category. Tier B is a credit score above 680, and easily qualifies for most conventional auto dealer car loans,.

Length of the Term

The longer the term of the loan, the higher the risk. Thirty-six and 48-month loans are easier to finance than a 72-month loan because the loan is less likely to be upside-down at any given time, giving greater security. If your credit is in a lower tier, you may be able to get a loan more easily by financing with a shorter term.

Down Payment Amount

In the early 2000s, people routinely financed well over 100 percent of the value of the new vehicle, usually to compensate for negative equity in a trade-in vehicle. This is less common now. If you have top-tier credit, no-down-payment loans are readily available, You might even be able to finance some negative equity. If your credit score is lower, a higher down payment will probably make your loan look more attractive and make it easier to finance.

Other Options for Financing

If your credit falls below the 680 score, that marks the lower portion of "B" tier credit, you may still be able to finance a vehicle at a conventional car dealer. Compensating factors such as down payments can help. A dealership with a strong finance department can often make this happen more quickly. However, if you have current bad credit, or a credit score lower than 640, your options for conventional financing are more limited. You may need to seek financing at a buy-here-pay-here dealership. These dealerships either carry the note themselves or use special sub-prime financing with high interest rates. If this type of loan is your only option, try to get a solid, serviceable car that you have had completely inspected by a competent technician.

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